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Strategy update: 21DTE to May21, 2021

This week we’ve reached the optimal 21DTE inflexion point for theta strategies, and is a good moment to revisit all our open positions.

Get ready to close, or roll your positions! The time to make a decision for current expiration cycle is almost here.

This week we’ve reached the optimal 21DTE inflexion point for theta strategies (as per TastyTrade folks statistical analysis), from this point onwards theta will start to accelerate, specially the last two weeks prior to expiration, and is a good moment to revisit all our open positions and decide if we should close them, let them ride, or roll them.

This same week coincidentally a big earnings week as well: Amazon, Google, Facebook, Microsoft, Apple, Raytheon, … so we need to be extra careful with volatility and specially with a potential IV Crush.

Current open trades at 2021-04-29

I have started to close all positions that have already reached a 50-60% profit, while is a conservative approach it also frees collateral for potential new trades or purchases that may be triggered by earnings release. For example TME was closed at 50%+ profit a few days ago taking advantage of the general positive market and a couple of positive green days. Then a few days later I was able to re-open a new position for the same strike price, out to the next expiration cycle (June 18th 2021) as the whole market went down.

Follow the trend, don’t fight against it.

Buy-To-Close orders, all of these are currently set to 50% profit, but will need modifications soon

I have updated these trades in the Open Trades page, you will see them striked-through at the moment until I do and post my monthly recap in a few days, so I can move them to the Closed Trades page.

Strategy at this point:

  • 1: From the looks of it as per today, seems I can let PSTH and DKNG to run their course a bit more, specially with the weekend coming over soon that’s a +3 days of theta while the market is closed. I believe I will be able to close these at 50%+ profit next week.
  • 2: AQB May21 is not going my way, I may roll it to the next expiration cycle and join AQB June 18
  • 3: GEO is pretty close to break even for zero profit/loss, I may close it on Monday reducing risk as is below the strike price currently.

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