September is officially in the books. And that means it’s time for another retrospective. Here’s how my trading went last month.

Theme of the Month

Pull up a chart of SPY, QQQ, or IWM and survey the behavior in September. You’ll discover it was a premium seller’s paradise. Low volatility? Check! The SPY traded in a range of $6.87 which translates into 2.37%. If you can’t make money as an options seller in that environment then something is wrong with your process. As for implied volatility, we saw not a whimper. The IV Rank for the S&P 500 entered the month at 13% and exited at the same level. Here’s a formula you can memorize:

No price movement + No implied volatility increase = Easy money for premium sellers.

Worrywarts and seasonality sleuths should be happy that September, a month known for many crashes of years past, has come and gone without incident. Now let’s see if October can also shake-off any weak winds that blow its way.

What I Did Wrong

At the risk of tempting fate here, I’m going to say I can’t find anything I did wrong last month. It was an onslaught of winning. The amount of gain wasn’t anything spectacular – I’ve had more profitable months this year – but the win rate was smile-inducing. The only loss I can find is a short call I sold in EEM to hedge an existing short put position. I ended up taking a small loss on the hedge but was still overall profitable with my EEM position.

If you focus on high probability, premium selling strategies like me you’re bound to have the occasional month like this. But don’t rest on your laurels. The Midas touch will leave you and losses will return. I guarantee it.

What I Did Right

This one is simple. I played and got paid. I followed the rules, managed properly, and reaped the rewards. Months like this are, dare I say it, boring. I received good feedback from last month’s piece where I included the trades taken so I will mention September’s trades below. Remember, these are not recommendations. I know as a new trader it was always interesting to see what other people were trading so consider this a peek behind the curtain to see what patterns I thought were worthy of speculation.

Iron Condor: RUT (Another win for Cash Flow Condors)

Covered Call: IWM (Hello, Bear Tamer)

Naked Puts: XOP, EEM, AMD

Bull Puts: FB, AAPL, NVDA, GOOGL, SQ

Bear Calls: BABA, FXI, GDX

Bear Call Diagonal: AMD

Put Calendar: AAPL

Trade of the Month

In case you missed it I already provided an overview of two trades taken this month over in the Options Theory blog. You can find them here and here. One of the quickest profits I grabbed in September came from Square (SQ). On the 24th, SQ formed a beautiful hammer candle at the end of a bull retracement setup. I elected to sell an Oct 80/75 bull put spread for 83 cents.

The very next day, SQ shot higher by over 10% amid heavy accumulation. Put premiums were squashed, and within a few hours the bull put had fallen to 33 cents. I exited with 50 cents in tow, netting a one-day 12% return. It is very rare for me to capture such a quick gain but that’s what happens when your stock pole-vaults double digits the day after you enter.

It’s worth noting that had I not entered on the hammer candle, I would have missed the up gap the following day. This is one of the benefits of entering on the potential reversal candle and not waiting until the next day. Last week’s pullback in DIA and today’s up gap to trigger the bull retracement pattern are yet another example.

If you missed last month’s retrospective, you can find it here.