VTS Community,

Today we’ll check in on all our VTS Discretionary Options positions and I’ll show you the simple way that I track them from day to day.  That’s one of the things that I think has surprised a few people who are relatively new to options trading is just how easy it is to follow the strategy once you get the hang of it.  The first trade can be daunting and of course, I’m here to help you through it step by step, but with a couple trades under your belt, it’s smooth sailing after that.

Now don’t get me wrong, choosing the right trades for the right market environment is not easy, that’s really the heart of the options traders skill set and it does take time to learn which is why I tell you what the trade is and why we’re taking it.  I am educating along the way and in time you’ll learn the when and why as well.  However, the actual execution of the trades and the day to day tracking is something that anybody can do.  We have three trades on right now so let’s go through each of them.


Position #18  –  QQQ Iron Condor  (Nasdaq)
+10 x 16 Nov 18′ QQQ 160 Put
-10 x 16 Nov 18′ QQQ 165 Put
-10 x 16 Nov 18′ QQQ 195 Call
+10 x 16 Nov 18′ QQQ 200 Call
Credit:  0.94

The turquoise line is what the trade looks like at expiration, and the much more important pink line is the daily profit/loss curve showing what the trade is at right now.  That’s really all I look at.  We don’t hold many options to expiry, and for Iron Condors specifically, it’s very rare I even let them get inside 30 days to expiry so that turquoise line is irrelevant.  We’re only concerned with the current profit/loss which is the pink line.

For stop-losses, I use my own proprietary formula for calculating how much reward is left in the trade given the level of risk so it’s a little different with each trade, but as a good ballpark rule you can use 1.5x the credit collected.  Since we collected 0.94 for the trade, the stop-loss would be if the option price goes above 1.41.  Since we have 10 contracts, that would be roughly -470$.  Remember 1 contract = 100 shares so we actually multiply by 1000 and not 10.

1000 * (0.94 – 1.41)  =  -470$

I’ve drawn two yellow hash lines on the chart where those stop-losses would roughly be, and the white line is hovering over today’s price.

Low-end stop-loss:  167.70
High-end stop-loss:  191.16
Current profit:  334.89

If the white line representing today’s price crosses over one of the hash lines on either side we’d close it out.  Since it’s in the middle range we’re still in it, and this trade is currently in profit range and getting pretty close to the point where we would close it and take our profit so we can put that capital to work elsewhere.  But that’s all there is to it.  Just draw your lines where the estimated stop-loss will be and track it day to day.  Couldn’t be easier right?


Position #19  –  EEM Iron Condor  (emerging markets)
+10 x 16 Nov 18′ EEM 37 Put
-10 x 16 Nov 18′ EEM 39 Put
-10 x 16 Nov 18′ EEM 45 Call
+10 x 16 Nov 18′ EEM 47 Call
Credit:  0.45

This is also an Iron Condor trade so it’s the same as the first one.  Again as a rough stop-loss estimate, we can use 1.5x the credit collected, which will be if the option price goes above 0.675.

1000 * (0.45 – 0.675)  =  -225$

Low-end stop-loss:  38.80
High-end stop-loss:  44.68
Current profit:  119.90

If the white line for today’s price breaches either of the yellow hash lines for stop-losses we’d get out.  Otherwise, we’re just waiting until we’ve collected enough premium and are ready to move the capital towards a new trade.


Position #20  –  SPY Long Straddle  (S&P 500)
+2 x 16 Nov 18′ SPY 291 Put
+2 x 16 Nov 18′ SPY 291 Call
Debit:  9.10

Our third position is a Long Straddle on the S&P 500.  With these, the daily tracking is the same but the stop-loss is slightly different.  Again though we’re not concerned with the turquoise lines at all, just the pink daily profit/loss curve and the white line representing today’s price.  For stop-losses, we just use 10% of the capital at risk, which in this case is 1,820.  910 per contract and we have 2 contracts open.  Of course, you may have a different amount open so just multiply by your number of contracts.  In our model portfolio:

1,820 * 10%  =  182$

Because it’s a debit spread and not a credit spread, meaning we paid the premium instead of collecting it, all we do here is hover our white line over today’s price and see the profit/loss.  Right now you can see it’s down 77.04$.  If this loss exceeds 182$ we’ll close the trade out.  If we are up money and want to take profit and move the capital to a new trade we can do that too.


So every option trade type has slight differences in how we track them from day to day but more or less it’s the same.  For credit spreads, I just draw the hash lines right on there and update every day.  If it breaches either one I close it out.  For debit spreads where we paid the premium, we hover over today’s price and check the gain/loss.  If it exceeds our stop-loss we close it out.

I began my career with options trading well over a decade ago now so of course, it’s my hope that everybody loves it as much as I do.  Take your time, ask as many questions as you like, and when you’re ready I’m here to help introduce you to the wonderful world of options trading.


Current VTS Total Portfolio Solution Allocations

6.7% VTS Conservative Vol Strategy  –  Volatility strategy for lower risk tolerance investors

6.7% VTS Aggressive Vol Strategy  –  Volatility strategy for higher risk tolerance investors

6.7% VTS Tactical Volatility Strategy  –  Volatility strategy using stock replacement through options

50% VTS Tactical Balanced Strategy

30% VTS Discretionary Strategy

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