2024 Week ending Summary - week51
- Summary
- Big moves, big winners or losers
- Offsetting Positions (Hedging)
- Defensive Trading
- New Opportunities
Summary
This week was a difficult week for most traders.
Dow is down for the last month (3 weeks down and was on a 10-day losing streak). That losing streak was the longest since 1974 (Sept 20-Oct 4).
S&P is flat if you look back 30 days due to the big DROP on Dec 18.
Nasdaq is up about 3% if you look back 30 days.
Big moves, big winners or losers
As an options trader, big moves can mean one of two things
- big gains
- or big losses.
In options trading, much of it is based on "expected average moves" over a certain time frame. When the market experiences a 3% drop in a single day or a 1% gain in a single day, you can either make substantial profits or suffer losses quickly.
Excluding the dividends received in week #51, I made about $425 from the option trades. This was not a bad week for me. However, I might still be in a tricky position with some holdings.
For example, my AMD Put credit spreads are currently under significant pressure, resulting in a losing position. I need AMD to trade above $135-$140 to resolve this issue. While the drop in AMD has caused my AMD-covered call to be in the money, I need to ensure I don't overreact on the call side and limit my upside if AMD rebounds in the next three months.
Offsetting Positions (Hedging)
This week I shared about my GILD position and explained why I did the moves I did.
- My Covered call is DEEP In-the-Money (ITM).
- My existing Put Credit Spread was making money from Time Decay.
- I extended my PUT credit spread out to Sept 2025.
- I rolled up my Covered call to a $80 strike price costing me $78 (cash out of pocket).
- I potentially gain $250 per contract (x2) if GILD stays above the $80 strike price.
- This position adjustment cost me $19 out of pocket; to gain $500 in value today.
My investment method does not NEED extreme moves in either direction to make money. I prefer market stays in a tighter RANGE between -15% to +15% a year. The last two years of over +20% gains have limited some of my GAINS from options trading because of the number of days that was greater than the EXPECTED MOVE (that I mentioned in the previous topic).
Defensive Trading
As the year ends, many traders like to move into a defensive mode to "lock in the gains" for the year. In one sense, I did the same by adjusting my position to remove some of the risk going into the last two weeks of trading. If I lose 17K, I would have MADE nothing in all of 2024. So I might have adjusted some positions earlier than I normally would have done (to remove some of the risk).
New Opportunities
On the other hand, this year I made it a point to sell off DIVIDENDS that I received and then buy into 3 different areas:
- Nasdaq 100 Index (QQQM)
- Bitcoin (or Bitcoin Proxy).
- New Position in Small/Mid Cap names or Special Conditions (WING/ PLTR / etc).
The objective was to steer clear of safe dividend businesses, despite my preference for them. I already have ample holdings that generate income and dividends. I've utilized these dividends to fund new purchases, demonstrating that most people don't have $20K or $50K annually to invest in new positions.
Over the past five years, I've added approximately $7K per year into new investments from my W2 income. I hadn't contributed new money to my ROTH IRA for over a decade until about two months ago. I spotted several promising opportunities and decided to make some sacrifices to fund the ROTH IRA.
As the year comes to an end, I will be writing a Year-End Summary and what I learned and what adjustments I will make for 2025 and beyond.
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