Started on July 10th 2020. BX stock price @ $53.60. Ended on November 13th 2020. BX stock price @ $56.16
Stock price range during the period was $50.65 low, $59.10 high. Trading within that channel saw a couple of strong up and downtrends (more rolling than I expected).
Opening transaction: Buy 1x Dec 18, 2019; 40 Call (cost $15.75) / 55 Put (cost $6.45) Long Strangle Stock Replacement + Put protection, debit cost $22.20.
Close out transaction was a credit of $17.40 ($15.64 calls, $1.76 puts) – so the Puts suffered more from time decay and a lower VIX (my assumption).
Over the period 49 Buy/Sell (split 50% Buy / 50% Put) transactions made with a net final total profit of $0.76 per contract (10 contracts = $760).
Strategy was selling 1x weekly calls and 0.5x weekly puts – rolling as required.
In this case, Buy and Hold w/o protection would have been a more profitable strategy.
A couple of takeaways, and it is relevant for a #sleepatnight strategy.
- DITM Collar trades pay off more to the downside (the combined short deltas of short calls + long puts) so great for an averaging down strategy.
- Overcoming time decay on the long puts is a challenge and a balancing act, particularly in a period of rapid stock price appreciation as one has to deal with both short calls and long puts being challenged.
- Depending on risk tolerance careful analysis is needed on the strike prices of the short calls and long puts in a collar trade.