Monthly Report for March 2023

MONTHLY MARKET SUMMARY FOR MARCH 2023

After the scaring 2022 bearish correction, the SPY (the S&P 500 ETF) ended the fifth consecutive month in a lateral consolidation regime. Despite the SVB collapse and subsequent market sharp pullback, SPY posted an encouraging monthly green hammer candle, allowing the month to close just below the top of the consolidation pattern around the 410 mark.

While the banking sector was shaken by shocking news, the QQQ (the Nasdaq 100 ETF representing the largest US tech stocks) strongly broke out from the last few months of consolidation, possibly confirming an inversion of last year's downtrend. An impressive monthly gain just below double digits vastly outperformed any other market area. Big-tech stocks could potentially become the trailblazers of the next leg upward in this long-term bull market, as they have in the past.

Monthly market performance (March 2023)

– S&P500 (SPY) +3.31%
– Nasdaq100 (QQQ) +9.32%
– Dow Jones Industrial (DIA) +1.85%
– Small Caps (IWM) -5.20%

With theS&P500 recouping all of its February losses, we saw a strong sector rotation into big tech stocks in March, while small caps lagged the rest of the market.

After a huge spike due to the bank crisis events, the Market Volatility Index (VIX) remains relatively low, closing the month below the 20 level.

MONTHLY TRADING SUMMARY FOR MARCH 2023

The Wheel Strategy is my mainstay strategy, and in this market environment of horizontal consolidation, I'm still selling cash-secured puts on carefully chosen stocks when attractive setups appear. In the case of an assignment, I have no problem acquiring shares of high-quality companies at a discount and then beginning to sell covered calls while attempting to earn a capital gain on the shares.

Following the market's bearish correction last year, many stocks are trading near or below fair value. So it's really just a matter of being diligent in selecting the right stocks and sticking to the Wheel Strategy's basic rules.

The following is one of the trades (taken on a real-money account) that I closed in March and shared in real-time with the members of the Options Trading Club (OTC) Discord community and the The Wheel Academy (my private coaching program).

On February 8, with the stock pulling back after a solid earnings report, I had sold-to-open an AMZN 03/17 CSP $90 for a $1.51 credit, with a projected AROI of about 16.4% in 37 days.

The stock continued to fall with the rest of the market during the following weeks, but after testing the strike level, it rebounded nicely and allowed me (and anybody that followed me along on this trade) to buy back the put contract for a $0.02 debit the day before expiration. I booked a profit of $146.90 net of commissions, for a return on the allocated capital of +1.63% in 36 days, equal to an annualized return on investment (AROI) of +16.5%, all of that while the stock was trading only a few cents higher compared to my original entry. 

The Wheel Strategy confirms (when used correctly) that it is a great way to generate income in the stock market during periods of choppy consolidation and that it can be implemented with very little stress and time commitment.

Take care and trade safely!

Gianmarco