Trading on Margin: $828.46 Profit Breakdown

I have to start off by saying that because I’m not your Financial Advisor, none of this should be taken as Financial Advice… I’m just sharing what’s worked for me so that you can get an idea on the various different ways you can make money in the markets.

It’s been an interesting past couple of weeks…. Lots of volatility which is great if you’re an Options Trader, but can be very tough if you don’t have Liquid Cash to deploy into the stocks that are on sale.

This past week, I had a lot of my Capital tied up into a handful of positions and found myself unable to do anything.

I was just sitting on my hands while every single stock was slowly tanking, unable to take advantage of the high Implied Volatility in the markets.

I knew I had to do something, so I enabled Margin and that’s where my perspective changed on it entirely…

If you’re new to the Markets, using Margin is borrowing funds from the brokerage to fund your stock purchases. If the purchases you made go down significantly, you’ll get a Margin Call and be forced to deposit more money into your account.

It can be very messy, but Enabling Margin to Sell Options helped me continue Trading while my liquid cash was tied up.

What really opened my eyes was that:

Margin is only considered to be used when you make a Purchase.

Meaning, that if I sell Cash-Secured Puts (using the brokerage’s money), and they don’t get assigned, the margin balance is $0. It’s as if I wasn’t using it at all…

It all depends on your risk tolerance, but when Healthy Companies are -20% in a few days, it starts to look attractive to me.

Here is a breakdown of the trades I took this week:

The Margined Trades:

HIMS

I sold the 35P, 38P, 40P, & 38.5C. Total Profits were $271.70

• HIMS had great earnings on Monday, and then the stock proceeded to lose 50% of it’s value in the coming days… I had no position because I knew the expectations were high going into the Report

• The day after the earnings had dropped, I swooped up 100 shares at around ~$38/share and immediately sold the Covered Call to protect my downside risk

• I started to sell the puts when HIMS went up above the $38.50. Rather than roll the 38.5C, I knew that I’d rather take the small wins and get out because I had actually used the margin for those shares and will be paying interest if I hold them for a while

This might not seem like a lot of money or a big deal but you’ve got to realize that I didn’t use any of my own money for these trades… The Cash-Secured Puts alone would have tied up $11,300!

HOOD

I sold the 43P and the 51C. Total Profits were $124.84

• I used Margin to buy 100 shares ~$50.23 and immediately sold the 51C.

• On Wednesday, I saw that HOOD was hovering in the low $40s, so I decided to sell the 43P

When I was thinking about selling the CSP, I saw that HOOD had fallen $10 in a span of 2 days. I knew the stock price was set for a rebound so I was okay with the idea of using the margin.

What makes these trades especially appealing is that when the stocks are dropping very rapidly, you’ll see the IV be very high, so the Risk to Reward becomes a bit more attractive.

The only downside is that the stock can continue to fall, so you’re going to have to sell Options that have expiration dates that are quickly approaching (I typically sell weeklies the week before, but for the Margined Options the expiration date is usually 2-3 days away).

If I got assigned on either of these and the stock continued to decline, I would be Selling Covered Calls and Cash-Secured Puts to lower the cost basis of the position and continue to collect premiums.

AMD

I sold the 99P. Total Profits were $26.92

• In hindsight this one was a bit riskier than I liked it to be… I only held this overnight and immediately sold it when I woke up the next day

• The selling was overdone, and I sold the 99P before closing on Thursday.

I should’ve waited to see what would happen at $100 because it’s a psychological level and the close under it would’ve invalidated the trade but I had a feeling that it would have a quick bounce next day.

Had I not closed it out, I would’ve been assigned those shares and it wouldn’t be the end of the world but I’d be holding them for a while with how the sentiment is around that stock.

The Non-Margined Trades

SOFI

I sold (13) 17.5C, & (5) 15C. Total Profits were $116.80.

• Nothing special about these trades, just a few Covered Calls to collect rent from the shares that I own.

AMD

I sold (2) 120C & (2) 119C. Total Profits were $95.68.

• The 120C was closed before NVDA earnings, but immediately after them I opened the 119C to squeeze some more juice out of the position

• The sentiment is bad, but the fundamentals are great so I’m a buyer

Hedges:

UVXY

I had (2) 21C & the 19.5C both get called away. Total profits were $81.76.

The Volatility finally came and took away my shares. I’ll be looking to pick up some more shares of UVXY under $20.

SOXS

I had the 23C expire worthless. Total profits were $6.92.

I would’ve collected more premiums here, but the problem with this trade was that I had sold it when Volatility was low, and then after NVDA earnings the entire sector took a plunge.

I’ll be looking to sell ATM Covered Calls on this to take advantage of the premiums.

SQQQ

I had (4) 29.5C get called away. Total profits were $103.84.

I’ve had these shares for a long time, so I’m happy to see them get called away. Even if I left a lot of money on the table, I still made a profit.

The goal with these hedges is not to make a ton of money, but to cover your risk in case of a downturn. You can think of them as a store of value or insurance policy. Your money’s safe in these.

I dont have any plans to get back into Hedges right now, unless they become cheap again.

Thoughts on the next few weeks:

It’s looking like an exciting time to have Dry Powder available.

There are already a handful of Deals on the market for Long Term Investors.

More deals will be coming over the next few months, so don’t bite off more than you can chew.