Options Trading Plan for the rest of 2021

Updated: 15 March, 2021 seen 70

I've been trading options since March 2019, about two years, during the past two years I've excelled a lot - it feels I've done it all - selling puts and calls, playing with iron condors, trading options on indexes (without underlying asset), futures on gold and oil, earnings plays with straddles. You name it!

These all are great tactics (except I don't like anymore trading without underlying assets ). I've mastered earning from a mere few hundred dollars in a month to almost $5,000 monthly (and I can do it monthly, at least if feels so). But there is one thing I've not mastered yet - liquidity issues. or more precisely trading on margin or having a negative cash balance. 

Buying power vs Cash balance

Buying power vs Cash balance

Trading on margin is awesome (your portfolio should be margin enabled), but it just doesn't feel rights to keep that negative cash balance opened, one of the greatest obstacles - I cannot withdraw funds, yes I can make $5,000 per month, but cannot withdraw them as I've negative cash balance.

In theory, I could now make $5,000 per month for the next 3 months and I'm done. It would take my cash balance back to 0. But this is not how it works (at least for me). I keep buying shares, and for that, I'm spending 50% of my monthly options income. So if I made $5,000, then I invest back in the stock at least $2,500. I'm left with $2,500, which of course is a nice sum of money, but it would ask instead of 3 months, 6 months to close my negative cash balance. Also quite acceptable. But, I'm trading for a living and I need these funds to be withdrawn to my bank account on monthly basis, to pay for bills.

Currently, we are making a renovation project for an apartment in the countryside, it asks for a lot of investment. My funds are all dried up almost.. I had an idea to put my income from options trades into the renovation, but currently, I cannot, despite I have made a pile of money in the stock market, and all is because I've liquidity issues - or a negative cash balance of over than -EUR 13,000.

This negative cash balance has grown from assigned credit spreads, which I have decided to convert into covered calls (they generate some nice money, but not enough to quickly close the negative balance). I'm holding positions on stocks I'm not truly happy with - SDC, SOLO, LI, SNDL, HUGE, CRBP

Current Long positions

Current Long positions

In the above table you can see stocks I'm currently holding and selling covered calls, which I've bought using margin buying power. The total invested dollar value is almost $21K, while the current actual value is just $16.4K, but in the options trades we have made some nice $8.8K income

If I would decide to close now all the above-listed positions I would get $16,400 or EUR 13,757, just enough to fully close my negative cash balance. Now this is already some good news, cause It would free up the funds I can withdraw from my account

On the other hand, I have about 65 open positions (puts and calls) and also some 85 combos (credit spreads)

Open option trades

Open option trades

It wouldn't be very smart now closing all positions, instead, I will gradually decrease some of them taking the largest margin - SOLO, CRBP, HUGE, SDC e.t.c

Currently, I'm holding 800 shares with SOLO stock, these 800 shares are using about $2,500 in margin maintenance. 

Maintenance margin

Maintenance margin

If I would sell all 800 shares I would quickly raise $4.728 in cash + would free up some $2,500 in maintenance margin. Awesome, but it wouldnt be smart to sell all stock now, as my buying price is higher than todays selling price. Instead I'm looking on a weekly basis decrease shares by 100, get some cash, free up little bit margin + keep selling covered calls to generate extra cash.

For the rest of 2021 in Options trading

  • I'm looking to make at least $40,000 options income
  • Selling credit spreads
  • If credit spreads are challenged, roll forward for a credit, avoid of assignment as much as possible (as this increases debt, and ties up margin)
  • Decrease negative cash balance to the levels I can start withdrawing funds on a monthly basis
  • Turn cash balance positive and growing on monthly basis.
  • have at least 2000 EUR in cash at the end of 2021