In this report
Executive summary

I have had the great fortune of being able to write to you this year in Excell with Options. The goal from the start was to simply offer ideas as to what is possible, not what one should or should not do. We wanted to show the power of using options as a vehicle to express an idea.

As we come to the end of the year, I thought it would make sense to go back through the ideas and see what I did well and what I did not do well. When I worked on the buyside, nothing frustrated me more than salespeople that would throw a different idea out there every day or week and then would never follow up on the idea to see how it performed, or even worse, only follow up when it worked. There was no routine attribution done to see if the types of ideas worked or didn’t work. Therefore, I feel this was important for me to show my clients when I managed their money, and so it should also be important when coming up with possible ideas for all of you.

I am going to go through asset class by asset class, as I thought that would be a more relevant way to approach it. For those that only care about one or two asset classes, you can scroll through to find the one you need. If you want to look through them all, you are more than welcome to. Here we go.

Image 1: Micro Bitcoin and Micro Ether futures YTD


We started the year in January by looking at cryptocurrencies. This was clearly the asset class du jour in 2021 and so we felt this was the best place to start our work. In January, I presented two different ideas, one for retail accounts and one for institutional accounts. The premise was with many potentially negative catalysts in Q1, following a difficult end to 2021, whether the account was retail or institutional, new to the asset or a long-term holder, there was potentially the need to hedge. For retail accounts, I suggested a March put spread collar in bitcoin, selling the 59,000 calls and buying a 43,000-34,000 put spread. The idea was the account wanted to hold longer term but would want to hedge out some near-term volatility. Sure enough, bitcoin did have a weak Q1 but that was only the beginning. With a move from 47,000 to 40,000, the hedge worked, and one hopes anyone that liked the idea set it up again for the next quarter. For institutional accounts, I took a more sophisticated approach and discussed selling BTC puts to buy NDX puts, with the idea that accounts might want to hedge both but the higher volatility in BTC and the strong desire to build a new position afforded this opportunity. Over the first quarter, these two assets moved about the same over the period, showing the sustained high correlation, but yielding no particular benefit to the trader.

In April, I did a more informative piece on using Micro Bitcoin futures to delta-hedge an options position or to scalp deltas on a straddle. I wanted to show traders that there was more to options trading than just breakeven ideas, and once a trade is put on, one can dynamically hedge to improve outcomes. While there was no idea per se, this still ranks as the most popular post Excell with Options (EWO) did this year, and I thank you for that.

Finally, in September I took advantage of two catalysts to express my last cryptocurrency idea for the year. Micro Ether futures and options came to the fore and this coincided with “The Merge,” the major catalyst for the Ethereum Network, as it transitioned from Proof of Work to Proof of Stake. As we sorted through the data, we determined that the volatility around this catalyst was potentially too high, and the move ahead of The Merge may already be taking a lot of the good news into account. As such, I suggested a condor idea in Micro Ether options as a way to fade the heightened focus on The Merge as a catalyst. I discussed a September 1250-1400-1500-1650 condor. The future was 1460 when we wrote about it, with a breakeven on the idea at 1614 and 1286. The September futures settled at 1345, not far from the peak in profits at 1400.

All in all, I would say we had a successful year in cryptocurrencies.

Image 2: Crude Oil and Nat Gas futures YTD


This was the next asset class we moved into this year and did so ahead of the Beijing Olympics and the potential for geopolitical risk, which was already rising at that time. Options are a great tool when there are catalysts and when the potential for risks are not fully priced in. Thus, it made sense to look at what was possible here.

As it was early in the year, our January report on energy straddle the fence a little. I offered up ideas for whether a trader was bullish or bearish crude oil. The bullish view was predicated on heightening geopolitical risk and a risk premium moving into oil. The bearish view was predicated on a rapidly slowing Chinese economy, particularly in the post-Olympic let down. The bullish view sold a 79-76 put spread to buy a 92 call in March. The bearish view bought a March 87 call as a hedge to a short futures position with a resulting small short bias (but essentially a backspread position). The future was 84 when I made both illustrations. Over the coming two months it went to 96 before settling at 92.50. I would say if the trader was bullish, they did extremely well on the zero-cost idea to fund calls with put spreads. Even for those who were bearish, having the long calls as a hedge was enormously beneficial, and the resulting position still made money even though there was a hold to dig out of from the original lean in the wrong direction.

