July results
July was a trendy month. Stock ETFs all tumbled and oil rocketed.
The IWM peak to trough move was 76.22 on 6/5 down to 64.52 on 7/15. I tend to open positions for the next expiration month around the first of the prior month. I get the best combination of ROC and exectancy here. So, this move happened after I opened my July expiration trades. This was a move of 11.20 or 15.35%. The Puts I sell in IWM are between 12% and 15% out of the money. I take first defensive action when the short option’s probability of being in the money reaches 15%. I take the second defensive action at 25% probability. (these probabilities are calculated using historical volatility averages…not implied volatility) So, a move of 15% would result in me reaching both the first and second defensive points.
See my previous post about defense to understand what I do at the first and second lines of defense.
The USO move during the tenure of my July positions was 98.62 to 119.17. This is 20.55 or a 20.83% move! But oil is much more volatile than IWM. In July I sold Puts and Calls in USO between 13% and 15% out of the money. Of course, a 20% move in a month would cause me to hit the second line of defense and close the positions.
