In this post, I had this section for the overall P&L.
Here is the current P&L by ticker. I had mentioned that only APLD and IONQ were at a net loss at the moment.
A mixed week.
Premiums earned of $4,495 on $517,012 at risk at a rate of 0.9%.
For the week, 5 stocks declined in value for the buy-and-hold, while 4 declined for the B/W campaign. All 10 campaign stocks outperformed buy-and-hold. None of the stocks were assigned, leaving all 10 in inventory over the weekend. There were no capped gains.
Buy-and-hold generated a gain of $4,156 (0.8%). The campaign's $4,495 in premiums (0.9%) resulted in a gain of $8,651 (1.7%) for the campaign. This compares favorably with the S&P 500, which gained 1.2%.
For the nine weeks ending, the Buy/Write campaign netted a gain of $20,138 versus a loss of $96,772 for buy-and-hold, a favorable difference of $116,910.
In addition, over the same period, the Buy/Write campaign had a gain of 3.0% versus a loss of 14.3% for buy-and-hold and a 2.4% gain for the S&P 500.
-------------------------------------------------------------------------------------------------------
Stocks currently 'underwater' for the campaign:
A quick 'back of the napkin' at the YTD history shows that, while there is a large unrealized loss, the campaign's net profit of $242k shows only two stocks "underwater" (in the sense that the premiums received have not offset the underlying's unrealized loss in value): APLD of $1.6k and IONQ of $15.4k.
Reconsideration of strike setting when there is a substantial unrealized loss:
I'm also reconsidering my approach to setting short call strikes in the current situation. Since the large decline, I've largely been setting them at 1 standard deviation, which has been below the original purchase cost.
If you've been following me long enough, though, you know I use 'mark to market' and psychologically acknowledge the loss on the underlyings, so my thinking is "just continue to set them ATM" even though if called away it would result in a recognized loss. Another alternative is to set the strike to approximately equal the current ATM strike plus the premium that strike would provide ("ATM+"), as this would allow a bit of breathing room to recover after the large declines.
Using CRWV for example, my actual cost is $110.59, and this week's close was $88.88.
A 1 standard deviation would be a $97.50 strike with a premium of $1.24.
An ATM strike would be at $89 for a premium of $3.98. This would provide protection up to $92.98.
Alternatively, I could sell a $92.50 strike for $2.52, providing protection up to $95.02.
So...a $1.46 reduction in premium for $2.04 more protection...
Roughly speaking (and calculated quickly), these three approaches would generate the following premiums for all ten stocks currently held.
I keep reminding myself that one of the primary points of this exercise is to compare buy-and-hold (and the S&P 500) to selling ATM strikes. I clearly would have been better off these past two weeks had I maintained the practice of selling ATM using current market prices.
So the question becomes: "Will the $27.6k of premium for selling ATM cover, on a portfolio basis, an increase in their prices next week?" With an at-risk amount of ~$520k, that would allow about a 5.25% increase before it underperformed buy-and-hold.
If I didn't have these unrealized losses, and went into the positions 'fresh' next week, those ATM strikes are where I would set them. Perhaps I should set them there regardless; that is my inclination.
I'd be interested in folks' thoughts. I know there is a strong feeling to not sell calls below your cost (or a 'net stock cost' some use); I also know there is a strong feeling to avoid selling at a loss.