In July, after a year that had already seen enormous volatility in the complex, we suggested that the expectations for OPEC+, based on what was priced into the market, had gotten ahead of themselves. We looked at a 95.50-91.50 put spread for September that had a breakeven at 94.09. After the OPEC+ meeting, the futures moved from 95.00 to 90.77 for the settlement, giving the trader a very nice gain again.

In October, we came to you with two ideas that were similar but in a different underlying. I suggested a crude oil December Christmas tree idea looking for a bullish end of the year trade. The trade had a breakeven at 96 and a peak profitability in the 96-105 range. As I write this, it has not expired yet, but you can see futures are below 80, so the trader would lose the small (1.28 ticks) premium outlay. Fortunately, at the same time we also illustrated a December Jade Lizard spread in Natural Gas. Futures were 6.24 when we wrote it, and the spread took in 1.18. As I write, the future is 6.79 and the peak in profitability is in the $7-8 range, so the trade is looking pretty good at the end of the year.

Maybe a bit more mixed, but still, I think we did well in energy.

Image 3: S&P 500 and Nasdaq futures YTD

Equity Index

I would be remiss if I didn’t spend some time looking at opportunities in the equity market. After all, this seems to be the market that commands the most amount of media attention and where many traders focus their time.

In February, I looked at strategies for trading a volatile market. I illustrated two ideas, one for a trader that is bullish, and one for a trader that is bearish. The first looked at a calendar spread using weekly options assuming volatility would remain high. We sold a March 4 4500 call to buy a March 25 4500 call, reducing the cost of a bullish idea. Stocks moved lower through the period, and we ended up losing the 40 ticks paid for the calendar. That was not a good start. however, I also illustrated a different idea for trading the volatile market and that was to buy a March expiration 4475 straddle. Futures were 4468 at the time. Over the life of the option, futures moved to a low of 4100 and back up to 4410 at settlement. The trader paid 200 ticks for the idea. If the trader had monetized the straddle when it had moved below the breakeven at 4275, the trader would have been able to trade out of the deltas on the way back up to strike. It depends on how well the trader handled the deltas (see the dynamic hedging post above), but given we moved outside the break-even of the idea, I would chalk this up as a winner.

In June, we were back and looking to use daily ES options to trade the June FOMC catalyst. The premise was the market in 2022 had tended to trade down into the event and then rally after the news. We expected a potentially similar pattern and traded a Tuesday to Friday 4125 call spread around the event. The idea was to find a way to express a bullish move on the day of FOMC for the lowest cost. We paid 14 ticks for this idea. In reality the futures had a major move lower, moving from 4110 down to 3650, meaning the trader would lose the 14 ticks paid for the spread. On the positive side, it was a better outcome than if the trader had bought futures expecting the positive move on the FOMC. While it ended up losing some premium, it still worked better than an outright trade.

In September, we were back and looking for ways to play the FOMC catalyst. This time we traded a Tuesday to Wednesday 3975 call spread. However, the premise was a little different. It wasn’t intended to be a directional view but a volatility view. I showed how we could infer that a 2.34% move was being priced in on the day of the FOMC, which was low relative to the moves we had seen so far this year. We wanted to get long volatility for this event and used the calendar to do so. It turns out that the High-Low move on the day of the event was 3.4%, much greater than the 2.34% implied volatility we were able to buy for the event making this a successful trade.

Our final idea for equities this year came out in early December. The premise is we would get a move lower in Q1 of next year. We saw the best way to play this drift lower was to use a March 2023 3900-2700-3600 split-strike put butterfly. It is still too soon to tell if this will be successful.

It was a bit more nuanced in the equity space as many ideas were a bit more dependent on how a trader handled the residual deltas from calendar ideas. However, we were one for two in February, we were better than outright futures in June, and we won in September. This is a pretty good hit rate in a very efficient asset class.

Image 4: Corn, Wheat, Soybean, Feeder Cattle, and Live Hog futures YTD


There was no asset class where we wrote more than in Agriculture. Not only was agriculture part of the original EWO rotation, but for several months we had some Ag Special reports using the end-of-month data that the team at CME Group put out. We ended up writing a total of eight Ag pieces this year, therefore I will not be going into too much detail for each one. In summary, I feel we had a very good year in Ag options.

March was the first piece, and we came out of the blocks swinging with some classic levered account trades to consider. We looked at levering a long Wheat futures position by using a May 1050-1180 call 1 by 2. Futures were 934 when we discussed it and settled at 1174 at the peak of the value of the 1 by 2 call spread. In general, this trade could not have gone better if I had dream of the perfect outcome. We also looked at a corn versus soy relative value idea where we sold a June 1500 put in corn to buy a June 645 put in soy. The idea revolved around the relatively higher implied volatility in corn, the tight correlation between the two, and the stretched relative level of soy in relation to corn. When all was said and done, both options went out worthless and this trade was done at zero-cost. It was a big push overall.

