Weekly Option Trades (May 27-31, 2024)

Weekly cashflow of $2,000 with option trades on CLSK, TNA, SOXL, and TQQQ

Disclaimer:

The information provided in this article is for educational and informational purposes only and should not be construed as financial advice or as a recommendation for any specific security or trading strategy. My assumptions and observations were only valid at the time of trade execution and, for this reason, the trades described in the article should not be mirrored. I share my trades and the rationale behind them exclusively for the purpose of teaching technical analysis and option trading techniques.

Summary

This week, markets continued to correct/consolidate to come down from recent extreme overbought levels (from near 100 to about 60), as expected and discussed in previous newsletters. See the SPY ETF charts (S&P 500) below.

A pullback or consolidation is normal and healthy for the bull market to continue.

I ended the week with a cash allocation of around 10% as I added cash-secured puts on CLSK, TNA, SOXL, and TQQQ (see option trades below).

Over the coming days and weeks, I will continue to look for opportunities to?sell new CSPs while also managing my open trades with a focus on the June 21, 2024 expiration date.

Option Trades

I executed the following option trades during the week of May 27-31, 2024:

Trade 1

On May 28, 2024, I added to my CLSK position and sold to open (STO) 10 CLSK cash-secured puts expiring on June 21, 2024 at a strike of $15 for a premium of $0.50 per share and received $500 for the 10 contracts ($50/contract), minus fees and commissions.

STO 10 CLSK 06/21/2024 $15 cash-secured puts ($0.50/share)

Motivation:

• This trade fulfilled my preferred criteria for new cash-secured puts with a delta of <= 0.2 and a monthly return of around 2%.
• Delta (when I executed the trade): 0.19 (81% chance of expiring worthless)
• If the puts expire worthless, it would be a 3.3% return on investment in 24 days
• Based on the IV (implied volatility) at the time of my trade, the expected stock price range by the expiration date was $14.50-$21.50, so the strike price of $15 was near the lower limit of this range.
• The $15 strike price coincided with a major support level. CLSK found support at around $15 in Feb, Mar, and May of 2024 (see the white arrows and annotations in the price chart below). It only got broken briefly during the market sell-off in mid-Apr 2024 during the peak geopolitical tensions in the Middle East. This $15 level may serve as support again should the price come down this much.
• The RSI indicator (bottom chart) was not at overbought levels yet and was still pointing and moving up. However, note that the RSI had made lower highs (see the white dashed line in the RSI chart) and we'll have to see how much momentum the stock has.
• My goal is to close this trade before the expiration date and lock in profits early.
• I’m bullish on Bitcoin over the next couple of years and I wouldn't mind owning CLSK shares at $15, if assigned. Having said that, should the CLSK price challenge the strike price, I would first aim to roll the puts out and potentially the strike price down.

Trade 2

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