I began more serious and focused options trading in April 2020 so it’s been almost a full year since I started tracking. I posted my 2020 options trading results after the end of 2020:
2020 Stock Options Trading Results
I plan to post my options trading results quarterly, and this post is the first quarterly report. Last year (2020) proved to be a spectacular year for my options trading, but eight months, during one of the biggest rallies in stock market history, does not provide enough of a track record to determine whether I can consistently yield positive enough returns to justify my time and effort.
OPTIONS TRADING RESULTS: Q1 2021
| Start date | 1/1/2021 |
| Total trades opened + 2020 carryover | 317 |
| Closed trades | 298 |
| Open trades (remaining) | 19 |
| Winning trades | 173 |
| Losing trades | 125 |
| Adjusted avg win | 1.000 |
| Adjusted avg loss | -1.234 |
| Net win | 173 – 154 = 18.75 |
(Win# times Adj avg win) – (Loss# times Adj avg loss)
| Trade Type | # of Trades |
|---|---|
| Long call | 23 |
| Short call | 101 |
| Long put | 3 |
| Short put | 190 |
The above tables show the high level statistics for my options trading in the first quarter of 2021. Let’s crunch some numbers to arrive at some more meaningful conclusions.
Win-Loss Percentage and Average Win Per Trade
In Q1 2021, the percentage of winning trades was 58.0%. This compares to a 2020 winning percentage of 61.2%. However, the average loss in Q1 2021 was 23.4% higher than the average winning trade. In 2020, the average loss was only 7.6% higher than the average winning trade.
Realized Gains
In Q1 2021, the net realized gains were the result of the 298 trades that were closed out. As a percentage of the 2021 starting value of GauchoRico Portfolio, the realized gains amounted to a 1.0% return. If this rate of return were to be maintained for all of 2021, the return would be 4%. For me this is not bad especially since the portfolio started 2021 almost three times the size compared to the start of 2020. Thus, I only need 1/3 of the return in 2021 to make as much return (in dollar) as I did in 2020. In 2020, the 8.5 months of options trading contributed a 22.7% return on the 2020 starting value of the portfolio. Thus, if I’m to achieve even 1/3 of the success of 2020 in 2021 then I will have some catching up to do during the next three quarters!
Unrealized Gains (errr….losses)
In Q1 2021, the unrealized gains/loss were from the 19 trades that remained open at the end of the quarter. These trades had a net unrealized loss (calculated using the midpoint of the bid and the ask of each option at the end of the quarter) of 0.05% of the portfolio’s value at the start of 2021. This is not even a rounding error leaving the overall return (realized plus unrealized) at +1.0%.
Trade Types
The majority of my options trades are short as I prefer to collect premiums and harvest the time value decay over paying premiums. Selling options also eliminates the requirement to be right on the timing and the direction because short options can usually be rolled forward (in time) for a net credit.
The vast majority of my options trades involve selling the ATM straddle together with a deep ITM put. I’ve described this technique in detail here, and I’ve posted a real, multi-week example trade here. These two posts should be very helpful in understanding the technique and implementing it.
Most of the long calls were directional bets on an earnings stock price run-up or an earnings result. I was not very successful with these trades in the most recent earnings cycle. Getting caught in a large market selloff certainly didn’t help.
The remainder of my Q1 2021 options trading included a only a handful of trades including covered calls, short puts, long call spreads, and short put spreads.
Underlying Stocks and Results
The table below shows the underlying stocks on which I traded, the number of closed options trades on each stock, and the profit as a percentage of the total Q1 2021 options trading profit remembering that the total Q1 options trading profit was only 1.0% of the starting value of my total portfolio. For example, in aggregate CRWD options trades included 60 closed trades in Q1 2021 which lost 0.071% of my portfolio’s value at the start of the year.
| Closed Trades | % Profit of Total | |
|---|---|---|
| CRWD | 69 | -71% |
| DDOG | 7 | 7% |
| DOCU | 23 | 18% |
| GOLD | 33 | -47% |
| LSPD | 6 | 202% |
| NEM | 48 | 28% |
| NET | 6 | 8% |
| PTON | 2 | 1% |
| SNOW | 32 | -19% |
| ZM | 63 | -35% |
| Other | 9 | 7% |
| TOTAL | 298 | 100% |
Trades on CRWD, SNOW, and ZM comprised a significant portion of the trading activity and losses. These trades where primarily the ongoing ATM short straddle with deep ITM short put. The 35% selloff in growth stocks caused these losses. I am still keeping CRWD and ZM trades going, and I expect to recoup (and more) all the losses on CRWD and ZM. The SNOW trades were closed/discontinued.
The LSPD trades were not intended to be options trades but investments. In January and early February, I had bought slightly ITM calls with 17Dec expiration dates. To reduce the cost of these long calls, I capped the upside by selling much higher strike price (far OTM) calls. Selling these calls reduced the cost of buying the ITM calls so that I could buy more of the long calls. When LSPD shares tanked along with the other growth stocks, I bought back the short calls for much less than I had received for selling them. When the shares rebounded, I sold the OTM calls again, and then bought them back when the shares fell again. The profits from these trades were not planned but were opportunistic; they also turned an investment into a trade and prevented a 1.0% options trading loss in Q1 2021.
I continue to trade options on GOLD and NEM, the two gold mining companies in the portfolio. Gold prices dropped in Q1 2021, and since my trades involve selling ATM straddles and deep ITM puts (i.e.directional bet to the upside), these trades resulted in net losses in Q1 2021. Volatility on NEM shares have been higher than volatility on GOLD shares so I’m trading more on NEM options to receive higher premiums.
The Other trades were on options of stocks that I do not own. These trades were either opportunistic or speculative.
SUMMARY
Despite a major (~35%) selloff in the companies on which I trade options and despite my preference to bet directionally to the upside, my Q1 2021 stock options trading managed to eek out a small gain. I consider this a win, and I expect to make much higher profits once growth stocks come back into favor. Hopefully, the recovery of the hyper growth stocks won’t take too long.
The opinions, thoughts, analyses, stock selections, portfolio allocations, and other content is freely shared by GauchoRico. This information should not be taken as recommendations or advice. GauchoRico does not make recommendations and does not offer financial advice. Each person/investor is responsible for making and owning their own decisions, financial and otherwise.