Thoughts of a mechanical engineer turned programmer turned statistical investor. Here to save you from making mistakes I made at the beginning of my investing career.

Weekly summary and portfolio review

How do you summarize the week that just on Friday the nasdaq went down 4.2%, the VIX went up 7% ending above 33$, and where my portfolio lost 28,700$ in value? It was a hard week.


In fact, in the last 2 weeks my portfolio went from 531k to 490k, so down 41k, or ~8%. It feels shitty, for sure, but considering the nasdaq went down from 14,300 -> 12,890 in the same time, which is ~10%, honestly its not that bad. Lets compare perforamance to the indices, YTD:

But VIX above 30, significant drawdown of value, earnings weeks, mean it’s a good time to go over the portfolio and see where I stand in terms of positions, and if something needs to be adjusted:

The positions I currently hold are showing $47k paper losses. $42k of those are lost on my positions in AMZN ($29k), TSLA ($8k), and MTCH ($5k). The other ~15 positions have lost together a total of $5k or ~1% of my portfolio, so to make this post a tiny bit shorter, and considering the nasdaq is down 10% in the last 2 weeks, lets leave those positions alone as they are performing quite ok, and deal with the 3 main losing ones first.

AMZN:

So the reason I lost so much money on these positions is because they reported and dropped >15%. But lets look at the actual positions and see what is happening (and we can ignore the call positions as they were part of a debit butterfly spread which cost ~1200$ and we can write them off as lost):

Expiring on May 21 (21 days), I currently have: (and these paragraphs are a bit technical, but if you’re interested in learning about options I highly recommend buckling down and focusing here because I explain quite clearly and if something is unclear hit me up in the comments):

1 x 2600-2500$ bear put spread (BPS) – This spread is currently worth $5K and assuming AMZN stays below 2500 on expiration will be worth $10K so 5K to gain in the coming 3 weeks.

1 x short $2500 put – This position lost $7k, and the reason for that is obvious.. I sold the put on AMZN when it was around $2850 and it dropped to $2450 after reporting earnings. But let’s be realistic here, AMZN isn’t going bankrupt this month, and is now trading around 2450$, down from ~$3700$ ATH. So AMZN is now in a 33% correction. And granted, if I wanted to open an AMZN position now, after the 33% correction, I wouldn’t sell 2500$ may puts… I would sell 2000$ June ’24 puts, or maybe even 1800$ June ’24 puts. But if I had waited for a 33% correction in AMZN before opening a position in them, its very likely I would just keep waiting forever, for a pullback that never came. Or the pullback may have come after much more than 50% increase in stock price, so even a 33% correction only brought it down to where it was when you could have initially invested. So knowing what I know now, after AMZN reported and is sitting in a 33% correction from its ATM, and that the whole nasdaq is in a bit of a downturn, with the VIX above 30$, and considering the short put position is hedged with the BPS above which will make another 5k$ in the same time frame if the puts don’t expire worthless, I feel comfortable leaving this position for now. All that’s left in the short puts is basically time premium, so if AMZN stays exactly where it is now, I will make another 10k$ on this position. Its only if AMZN goes down another 100+$ from here will the position be in a worse place. So for now lets see what happens with the market, and with AMZN specifically, in the coming week, and revisit the position next weekend.

The calls we’ll ignore as they will expire worthless, so taking the loss on the ~1200$.

Other than that there are June ’22 expiry positions:

2x 2600-2560$ BPS – currently worth 4800$, will be worth 8k$ if AMZN stays below 2560 through June expiration, so ~3k$ to gain on this position.

1x short 2560$ put – This put is also showing ~10k$ in paper losses, but the story here is similar to the previous put. Its mostly time premium at this stage, and add to that the high VIX of the market and we get a position which even if the stock stays the same, will decay very fast. If AMZN does continue going down more, the move would be to roll the puts out and down in strike, possibly to join the other 2024 short puts I already sold.

Other than that there’s Jan ’24 short 2000 puts, which are showing 10k$ paper losses as well, but honestly, that position expires in almost 2 years, and is all premium, so on track to make ~20k$ until expiry. 

So having gone over the AMZN position and realizing really its not actually in such bad shape, that leaves us with TSLA and MTCH, 2 companies which (along with AMZN) I feel very confident in their future.

TSLA:

Ignoring the BPS as its irrelevant here, the position is 4x short June ’24 450 puts, and even with TSLA trading at 870 (off from 1250$), are still 100% time premium, and TSLA would need to drop another ~50% from here before they go ITM. So the losses are mostly just because of the high VIX environment, and will decay significantly even if the stock stays the same but the market stabilizes. 

MTCH:

5x Jan ’24 short 90$ puts – with MTCH trading at ~80$ and down >50%  from their ATH, it makes sense this position lost a bunch of money. But even with MTCH down >50%, these puts only lost ~45% of their value, and still most of it is time premium, so will decay as long as MTCH doesn’t continue going down further. And this is a position which I would feel perfectly comfortable doubling down on if the need would arise, as its a relatively small position and a company which basically holds the future of online dating. 

So to summarize: the vast majority of the loss in value of the portfolio is due to 2 things:

  1. AMZN reported earnings and dropped 15%.
  2. The currently high VIX environment in the market, which when you sell options as a strategy, even if the options are on track to expire worthless, they will show (sometimes significant) paper losses while the VIX is so high. 

But looking at the actual positions, they seem to be on track with no reason to adjust for now, assuming the market doesn’t drop another 10% in the coming 2 weeks. 

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