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Captain One Lot Strikes Again

Captain One Lot Strikes Again

Captain One Lot Strikes Again

by The MoleMay 1, 2020

This is a quick update on my Tuesday post in which I strongly suggested everyone to detach yourself from trading direction and instead focus on much more predictable parameters such as 1) time and 2) volatility. To that end I introduced you to the concept of selling calendar spreads which is one of several strategies Tony and I have been experimenting with over the recent past. Now let’s see how we fared!

Well I am happy to announce that I’m finishing the week 5 out of 5 – actually it’s 6 out of 6 in that I took out two separate positions in AAPL. Please note that all of those campaigns were placed far OTM from the respective price on Tuesday – thus they did have a directional bias.

Since this was an earnings season experiment I relegated myself to playing Captain One Lot. And as you can see in the featured image I even dressed up for the occasion. Shown above are the respective strategies that were employed:

  1. Short calendar.
  2. Short diagonal.
  3. Short strangle.

The combined profit for all six campaigns was only $504 due to Captain One Lot position sizing but what’s more important as a learnings experience are the profit margins – small but consistent.

  • FB calendar: Sold at a 1.80 credit – bought back for a $1.45 debit = profit 35 cents.
  • AAPL calendar: Sold at a $3.30 credit – bought back for a $2.75 debit = profit 55 cents.
  • AAPL strangle: Sold at a $1.29 credit – bought back for a $0.46 debit = profit 83 cents.
  • BA calendar: Sold for a $4.55 credit – bought back for a $3.25 debit = profit $1.30.
  • TSLA diagonal: Sold for a $5.06 credit – bought back for a $4.20 debit = profit 86 cents.
  • AMZN diagonal: Sold for a $2.65 credit – bought back for a $1.56 debit = profit $1.09.

What’s particularly remarkable here is that price heavily moved against us in three occasions, as was the case with TSLA, AAPL, and AMZN. Nevertheless we were able to eke out a solid profit margin at very manageable risk.

Perhaps this will encourage you to give options trading another chance. While most of you are still focused on gambling on trading direction there is a small cadre of savvy option traders who make bank every earnings season purely by deploying strategies that exploit volatility and most importantly: time.

In the context of this you may be happy to learn that I am currently in the process of wrapping up my Options 201 course which will focus exclusively on vertical and calendar spreads. More news on that front to follow, so stay tuned!

Enjoy your weekend!


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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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