Monthly Report 2022-12-04

trading journal


I really like monthly charts as they allow me to keep things in perspective and zoom out from the daily market noise.

After the strong rebound in October, the SPY (S&P500 ETF) posted the second consecutive monthly green candle for the first time in this crazy year in the stock market. 

Three are the positive (or at least encouraging) signs that I can see in this monthly chart.

  1. The price closed above the psychologically critical resistance level at the 400 mark for the first time since July.
  2. The solid green body and long lower wick of the monthly candle are showing strong buying pressure, with bulls ready to take action on market pullbacks.
  3. The November monthly candle has broken out of the descending trend line started at the beginning of 2022, and that has been working as resistance during this extended market downturn.

Of course, it's still too early to tell if the worst is behind us and the market is ready to resume the long-term uptrend. For sure, a possible Santa's Rally could inject more confidence in this beaten-down market and help it get out of the 2022 correction.

Monthly market performance (November 2022)

 S&P500 (SPY) +5.56%
 Nasdaq100 (QQQ) +5.54%
 Dow Jones Industrial (DIA) +5.72%
 Small Caps (IWM) +2.20%

Despite the broad market rebound, appetite for risk is still pretty low, with market participants favoring traditional and conservative sectors against small caps and growth stocks.

After the second solid bullish month in a row, the Market Volatility Index (VIX) is back at the bottom of the 2022 range, just above the 20 level.



Last month's update of my trading activity within the Options Trading Club (OTC)

Currently, the primary goal with my main Wheel Strategy portfolio is to collect premiums by selling covered calls in order to reduce the adjusted cost basis of the shares and, as a result, the total risk of the portfolio. With the recent market rebound, I expect that some of the shares will be called away freeing capital and reducing the number of equities in the portfolio.

I was able to close six distinct covered call positions in November, keeping a total premium of $687 and freeing up $9,400 in capital. In the December and January monthly cycles, more covered calls are set to expire.

With the majority of my portfolio in stocks and covered calls this year, I took the opportunity to study new strategies and experiment with small positions. On the last trading day of November, I used one of these strategies to initiate a multi-leg campaign on Macy's (M).

  • I sold one put contract at the 22 strike expiring on December 9th for a $27 credit.
  • To protect the short put from a market crash, I bought three put contracts at the 19 strike at the May 19 expiration for a $172 debit per contract.
  • I then bought one call contract at the 26.5 strike expiring on December 9th for a $6 debit to hedge the position in case of a short-term spike in the underlying stock.

The total amount I had to pay to get into the position is $495, while the capital requirement from the broker is $791. I will manage the position over the next few weeks and will post the results in the January Monthly Report.

Take care and trade wisely!


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