We were back in May for some various butterfly trades that were a bit unusual in either the underlying I looked at or the implementation I chose. In lean hogs, I looked at a June 103, August 108, and Dec 90 calendar call fly, suggesting that the August futures and volatility were too high relative to the months around it. This takes some nuance to interpret how a trader would have handled the deltas after expiration, but if we assume the trader just kept the inherited deltas and did not make any changes, we can see that the idea would behave like a backspread (straddle) until June expiration where futures were 111. The trader would be left 1 future against short 2 August calls and long 1 December call. At August expiration, futures were higher still and the trader would have gotten short 2 contracts from being assigned on the short calls meaning the net position was short 1 future and long one December 90 call. Now, as we approach December expiration, futures are near 82, well below strike. At expiration, the trader can cover the short futures and be flat. The trader took in small premium and, depending on how the delta was handled, probably ended up winning on this idea. The corn idea in May was much easier. It looked at a 760-800-820 split-strike call butterfly. The peak on the trade was 800 and it cost 8 ticks to do the trade. At expiration, we were lower than all the strikes, so the trade went out worthless.

In June, we were fading the move in corn by selling a September 685-715 call spread to fund a 585 put. We did the trade at zero-cost, and it went out worthless without harm or foul. We also looked at buying the September 900 puts on an expected move from the acreage report. The breakeven was 871. Futures were 950 at the time of trade and ended up at 731, which was successful. I would say one for two wasn’t too bad.

In July, we were right on both ideas. We looked for little movement in soybeans out to November by using an iron butterfly idea where we sold the 1400 straddle and bought the 1270-1530 strangle. We took in 94 ticks on the idea and the breakeven of the entire idea was 1495. Futures settled at 1441, close to the peak profitability of the idea. We also looked at a ratio call spread in Class III Milk looking for a levered move higher. We sold one September 20.50 call to buy three of the 22.50 calls and took in 18 ticks to do it. The future was 20.16 at the time of trade. It got up to 21 but settled at 19.83. At least we took in some money on the idea, we walked away a winner, though we didn’t get the big move we wanted.

In August, we were focused on the seasonality in markets. Feeder cattle had negative seasonality but positive technical, so we decided to buy a straddle with futures at 184. The breakevens were 192 and 178. Futures went to a high of 190 and a low of 172 before settling at 176. This idea was a winner for us. We also looked at selling a corn December 700-750 call spread and using the proceeds to buy a 600 put with futures 664. As I write this, futures are 625 with a breakeven at 599, therefore, it isn’t looking bad. I would say we won one and pushed one.

We were winners in September, October, and November. In September, we looked to lever a long position in Wheat futures with a ratio call spread. We took in some premium to do this, and while the future ended below strike, the premium we took in helped reduce our basis. In October, we were back to the relative value ideas looking at corn vs. wheat calls and taking in some premium. Both ended up below strike but at least we made the 5 ticks net. Finally, in November, we looked at selling the December 140-135 put spread to buy 154 calls in live cattle, looking for a strong end of the year. As I write this, it is 153.40, so I can say that was a winner even if we sold the position and locked in premium given we did it at zero cost.

A lot of write-ups, a lot of variety, but far more winners than losers.

Image 5: Silver, Gold, and Copper futures YTD


We made our first foray into the world of metals near the end of March. While we were a little slow in getting here in the first place, we made a big splash with our first idea. The focus of the piece was to hedge the growing systemic or macro risk in the markets. A ratio in the metals that aligns well with this is the copper versus gold ratio. It had not moved as much as other macro indicators so we illustrated selling a June gold 1875 put and use the money to buy a June copper 440 put. Over the ensuing three months, gold was down about 5% and so we lost money on the short put. However, copper was down almost 20% so we made four times on our money in the spread, which we initially did at no outlay. This was a winner for us. Along the same lines, we also suggested to buy a straddle on silver for many of the same reasons. The future was 25.09 and we suggested a straddle with breakevens at 27.23 or 22.78 until the May expiration. We settled at 22.50 or below the breakeven. Another win, even if not as big as the copper versus the gold trade.

