Are we ready for a market crash? Will that even happen? How do we benefit from it?
These are some of the questions I have been thinking about for a long while now.
So far, the market held up fairly well but are my portfolios crash proof? Are your portfolios crash proof?
We must be prepared.
Here is a bullet proof solution, which will guarantee a growth in one's portfolio but the growth is less than the inflation:
Buy 100x SPY and buy a June 2023 $390 put. At the same time sell the $390 call.
The deal would give us about $8 credit plus we can expect about $1.4 dividends every quarter.
The outcome:
The market tanks >> in this case we would make $971 (2.5%)
The market stays at this level or goes up >> we would make about $1360 (3.45%)
Neither would be higher than the inflation so our real wealth would go down but if the market crashes then at least we would be in a much better position than most people.
An alternative solution could be that we buy a June 2023 $390 put and buy the $390 call. The deal would cost us about $8000 so we would need to make sure that we get more money back by selling call options.
This would be very difficult to model out without access to all the historical options data but we know that the June 2022 $390 call is selling for $13.70. So if we could sell a call option around $8 every month then we would be laughing at the end of the 12 month cycle.
So what's my trade for today?
I ran to safety again with an #IWM (#Russel2000) strangle. I selected the June expiration with the intention to either close it this week or roll it to July. This ETF covers 2000 stocks so it's fairly stable.
The stats
Trade Type: Short Strangle
Strike: $155 / 195
Expiry: 17 Jun
Delta: 3.1
IV Rank: 70.8
Premium: $1.38
Cap Req: $1759
Annualised Prof at Expiry: 119%
IMPORTANT: we can all learn a great deal by studying previous trades. Today I only made one adjustment:
https://www.tycoonitos.com/community/market-comments/market-comments-20220414
Let me know your thoughts.
I could no longer resist rolling up my put side so I rolled to $180 for $0.41 credit.
Current position: Mar $180p/$198c
Total credit: $13.27
Rolled to March as the price is getting too close to my call side.
The roll did not generate extra credits but allowed me to widen my strikes a bit.
Current position: March $174p/198c
Total credit: $12.86
Rolled up my put side to $175 for $0.40 credit.
Current position: Feb $175p/190c
Total credit: $12.86.
Rolled up my put side to $172 for $0.37 credit.
Current position: Feb $172p/190c
Total credit: $12.46
Rolled up my put side to $168 for $0.59 credit.
Current position: Feb $168p/190c
Total credit: $12.09.
Rolled up my put side to $162 for $0.40 credit.
Current position: $162p/190c
Total credit: $11.50.
My put side was heavily tested ($169) so I decided to roll out to Feb $157p/190c for $1.03 debit.
Total credit: $11.10.
Rolled down the call side to $185 for $0.50 credit.
Total credit: $12.13.
Rolled down the call side to $190 for $0.46 credit.
Total credit: $11.63.
Rolled down the call side to $195 for $0.47 credit.
Total credit: $11.17
Rolled up the put side to $169 for $0.48 credit.
Total credit: $10.70.
Rolled to Jan $165 / 199 strangle for $1.04 credit.
Total credit: $10.22.
Rolled up the put side to $172 for $0.49 credit.
Total credit: $9.18.
Huge rally today...
Moved up my put side to $167 for $0.71 credit.
Total credit: $8.69
Rolled to December $160 / 192 for $1.65 debit.
Total credit: $7.98.
Rolled up the put side to $172 for $0.44 credit.
Total credit: $9.63.
Rolled up the put side to $169 for $0.46 credit.
Total credit: $9.19.
Rolled up the put side to $165 for $0.69 credit.
Total credit: $8.73.
Rolled down the call side to $180 for $0.64 credit.
Total credit: $8.04.
Rolled down the call side to $183 for $0.62 credit.
Total credit: $7.40.