QQQ Core Portfolio Position

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Today I wanted to take a look at my QQQ options position which is the core position of my portfolio. What I mean by “core” is that this is where the bulk of my positive theta is coming from and also the position that I use if I want to adjust my portfolio beta-weighted delta’s.

QQQ Options P&L Curve
QQQ Options P&L Curve

The graphic above show’s an inverted strangle (156 put/152 call) with an extra naked short call (161 strike) as a negative delta kicker. This is a 42 DTE position. Maximum profitability falls between 152 and 156 with $1,475 of credit. Breakeven is 137.50 and 166. The maximum potential credit would be about 8% gain to my overall portfolio. That is a huge gain when you consider this is for a position that will expire in just over 1 month. Also consider that this is not my only short premium position as I also have covered calls on ABBV and a straddle in XLE. Maximum potential profit on all of my current positions is around 15% in just 42 days.

Chart of QQQ Position Break-Even's
Chart of QQQ Position Break-Even’s

I am not trying to count profits that I don’t yet have but rather taking the opportunity to show how profitable option selling can be. In the real world these positions will not always expire at max profit and may require defending and possibly result in a short-term loss.

One key component of this position is that it is generating $20 in daily theta decay. The other is that it is generating almost -40 beta-weighted delta’s. That is important because in my previous blog post I had mentioned that I wanted a portfolio closer to delta neutral, especially while market volatility is as high as it has been. My QQQ position is doing just that as it is generating about 90% of my portfolio’s negative delta’s.

This position will likely remain in place until volatility drops too low. In which case I will switch from dynamic delta’s(via short options) to static delta’s (short QQQ directly). This position may become “less core” as I add on more short premium positions down the road, but it will likely continue to be the dial that I turn to get my delta’s adjusted just the way I want.