Right now I have on 12 #Fuzzies and the total amount of hedge/income premium that is sold and pending collection is $11,480 (spread mostly between this week and next week). Here’s why I love Bull Fuzzies:
–Less risk than a covered call (due to protection)
–Way less buying power than a covered call
–Same benefits of a covered call (except dividends)
–Positive Vega/Positive Theta (a covered call doesn’t have positive Vega)
–Better design than many diagonals I see
–When opened using 90-120 DTE but closed before 45DTE I should be able to maintain a really good chunk of the protective put value that would be exposed to theta decay
I know you know all this. Here’s where it gets interesting, and where I expect to now become your “Fade Muse”
i closed the #fuzzybear today. for a decent loss. Listen I hated this trade. I timed it all wrong. I put it on at the bottom of a swing vs. the top. I sized it too big for SPX. I made it a Feb trade so big theta decay was going to start soon on the long put. I’ve realized I like fuzzy setups (long or short) that cover the trade debit in 4 weeks or less, and SPX doesn’t do that. I’ve been battling it for this whole up move. Hedges can’t keep up with it. It’s beyond effective hedge range now. I ran every scenario and I just didn’t see a way out short of a big market crash, all the while theta was burning away. I was running scenarios in my head at night for saving the trade. I’ve been watching this week for a VIX upside warning to hit today (it didn’t). I can see some liquidation breaks hitting the market, but drivers are too strong for a big hit I think. Of course anything can happen, but I don’t want big (BIG) bets on market crashes in my portfolio. Today’s dip gave me the opp I needed to wipe it clean and wait for a better setup in the future.
Paid my 4Q taxes today, so just took the hit on it today. When all the laundry was washed and dried and put away it was exactly a $14K hit (net of premium collected). Luckily all the other fuzzies have been financing that so my account balance has been running in place.