Systematic Put Write - March 2020

Summary

Last Friday was Option Expiration day and it is time to review the movements done following our strategy.

IBEX 35 on March 20th 2020. Source Investing

Total meltdown, panic on the markets due to the COVID-19 and its effects on the health and the economy. The IBEX 35 index closed at 6443 points, losing 3489 points (or a whooping -34,83%).

As I had sold a 9900 PUT for 136,35€, I have to book a loss of -3300,30€ (also a painful -32,24%).

Considering this, since its inception, the Put Write Strategy is at -28,6%. During the same period, IBEX 35 lost -32,5%.

This strategy delivers what it promises: "Equity-like performance with less volatility", so when the underlying equity crashes, we crash too, although less hard.

To make matters worse, the CNMV (the Spanish market regulator) forbid short operations (spanish) on Indexes and derivatives and, although PUT selling is a bullish/neutral strategy, we will not be able to sell a PUT option for April.

Instead, I will have to buy next Monday the underlying future contract to keep the same exposure level during the month of April. For the tracking purposes, I will note the theoretical value of the PUT option, which would be been the biggest one in our history series due to the huge current volatility.

Movements and results so far

I started on August 22nd 2018 selling a 9500 September 2018 Put with the IBEX at 9540. This value will be used as base value from now on. These are the last twelve months (complete records can be found here).

	Option	Spot	Premium	Profit/Loss	Spot Closed
15/03/2019	Ibex 9300 Apr 2019 Put	9330	167,35€	167,35€	9581
18/04/2019	Ibex 9500 May 2019 Put	9581	109,35€	-135,75€	9256
17/05/2019	Ibex 9300 Jun 2019 Put	9256	187,35€	127,35€	9227
21/06/2019	Ibex 9300 Jul 2019 Put	9227	164,35€	164,35€	9170
19/07/2019	Ibex 9200 Aug 2019 Put	9170	144,35€	-390,65€	8635
20/09/2019	Ibex 8600 Sept 2019 Put	9170	202,35€	202,35€	9178
18/10/2019	Ibex 9100 Oct 2019 Put	9178	125,35€	125,35€	9345
15/11/2019	Ibex 9300 Nov 2019 Put	9345	136,35€	97,35€	9261
20/12/2019	Ibex 9300 Dec 2019 Put	9345	161,35€	161,35€	9617
17/01/2020	Ibex 9600 Jan 2020 Put	9617	103,35€	103,35€	9680
21/02/2020	Ibex 9600 Feb 2020 Put	9680	136,35€	136,35€	9932
20/03/2020	Ibex 9900 Mar 2020 Put	9932	143,50€	-3.300,30€	6443
17/04/2020	Ibex 6400 Apr 2020 Put	6443	437,50€	???	???

So, considering this nineteenth month, this is the comparison between the strategy and the IBEX 35 index:

Regarding April, as mentioned above, the theoretical price of the ATM April option would have been 437,50€.

Portfolio

No other position is open right now.

Resources

• IBEX 35 Systematic Put Write Strategy