Day 78

Market Recap

The market moved up last week. SPY ($643.23) moved up by ~10 points and QQQ ($577.14) moved up by ~7 points.

• SPY: +$9.69 (+1.53%)
• QQQ: +$6.85 (+1.20%)

Year-over-year:

• SPY: +$93.73 (+17.06%)
• QQQ: +$108.38 (+23.12%)

Trading Update: Aug 11 - Aug 15, 2025

Here is a summary of all trades I made during the week.

• Unrealized Profit/Loss: +$623
• Realized Profit/Loss: +$122

*Spotted an error in the above screenshot, the top row is actually a $145 Strike, not $223 - that was the premium (as is correctly shown in the Credit column).

Trades

I had one open position from last week, and opened 5 new positions this week.

However, my undefined risks caused my buying power utilization to shoot over 80%, and I did not want to go into the weekend with that kind of risk. Yeah, what can I say - I am too chicken to sleep easy with anything over 60% utilization. So I closed a couple of undefined trades, even though they had not yet breached either my profit target or my loss threshold.

I closed 3 of the total open positions, leaving another 3 positions open.

At this time, 2 of the open positions are naked (undefined risk) and 1 has a defined risk, with my buying power reduced to 40%. Ideally, I would like my available buying power to hover around 60%, but anything above that makes me restless and that seems pointless with already so much risk on the line (at least for my psyche).

Considering I have been driving this whole week, I am generally happy with how the week turned out.

This week has been the 4th consecutive week I have realized profits.

Portfolio Status

Closed this week slightly higher than last.

• 2025 Net P&L: Down $2.7K
• All Time: Down $5.9K

Profit and Loss Trend - Monthly - Year to Date

Portfolio Strategy Breakdown

Here's a view showing my Win Rate breakdown by strategy deployed.

Here is a breakdown of P/L by strategies I have used so far.

• Best Performing Strategy: Sell Put
• Worst Performing Strategy: Buy Call (LEAPS)

Plan for Next Week

I still have too much risk - at least one more naked position than I can realistically afford.

So next week I will look to close one or both of the naked positions I have open and switch to perhaps a more defined risk position.

I noticed that on balance I took on more risk than my account size warrants - and perhaps that is the reason I have been more profitable. I need to be able to make the same profits or at least be able to expose myself to the same volatility - but by capping my risk.

It is always a tussle as to what an ideal position size is. And once again, here is a fantastic tidbit from TastyTrade (source here):

For example, if the probability of success on a defined risk spread is 67%, we should lose 1 in every 3 trades over time. If we place 33% of our account in three uncorrelated trades with a 67% probability of success, we have a .33^3 chance of losing all of our money. The probability of this occurring comes out to about 1 in 28. If we are trading actively, this is quite likely! From this analysis, we can safely say that putting 33% of our account in trades with a 67% probability of success will eventually leave us with no capital left to trade. On the other hand, if we put 5% of our account into independent trades with a 67% probability of success, we must lose 20 trades in a row to get wiped out. The probability of this is 1/[.33^(20)] = 1 in 4.25 billion. As you can see, by reducing our capital allocation in each trade (still with 67% probability of success), we have a significantly higher likelihood of not losing all of our capital. For undefined risk trades, the margin requirement is what we must put up to cover potential losses on the position.......

In conclusion, when we are trading defined risk spreads, it's a good practice to consider the probability of experiencing a full loss on a certain number of trades in a row. This can help us determine a proper position size for trades with a chosen probability of success. For undefined risk trades, it's important to be aware of the risk to 2 standard deviations, as this can be much higher than the margin requirement to initially put on the position. In addition, be aware of the fact that the margin requirement for undefined risk trades will increase as the volatility of the underlying increases, and/or the underlying moves towards our short strike. In other words, the margin for undefined risk trades is subject to change often, and it's a great idea to keep capital available to account for adverse changes in margin.

So what does that mean for my current ~8K account if I want to make any profit, say 20%?

Turns out the math is not simple to arrive at. I will dive deep on this next week and share what I learn!

Thanks for following along - see you next week!

📌 Disclaimer: Nothing on this site is financial advice - I’m just here to entertain! Here’s my introduction, my trading philosophy, and some ground rules.