This is my third options trading update. The first update encompassed my 2020 options trading since I began systematically tracking in April 2020. Starting in 2021 and going forward, I intend to post my options trading results quarterly. Below are links to my previous updates:
2021-Q1 Options Trading Results
2020 Stock Options Trading Results
OPTIONS TRADING RESULTS: H1 2021
| Start date | 1/1/2021 |
| Total trades opened + 2020 carryover | 565 |
| Closed trades | 556 |
| Open trades (remaining) | 9 |
| Winning trades | 336 |
| Losing trades | 220 |
| Adjusted avg win | 1.000 |
| Adjusted avg loss | -1.184 |
| Net win | 336 – 260.5 = 75.5 |
(Win# times Adj avg win) – (Loss# times Adj avg loss)
| Trade Type | # of Trades* |
|---|---|
| Long call | 36 |
| Short call | 182 |
| Long put | 3 |
| Short put | 344 |
The above tables show the high level statistics for my options trading in the first half 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%. In H1 2021, the percentage of winning trades had improved to 60.4%, and the percentage of winning trades in Q2 2021 was 63.2% (163/258).
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. For H1 2021, the average losing trade was 18.4% higher than the average winning trade. Thus, the average dollar win per trade also improved in Q2 2021 compared to Q1 2021.
Realized Gains
In H1 2021, the net realized gains were the result of the 556 trades that were closed out. Of these 298 trades were closed out in Q1 and the other 258 were closed out in Q2. As a percentage of the 2021 starting value of GauchoRico Portfolio, the realized gains from options trading H1 2021 amounted to a 4.2% return on the entire portfolio’s 2021 starting value. If this rate of return were to be maintained for all of 2021, the return would be 8.4%. After Q1, the realized gains only represented 1% of the portfolio’s 2021 starting value. Therefore, the options trading in Q2 was much more successful than the Q1 options trading. In percentage terms, the realized gains from H1 options trading comprised 14.7% of the total portfolio gains (both realized and unrealized gains on the total portfolio gains).
Unrealized Gains (errr….losses)
In Q2 2021, the unrealized gains/loss were from the nine 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 0.7% of the portfolio’s value at the start of 2021. Thus, these unrealized losses combined with the realized gains of H1 2021 amount to a 3.5% gain on the starting 2021 portfolio value.
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 first earnings cycle of 2021. Getting caught in a large market selloff certainly didn’t help. In the second earnings cycle of 2021, I was a bit gun-shy on the directional long call bets so I didn’t do many of them. We are now approaching the third earnings cycle of 2021, and I haven’t yet made any bets on earnings. I’ve continued to trade the short straddles with short deep in the money puts; current targets of the short straddles and short deep ITM puts are UPST and DDOG. If I do decide to place any long call directional bets on earnings, I’d likely target UPST, LSPD, and maybe DDOG.
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. I’ve added columns for Q2 2021 trades, H1 2021 closed trades, and the percentage realized profit for each underlying stock of the total realized profit for H1 2021. Note than the denominator for H1 2021 is more than four times higher than the denominator of Q1 2021.
| Q1 Closed Trades | % Profit of Total (Q1) | Q2 Closed Trades | H1 Closed Trades | % Profit of Total (H1) | |
|---|---|---|---|---|---|
| CRWD | 69 | -71% | 86 | 155 | 30% |
| DDOG | 7 | 7% | 51 | 58 | 9% |
| DOCU | 23 | 18% | 1 | 24 | 4% |
| GOLD | 33 | -47% | 3 | 36 | -8% |
| LSPD | 6 | 202% | 2 | 8 | 51% |
| NEM | 48 | 28% | 43 | 91 | 6% |
| NET | 6 | 8% | 0 | 6 | 2% |
| PTON | 2 | 1% | 0 | 2 | 0% |
| SNOW | 32 | -19% | 4 | 36 | -4% |
| UPST | 0 | 0% | 39 | 39 | 12% |
| ZM | 63 | -35% | 29 | 92 | -4% |
| Other* | 9 | 7% | 0 | 9 | 2% |
| TOTAL | 298 | 100% | 256 | 556 | 100% |
SUMMARY
Despite a major (~35%) selloff in the companies on which I trade options (during Q1 2021) and despite my preference to bet directionally to the upside, my Q1 2021 stock options trading still managed to eek out a small gain. I considered this a win, and I expected to make much higher profits once growth stocks come back into favor. This is exactly what happened beginning in mid-May. Growth stocks reemerged as favorable investments and my options trading results improved dramatically.
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.