The Option Writer

99% boredom vs 1% mega stress

📅 May 5, 2023 edition

📰 Managing Big News Events: Lessons from the FOMC Meeting

In the world of option selling, big news events can lead to sizable 📈losses if not managed carefully. My only relevant loss was during a week with significant news, where CPI printed an unexpected number and prices reacted aggressively. This experience taught me a valuable lesson: to be more conservative in my approach during atypical weeks and reduce exposure to the market.

If I have💵collateral available, I also like to sell the direction of the move (calls in big pumps and puts in big dumps) to react to big moves, but after the news. Capital preservation is the top priority here, as losses can be quite sizable if unmanaged. Therefore, exposition needs to be preemptively managed during weeks with significant news.

Although I might not make the expected 1.5% to 2% return, and only add up to 1%, it is crucial to remember that the market is always there, and resuming the established plan on normal conditions is possible the following week. In the meantime, profitability can still be achieved on a news week, with the option to ❌terminate positions with a manageable loss if things go crazy, as they sometimes do.

In conclusion, managing risk during weeks with significant news events requires moving 🐌slow and 🗻steady while keeping in check unexpected outcomes. Going light and wide on news weeks is a recommended approach to minimize volatility and preserve capital.

📋May 5 Epoch Review

As mentioned in the previous section, I did not commit fully this week. I only entered 3 positions for 38% of my capital, with an account increase of 0.7%:

• $2100 CALL

• $2050 CALL

• $1700 PUT

📋May 12 Epoch Plan

Back to a “regular week, I am scouting the same areas as last week, and I entered 2 positions on Thursday for 43% of my capital:

• $2100 CALL

• $1700 PUT

In accordance to my strategy, I will build more positions in the next days, in hope to catch better premiums and/or strikes due to major changes in price action. If that opportunity does not present itself, I will add to the current positions

As per my strategy, I plan to ⬆️increase my positions over the next few days, in anticipation of better premiums and/or strikes resulting from significant changes in price action. If such an opportunity does not arise, I will instead add to my existing positions.

The plan is still the same: multiple strike prices way out of the money.

📈📉My results

Average Yield %: 1.86%

Projected APY %: 162%

Growth %: 14.25%

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Nothing in this newsletter is financial advice. I just share my thoughts and personal experiences on Options and the markets in general