We weren’t back to the metals market until August. At this time, we felt that maybe traders were getting a little too pessimistic, which we could take advantage of. We suggested buying two October 375 calls and selling one December 375 call to defray the cost. The future was 3.70 at the time of trade. At October expiry it was 3.50, so below both strikes, thus the October went out worthless and I was left short the December calls. There were two ways to handle this outcome, either spending premium and covering the December calls, which would have resulted in a small loser overall, or I could have also bought some deltas at that time against my short December calls, even if on a delta neutral basis. Futures are now 3.79, meaning right at strike. If I turned this into a buy-write or a short straddle, I am winning right now. Overall, the idea didn’t work for the leverage, but the cost was small. Depending on how I managed the deltas, it could have turned into a big winner.

The last metals piece came out in October. I looked at a bearish gold spread, selling the 1690-1730 call spread to buy a 1590 put for November. The premise was higher real rates, which hurt gold. This did not work at all with futures moving higher to close at 1740 at expiration. This means I lost the maximum on this idea or 40 ticks, the difference between the strikes.

Big winners in March, a mixed bag in August, depending on how you handled it, and a loser in October. Net-net, I think there were gains overall if all ideas were down equally weighted. However, the hit rate was more mixed in the metals market.

Image 6: Yen, Euro, and British Pound YTD


We didn’t start speaking about the Foreign Exchange market until April. I was certainly remiss in doing so because I have strong feelings and ties with FX, having started my career there back in the late 1980s. It is one of those markets that doesn’t always have headline catching moves, but when it does, it is all that people want to speak about.

We began our foray in FX by looking at the market that had arguably the most eye-popping move of any this year. Yes, you can argue stocks, but in some ways, that wasn’t a surprise. You can certainly make the case for bonds as well. However, given the BOJ had to ultimately intervene once (maybe twice) to slow the rise of the USD versus the yen, the moves seen here were among the most surprising. In April, the move above the 35-year downtrend line from 1987 to 2022 caught my attention. With implied volatility surprising calm, and skew not reacting nearly as much as one would think when breaking such a long-term trendline, I decided it was a good time to look at a leverage yen put spread, selling one unit of the 0.0081 yen put (123.45 equivalent) to buy three units of the 0.00785 yen put (123.79 equivalent) for zero cost. The breakeven was 129.50 equivalent (0.00723) due to the difference in the strikes. The trade was done for September expiration. However, once the yen moved, it never looked back. Over the time we had the trade on, spot moved from 125 to 135 (from 0.008 to 0.0074) and the puts we owned finished well in the money for a big winner in our first FX trade of the year.

In the same month, we also looked at a bullish Mexican spread idea, selling one unit of the 0.0470-0.0450 put spread to buy two units of the 0.0525 calls. The idea was that the peso was being held down by fears of the U.S. economy slowing but could be supported and see a move higher given its ties to energy prices. In the end, the crosswinds kept the peso somewhat pinned around 0.050, so the zero-cost strategy went out worthless.

We were right back in the FX market in May focusing on the euro. As we approached the magic level of parity to the dollar, I asked if it was the time to bet against the euro and a break of parity, or if this was the level to lean on to put on a bullish idea. I put out both bullish and bearish ideas at the end of May for a September expiration. While EUR/USD ultimately did break through parity of 1.00 by September expiration, given there were both bullish and bearish ideas, I must call this a push.

In August, we were back and looking at the Yen. At this point, with the BOJ intervening, and given the technical set-up, I asked if it was time to take a tactical view on a strengthening of the yen. The preferred way to express this was with a ratio call spread. Normally, I suggest these ratio call spreads as a way to lever underlying positions. This time I did not do so, instead taking the risk that the yen did not strength too much because levered funds would get back in and short the yen if it moved too high. I spent 28 ticks for an attractive breakeven trade but in the end, the yen continued to weaken and so I lost the premium invested.

Finally, I was back-to-back with the yen (it was the most interesting move this year), but this time I compared it to the GBP market. In November, we were coming off a time when both the yen and GBP had weakened to extreme levels and where the BOJ reportedly intervened again, and where the BOE had to intervene in the Gilt market. Two markets with similar set ups. Were there different opportunities? I thought the GBP had the potential for a move higher and the yen a potential for a continued move lower. I suggested selling a November yen call spread to buy puts, and instead in GBP, selling a put spread to buy calls. The idea was if both continued to weaken, I would benefit from the open-ended nature of the yen puts. If both strengthened, I could benefit from the open-ended GBP calls thinking GBP had the potential for bigger moves higher and the yen the potential for bigger moves lower. In the end, both moved higher, so I lost the 0.000225 difference of strikes in the yen, while making 2.50 on the GBP calls at expiration. Given the correlated nature of the move, this largely ends up being a push.

