Trade Review on Short QQQ Trade

I had an interesting experience on a short trade on QQQ that I thought would be a good experience to journal down.

Trade Setup

On 7 Jan, I entered a 8 DTE QQQ Put Credit Spread (Bull Put Spread). So I'm anticipating a bounce up movement when QQQ dipped on 100 moving average.

Sell 2 x 400 put on 14 Jan @ $14.04 ($2808)
Buy 2 x 390 put on 14 Jan @ $6.95 ($1390)

This gave me a credit of $7.09 per contract, I did 2 contract here. Means I collected a credit of $1418 total.

Assignment

On Thursday, I received an assignment on the 400 put strike. Means I now own 200 shares of QQQ at $400, also means I paid $80,000 for 200 shares of QQQ.

Re-Analyse

At this point I did some re-analysing of my trade.

• I received $2808 credit from the 400 put
• I paid $1390 debit on the 390 put (I still hold this option)
• I got assigned on the 400 put, 200 shares at $80,000
• I see my 390 put in a profit position of $2800 value

So after doing some calculation, if I sold my 390 put option at $2800 I will be owning the 200 shares of QQQ at $75782. Ok let me run through the calculation with the above points.

+2808 -1390 -80000 +2800 = -$75782

So now I know I owned 200 shares of QQQ at $75782, it means my average price is $378.91 ($75782 / 100 / 2)

What to do?

On Friday market open, I sold the 390 put at $2800.

I didn't want to hold the 200 shares of QQQ and I also don't want to simply sell it off at market price. So I looked at what can I do at the options chain.

Since I know my average price is $378.91, as long as I sell my QQQ above that price, I will be at a profit.

I see that the $378 call on that day (0 DTE) expiry was $1.46, so I sold 2 covered calls at $378 strike. I collected $292 ($1.46 x 100 x 2).

If QQQ closes above $378, I will get exercised and sell my 200 shares of QQQ at $378. So that's exactly what happened, QQQ closed at $380.01, my covered calls got exercised and sold off my 200 shares of QQQ at $378 ($75600)

Outcome

So now we see what's the outcome of the entire trade series.

Continuing from owning QQQ at $75782, I then got exercised and sold it at $75600. Not forgetting I collected $292 credit.

-$75782 +$75600 + $292 = +$110

So after all that I actually had a positive outcome of $110 profit.

I have to say it's really confusing to go through that. I believe even simply reading how I journal it above is quite difficult to follow. Imagine I have to do all that WHILE the trade is on and response to it properly.

I thought it's an interesting experience because that original trade of 390/400 PCS should have been a losing trade but turned out it became a profiting outcome after some follow up scenarios.

I believe this is the benefits of understanding options deep enough. When you understand it well enough, you will have more options to deal with your options trade.