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Weekly Report 2022-09-18

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WEEKLY MARKET SUMMARY 

After the gap up at the weekly opening on Monday and the fourth solid daily green candle in a row, the expected pullback of SPY (S&P500 ETF) came on Tuesday with a deep gap down at the open (eating up all the gains from the day before) and panic selling that quickly spread across the entire market.

The two following days of slightly bearish consolidation led to another scary gap down at the open of Friday's session, with the price losing the key support at the 390 level and moving into short-term oversold territory. However, what could have been another day of red-hot pain, in the end, delivered an encouraging green candle (technically known as a hammer) with an upper body and a relatively long lower shadow.

But of course, a new wave of selling pressure could easily take the market to another deep pullback down to the test of the new major support that's now at the 2022 lows around the 360 level.

 

Weekly market performance (Week 37/2022)

 S&P500 (SPY) -5.17%
 Nasdaq100 (QQQ) -5.79%
 Dow Jones Industrial (DIA) -4.42%
 Small Caps (IWM) -4.49%

Following last week's sharp market pullback, the Market Volatility Index (VIX) is now above the 26 level.

 

WEEKLY TRADING SUMMARY 

Here is the summary of some of the main events from last week at the Options Trading Club (OTC).

Cash Secured Puts (CSP)

Despite the market's sharp decline, I was able to close a cash-secured put campaign on CWH last week.

On December 13th, 2021, I opened the first position, just as the market was about to turn bearish. This is the initial trade setup and chart.

STO CWH 01/21 CSP $35 for a $1.05 credit
Delta = 0.28
IV = 49%
Projected AROI of about 28% in 39 days

On Friday, after 277 days and 6 different adjustments that allowed me to reduce the strike price down to $30, I was able to buy back the put for a $0.80 debit and get out of the campaign with a total retained premium of $330, resulting in about a 15% annualized return. This is quite an impressive achievement considering how badly the stock and the overall market have performed this year thus far.

 

Small Account Challenge (SAC)

Four weeks ago we launched in the Options Trading Club (OTC) a new paper-trading challenge. As the name suggests, the Small Account Challenge is dedicated to traders having a limited account size.

Here are the main rules for the challenge:

  • Start Date: 08-22-2022
  • End Date: 12-31-2022
  • Starting Account Size: $5,000 cash account.
  • All trading strategies are allowed.
  • Trades should be unique (not already posted in other channels).
  • The winner will be the trader with the largest account balance on the last trading day of 2022.  

Considering the difficult market conditions, I decided to use mainly delta neutral hedged positions that are benefiting from the expansion in the overall market volatility. So far, after about a month from the beginning of the challenge, I have closed 13 trades with 12 wins and 1 loss. I entered the fifth week of the challenge with only 2 open positions (with a current capital allocation of 21.7%) and have realized a profit equal to 20.4% of the initial capital.

As usual, if you have any questions, just send me an email at [email protected]

Take care and trade wisely!

Gianmarco 

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