In total, I had a big winner on the yen at the start but after that, I really struggled with a lot of non-events and even the yen loser in August. The hit rate was not as high as I would like but since I started with a big winner, I still took home some profits at the end of the day.

Image 7: SOFR, Fed Funds, Eurodollar, and 10-year Bond futures YTD

Interest Rates

The last category I looked at is the anchor category for all markets, which is rates. 2022 was definitely a year in which the rates market was a major driver of performance given the changing Fed policy and expectations. We started with both bullish and bearish ideas in February, but then moved into more directional ideas the rest of the year.

In February, I looked at the Eurodollar market and posited that if a trader was bearish, they would be better served by expressing that view via risk reversals than via outright short futures. The market, the skew, was not pricing in the possibility of moves that could happen. With futures at 98.535, I suggested a 98.0625 put versus a 98.9375 call out to December 2022 was a better expression. Given the future is currently 95.17, adding the leverage from the options idea was clearly beneficial for the trader.

However, I also said I gave a bullish idea. The tactical bullish idea was in the SOFR market where I suggested selling the June 99.375 call and buying the March 99.25 calls, paying 3 ticks. The argument was if there was no move from the Fed in March, we would benefit from a move higher with a lower strike on our March calls. However, if the FOMC did hike, they rarely were one and done, so futures would start to trend lower. In March futures were 98.49 and kept going lower. Net, I lost the 3 ticks I had to pay.

In May, we moved further out on the yield curve and looked at trading U.S. 10-Year Treasury moves with T-note options. I again gave both bullish and bearish ideas, somewhat straddling the fence perhaps, but showing traders what was possible regardless of their view. The bullish idea focused on a calendar spread, and the bearish idea focused on a risk reversal. Given a sharp move lower to June expiration, when both ideas expired, the incremental leverage on the risk reversal benefitted the trader, while the calendar spread ended up worthless on both options. I would suggest this was a push overall.

In July, we were approaching the Fed’s Jackson Hole meeting and I thought it was time to look to the SOFR market to trade a potential Fed pivot. The idea had been gaining traction in the market, so I wanted to show traders what was possible in the options market to express a view that had been growing in popularity. The particular details of the trade were as follows: I could sell an August SOFR 97.25 call and use the proceeds to buy a September SOFR 97.4375 call. This trade could be done for roughly zero-cost. The futures settlement in August was 97.15 and for September the settle was 96.52. Zero-cost idea but both end up out of the money. All in all, a push.

For my final idea in rates, I was back in the SOFR market, keeping the focus here as the market transitions to SOFR for short-term rates versus Eurodollars. By this point, the view was that the market had gotten more hawkish then FOMC and implied volatilities were too high. There was a heightened sense of risk at a time we might be at peak Fed risk. If Fed were to pause, or even suggest when a pause could happen, implied volatilities would come lower. In order to express this, I sold March 95 straddle, but I chose to cover the risk of a hawkish Fed by buying 94.75 puts. This was a way to be bearish on vols while covering the biggest risk of the idea. Since this idea was suggested, futures have pinned near 95 for the past month. Thus, I would call this a winner.

A lot of pushes, a winner, and some timely illustrations of how a trader can move into options positions instead of futures positions. In aggregate, I feel I did a pretty good job in the rates market.

Pulling this all together, I am happy with how the journey of Excell with Options went this year. As I said at the start, the goal from the beginning was to educate and not bring directional trade ideas. I pivoted around mid-year to bringing more directional ideas as a way to help in the education process. We covered more ideas in more asset classes than just about any blog on the market, and were clearly successful in cryptocurrencies, energy, agriculture, and interest rates. It was more mixed or nuanced in equities, metals, and FX, but we had some big winners there in the yen and the gold versus copper trade. Overall, far more winners than losers, a good hit rate within and across asset classes. Something to be proud of and to build from.

Most importantly, I hope it shows that options can add value to a trader’s portfolio. I also wanted to show that things are never easy and there will be winners and losers. However, if you structure the idea correctly, and can make more on winners than you give up on losers, you can be a beneficiary overall.

As I look forward to 2023, I thank those of you that have subscribed. If you enjoyed what you have read this year, please share it with your peers so we can spread the word on how to use options in your portfolio.

Good luck trading and Happy New Year!

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