Ethereum Merge Brief Background Most people are aware of Proof-of-Work (consensus mechanism to validate blocks on the blockchain - this is done with miners solving math problems (work)).  Ethereum, the second largest Crypto Currency is moving from a Proof-of-Work to Proof-of-Stake (consensus mechanism that validates blocks through a validator (like voting) system).   The main reason for doing this is to get away from miners wasting electricity solving useless math problems to a system that doesn't waste energy on miners.   One argument against moving to Proof-of-Stake, is that it becomes more about controlling a large number of validator nodes (so in a sense, the larger validators have more say, whereas Proof-Of-Work rewards are more 'fair' as it is randomly distributed. Either way you look at it being positive or negative, it is an event that can be traded as the current estimated merge date (the date the blockchain switches from Proof-of-Work to Proof-of-Stake...

  The Setup purchased 100 shares of RCL @ $40 sold 35 25 Put Spread and a 40 Call Expiry August 19 for $5.00 the original post is here: https://www.unpackinvesting.com/2022/07/using-options-to-recover-from-big-move.html Management After a month holding and the stock rallying up to around $38, I closed the options for $2.28.  Even though I could have waited longer to see if it goes to zero, I would have much more increased gamma risk (gamma risk is changes in value with respect to stock price, it gets really big the closer it gets it expiration).  I collected a total of $5 - $2.28 = $2.72.  Which is just over 50% of the original option premium for holding the position for about 66% of the time.  Generally, when options get to within 2 weeks of expiring it is a good time to re-asses the structure and potentially close out the trade or roll the position further in time. Takeaway I originally purchased shares for $40, but the price quickly dropped with the volatili...

What is Theta? Theta is amount of value that an option position changes each day due to the passage of time.   For example, SPY closing at 411.99 and Implied Volatility (IVOL) 22.58% SPY 9/16/22 (47 DTE) Strike delta price theta 376P -0.15 3.12 -0.09 440C 0.15 1.97 -0.07 The above table shows that the 376 Put has a theta of -0.09.  This means the option will lose $9 a day (each contract represents 100 shares so -0.09 x 100 = -$9. To standardize, the theta/price is a ratio that can be used.  In our example  -$9/411.99 => -0.02%. Table of Theta for 15 delta Strangles for SPY, META, and IEF Information was pulled from market data on 7/31/2022 taking the initial strikes and seeing how the data changes for different upcoming Days to Expiration (DTE).  (15 delta Strangles for SPY correspond to 376P and 440C). SPY is the most active ETF for S&P 500. IEF is an ETF of 10 year Bonds. META is the ticker for the company formerly known as Facebook. Analysis 1) T...

Portfolio Performance for 1st Half 2022 The information below is purely educational and not financial advise.  Portfolio SP500 60/40 YTD -7.5% -20.6% -17.1% Portfolio Composition As much as I would love my portfolio to be completely rule based and algorithmic, I'm still refining a lot of processes and the environment appeared to have some unique features, but in general I would describe the holdings for the first half of 2022 as the following:     Part 1: long exposure to equities with built in crash hedges (also 0 Bonds)     Part 2: opportunistic short volatility trades The unique features starting at the beginning of the year were:      VIX levels getting close to 30 in January 10 plus year bull market in US stocks (SP 500 - basically straight up since Financial Crisis) Interest Rates being so low for so long Inflation fears Approach for my portfolio, I'm long term bullish (I'm very optimistic technology unlocking more value and produ...

Shareholder Benefits Owning shares of a company can entitle you to special benefits when consuming products or services.  For example, Royal Caribbean Cruises (RCL) provides $100 onboard credit per Stateroom on Sailings of 6-13 nights.  With an upcoming cruise booked and most of my portfolio in cash, I decided to take advantage of this offer.  I've done a few cruises in the past and definitely enjoyed Royal Caribbean, especially having young children; and can imagine I will take more cruises with them in the future. The Purchase of Shares I didn't do any deep Fundamental or Technical Analysis, but looked at a 5 year chart seeing the stock priced at $135 before the COVID-19 pandemic, and during the pandemic reached a low of around $24.  When I purchased the shares it was $40 and dropped in price for the 2 preceding days.  Since I bought at the end of the day, I figured I would sell a call option (overwrite) the next day as the volatility was high around 85%....

  1) Capital Efficient - Larger Potential Profit Buying options, the capital required will be at most the cost of the option contract, as owning an option can only go down to $0.  Because option contracts have a time component and strike component (unlike stocks), it means only option contracts will always be cheaper than owning shares. Selling options, the capital required will be based on Margin Requirements set by the regulators and potentially adjusted by the broker.  The main difference is that initial capital required to sell options is based on formulas trying to target a probabilistic move against the position and not based on the max value the shares could become.  This generally leads to about 1/5 the capital and potentially less if the account qualifies for Portfolio Margin. These lower capital requirements mean that options can have risk that is leveraged to the corresponding stock, meaning less capital is required to taking similar risks of buying stock ...