My Strat: Winning by a Thousand Singles

Hello everyone, I've been trading options on and off for a little over a year, but decided to try something new in April, here are my current Stats

• Trading Start: First Monday in April 2024
• Amount Invested: $2,750
• ROI: 25.33%
• 75% Win Rate

My Dashboard

The Story

Feel free to skip, just letting y'all know the thought process.

Sometime last year, while unemployed I started thinking about investments and how everyone wants to hit home runs, but maybe the right way to do it, is to try and hit 1000 singles. So, last year I had built a python script on the EOD API, that would pull the option chains for ~3000 symbols and find what I thought were good profitable cover calls to sell. I didn't have a lot to invest at the time, but the little I did, I didn't love the return because holding the stocks for an extend period creates longer and longer downside loss potential. After staring at options chains for a long time, I got interested in why people would sell In the Money (ITM) options. I did some research and as it started to make a bit of sense I modified the script to show me profitable at the time ITM Covered Calls and there was a lot more than I expected.

The Strategy

• Sell weekly ITM Covered Calls on Monday that expire on Friday, with the intention of them getting assigned
  • I know is against popular options theory but the idea is to turn the money over completely every week.
• Seek out options that balance gains with downside protection
  • A key part of this strategy is to minimize loss as much as possible
  • For example: Option A is a 5% ROI, with 20% downside protection, and Option B is 3% ROI with 40% downside protection, I take option B.
• Don't get fancy with trying to roll or guess what the stock is going to do, set it and forget it.
• Make 2% a week
  • 2% doesn't sound like a lot but if you can average that, its a 168% yearly ROI
  • Averaging 1% weekly comes out to 68% yearly ROI

The Rules

• Avoid Earnings for the most part
  • This means if a company is going to report earnings the week I am trading, I typically avoid making that trade.
  • Earnings provides extra volatility and this is something we want to avoid.
  • This is balanced by ROI and Protection though. If there is a lot of downside protection it might be worth the risk
• Do not trade before 10:30 on Monday morning.
  • Monday mornings are extremely volatile
• Avoid stocks that have made a big upward move that morning.
  • Stocks that have made a big downward movement, are more likely to recover throughout the week
• Be careful with short weeks
  • Short weeks tend to really ramp up the volatility

Some Observations so far

• A lot of none profitable trades on Friday, get to breakeven or profitable on Monday morning.
• There's always profitable trades every day of the week
  • I can generally find trades on Tuesday with a 3-4% potential profit
  • There's generally a 2-3% trade available on Thursday that expire the next day
• Sometimes you get lucky, and sometimes you don't
  • I've bought the stock and set it at price I think that is for sure to sell, it doesn't and the stock dips 20%, sucks but you sell and move on
  • The flip has also happened to me, I thought for sure a option would sell, didn't and the stock moves up and I get a solid gain.

Feel free to ask me anything. My current dashboard uses the Tradier API, and I am testing out some new metrics that I derived to hopefully simplify the process. I know this isn't a sexy strategy, but it's something that's working so far.