Systematic Put Write - August 2019

Summary

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

IBEX 35 on August 16th 2019. Source Investing

After a sizable drop, the IBEX 35 index closed at 8635 points, losing 535 points (or -5,83%).

For this month I had sold a 9200 PUT, so the final result after re-buying the sold option is a loss of 390,65€ (or -4,34%).

Considering this, since its inception one year ago, the Put Write Strategy is at -2,7%.

Ugly end for my first year following this strategy. However, I am quite satisfied with it and plan to continue it for another year, profiting from higher volatility levels caused by these drops (second biggest premium has been received for the September Put option). If we keep these levels by the end of the month,  we will be close to break-even while the IBEX stands close to losing 10% from the initial levels.

Let´s take a look to the last month movement and then review the most important parameters of the strategy after this first year.

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.

Date	Option	Spot	Premium	Profit/Loss	Spot Closed
22/08/2018	Ibex 9500 Sept 2018 Put	9540	129,35€	85,70€	9492
19/09/2018	Ibex 9500 Oct 2018 Put	9492	150,23€	-447,67€	8904
19/10/2018	Ibex 8800 Nov 2018 Put	8904	176,35€	176,35€	9056
16/11/2018	Ibex 9100 Dec 2018 Put	9056	182,35€	-366,85€	8550
21/12/2018	Ibex 8600 Jan 2019 Put	8550	226,35€	226,35€	9078
18/01/2019	Ibex 9000 Feb 2019 Put	9078	146,35€	146,35€	9130
15/02/2019	Ibex 9100 Mar 2019 Put	9130	123,35€	123,35€	9330
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
16/08/2019	Ibex 8600 Sept 2019 Put	8635	202,35€	??	??

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

Regarding September, I have sold again a 8600 PUT for 202,35€. 

Base	Put-write value	Total Premium	Break-even
9540	9285	-55,77€	N/A

Review after one complete year selling ATM Puts

Let´s take a look to how the strategy performed each month compared to the underlying IBEX 35 index:

Premium received each month and PutWrite vs IBEX 35 monthly performances

As you can see, the strategy has outperformed the index 8 out of 12 months. This makes sense given the fact that the index has moved laterally and downwards. The worst that happened was the "V" movement given in December, January and February:

• December´s sell-of meant almost 4% loss for the PutWrite.
• Although the premium received then was rich, a 6% rally followed in January and February, leaving our strategy considerably behind.

The rest of the months were either small losses or small winners for the IBEX, which yield the best results from selling ATM Puts.

Regarding drawdown, the maximum drawdown suffered by the strategy was around 5% while the underlying had a much more painful 10% drawdown.

So, having all these facts on the table and, even when the strategy was not profitable this year, I intend to repeat it for another year. It requires no extra work than rolling the options and suffers way less volatility than being invested in the underlying.

Portfolio

No other position is open right now.

Resources

• IBEX 35 Systematic Put Write Strategy