2021-02-28 Sunday

WEEKLY MARKET OVERVIEW

Last week started with a gap down at the opening on Monday, followed by a failed rebound, and finally more selling pressure running into the week’s end. Despite the choppy price action in the second half of February, the overall post-election uptrend is pretty much still intact, with the S&P500 (SPY) sitting just over the rising trend line.

SPY

In this painful week, mega tech stocks and small caps have been once again the weaker areas of the market. The weekly losses in the Dow Industrial stocks have been more contained, even if they started to accelerate (also relative to the rest of the market) towards the end of Friday’s session.

Weekly performance (Week 8/2021)
– SPY (S&P500) -2.48%
 QQQ (Nasdaq100) -5.10%
 DIA (Dow Jones Industrial) -1.74%
 IWM (Small Caps) -3.06%

Volatility (VIX) has been expanding over the week and still pretty high in the 28-30 range.

VIX

WEEKLY TRADING JOURNAL

As the week started deep in the red I took a contrarian approach and started to sell covered calls on all my shares. I normally tend to sell calls during green days, but as the market kept plunging, I looked at making some quick profits rather than just sitting and watching my positions going down in price. The strategy worked pretty well as I was able to close four positions in the following couple of days locking some nice profits. That at least helped to reduce the cost basis on these stocks while waiting for them to recover.

On Monday I sold to open PLTR 03/05 CC $32 for a $1.14 credit, and on Tuesday I bought it back to close for a $0.56 debit, keeping 51% of the premium for a 662% AROI in 1 day.

PLTR

On Monday I sold to open NNOX 02/26 CC $58 for a $1.50 credit, and on Tuesday I bought it back to close for a $0.30 debit, keeping 80% of the premium for a 755% AROI in 1 day.

NNOX

On Monday I sold to open NKE 03/12 CC $142 for a $1.80 credit, and on Wednesday I bought it back to close for a $0.88 debit, keeping 51% of the premium for a 118% AROI in 2 days.

NKE

On Monday I sold to open WMT 03/12 CC $140 for a $1.26 credit, and on Wednesday I bought it back to close for a $0.63 debit, keeping 50% of the premium for a 82% AROI in 2 days.

WMT

For last week’s expiration (02/26) I had six cash-secured-puts (CSP) that were caught on the recent market pullback. I let them expire on Friday and got assigned on all. I am still bullish on these stocks, and so far all the premium collected in the past few months is more than compensating for the (unrealized) losses I will have to face as a shareholder starting into the new week. It might require some time for the stocks to recover, but I am not in a hurry and happy to hold them over the long term while selling covered calls as soon as prices will get closer to the assignment levels.

AAPL
DDOG
GRWG
MTCH
NIO
PTON

The total premium collected for the week has been $1,296 (net of brokerage commissions) with an average holding period on the CSPs of 8 days, and an annualized return of about 78% (calculated over the strike prices). Due to their short duration, the average AROI on the quick CCs plays has been of course much higher.

With all these new assignments of shares, the cash portion of my wheel strategy portfolio is now down to about 35% most of which already tied as collateral for the CSPs expiring next Friday.

If you are interested to follow all my trades in real-time, you can join for FREE my Community on Discord, where I share my personal trading journal via instant private feed.

In case you have any questions, just drop me an email to info@thewheelstrategy.com

Take care and trade wisely

Gianmarco