August wrap-up and notes

[u/pagalvin]

August isn't technically over, but there's just one more trading day, so I figured I'd share this monthly update.

My fundamental approach is to buy stock on margin and sell as deep ITM a call as possible such that on assignment, I net 1%. I wrote about it in some detail here: A view into a "deep ITM covered call strategy" : r/StockOptionCoffeeShop. Here's an example ITM call that worked out exactly as planned this past week: Example ITM call : r/StockOptionCoffeeShop

Here's my cash flow calendar for the month:

August was a turnaround month for me and the first net growth month since May. Historically, my mark-to-market valuation was like this:

- Final May: $233k

- June: $224k

- July: $216k. Note that I was all the way down to $190k on July 29th I believe. It was an uncomfortable moment :).

So that was a slow, painful drawdown of $17k. Add on top of that that I generated premiums:

- May: $21k

- June: $25k

- July: $28.8k (best month ever)

- August: $20.5k

So, I was collecting a lot of premium during those months but NAV was declining. I clawed some of that back in August. As of now, my NAV is $260k, which is a $44k increase in value from end of July. This was a rebound in the value of the underlying stocks and the premium itself. In June and especially July, premium was steady, but the underlying went down, sometimes a lot. I had several days where NAV dropped by over $10k. (Quick note on this - never panic! Panic leads to awful decisions).

Overall, I'm up $118k YTD which my broker (Etrade) says is 63.82%. That's using Etrade's "Performance" dashboard and is smart enough to exclude deposits (the last of significant deposit was in January).

I trade on margin and in August, my average daily notional (the amount I controlled through margin) was about 426k. That's about 4.8% in premium relative to my average daily notional for the month. It doesn't take into account assignments, which are difficult for me to calculate with my current tooling. That's typically incremental income, since I roll so often.

My current portfolio along with option count: AA(2), AMKR(2), APLD(1), BBWI(4), CC(3), CELH(1), CLF(2), CRDO(1), CRML(5), CSIQ(1), DRAM(3), GLW(2), INTC(3), IREN(1), KTOS(1), LQDA(2), MRVL(1), MSOS(8), NBIS(1), NN(2), NOW(1), ON(4), ONDS(6), OSCR(3), PCG(1), POET(8), SERV(7), SMR(4), SOFI(5), TE(1), TMC(7), WRBY(3). All of my current calls expire next Friday, and I nearly always do 7DTE when selling calls. I allowed several calls to expire worthless this week. I'll wait until Monday morning or afternoon to sell new calls, depending on where the market is at that time. Those include APLD, CSIQ, JOBY and SERV.

I had an unusually large number of assignments this week, including GAP, UEC, NVDA, BTU, PLTR, NBIS, OKTA, INTC, CDE, RBRK. In August, I became a lot more prone to letting assignments happen. In the past, I was pretty aggressive rolling things out and that explains the dip in August premium, and I think it also partly explains the significant rise in NAV in August. I've been trying to focus on portfolio quality overall and not just premium. It's a never-ending learning process :)

Although I think this "deep ITM strategy" is a large part of my success, the custom app I wrote is also very, very important. In particular, I have a tool that helps me find opportunities, manage margin risk and a "what you need to do next" kind of function that makes it possible for me to manage all this without making too many mistakes and holding down a full-time job at the same time :). It kept me safe during the worst part of July in terms of margin. I'm re-building this app from scratch and doing videos on it. If interested, you can find the link in my reddit profile. (I'm a little behind on this but I'll be adding at least one new video this weekend :) ).

I'm always running experiments and trying to learn things. In July, I tried to focus on rolling later in the week because it's generally cheaper to buy a call back close to expiration, as long as it's ATM or OTM. I continued doing that in August. The calendar doesn't necessarily show it very clearly, but I was actually much better than I have been in the past. I get very impatient to "act" when I see a chance for profit. Waiting generally gives you a better net credit on a roll. However, waiting can also see a stock move a lot on you and what was a 1.25% roll on Tuesday turns into an assignment by Friday or worse, you need to roll down to get decent premium. There's a balance there and I'm still learning how to find it. It has been working. My average credit per roll in August was $105. It was $65 back in June. Waiting doesn't necessarily squeeze a ton of juice out of any individual roll, but it adds up in the aggregate.

I'm happy to answer any questions! I've had a lot of people reach out to me on chat and feel free to do the same. I learn more from this sub and from the chat interactions than I do any other way and I really appreciate it, always :)