Market Movements

^{*Weekly Return is calculated as market open of the previous Wednesday, to market close this Tuesday (yesterday); Current Level is Tuesday’s (yesterday’s) close.}

Weekly Rollout

• U.S. stocks notch fresh records as tech and chip names surge ahead of the next Fed Rate Decision.

• Trump announces a 10% tariff increase on Canadian imports following a Ronald Reagan-referenced ad.

• The government shutdown drags on…

• Gold falls to a three-week low, extending its slide as risk appetite ticks up.

• Amazon is cutting about 14,000 corporate jobs amid a fresh focus on AI and efficiency.

• Soybeans surge on more friendly U.S.–China trade talks.

• Tech earnings are back; Here’s what Cramer thinks (oh boy).

• Options traders brace for a Microsoft swing ahead of their earnings—the biggest in over a year.

“Good-To-Know’s”

In WWII, the air force was trying to determine which parts of their planes needed increased armor based on where they were shot. Using the data they collected from their fleet of damaged planes, they determined that most were shot in the wings, and there was very little damage done to the engines.

Based on this information, it would seem logical to armor the wings and not the engines.

But that’s exactly the issue—the planes that took damage to the engines didn’t make it back. This analysis was biased to the fleet of survivors, not considering the missing non-survivors.

This is mistakenly echoed when comparing mutual funds or hedge funds. Analysts focus on the top performers still in existence, ignoring those that have closed or underperformed. As a result, average returns appear inflated, painting a misleading picture of how difficult consistent outperformance really is.

Be cautious of this.

Quote(s) I Like

Thought Throttle

So many traders repeat the same mistakes, and despite the abundance of information and historical lessons available today, those errors keep resurfacing.

As the old saying goes, “most men learn from their own experiences, where a wise man learns from the experiences of others.” So, here is some wisdom that may help.

Consider these three things that new investors and traders can’t seem to shake:

Selling Too Close to Earnings

…Especially when you are new to selling options. IV Crush, which is the sudden drop-off in implied volatility and an option’s premium (good thing for sellers), isn’t just easy money for the option seller. There is a reason that the return is higher.

The risk is also higher. Volatility can be tricky. Most traders starting to sell options are not fully knowledgeable about the risks involved, and thus do not evaluate these opportunities correctly.

And just because IV is higher, this does not mean that it is “too high.” The market may very well be pricing in the uncertainty properly. It could even be pricing in too little uncertainty, even though it is elevated relative to the average.

This isn’t to even mention the gamma risk, pin risk, liquidity deterioration, etc. Best to stay away until you have a firm understanding.

Ignoring the Liquidity

Not every stock is attractive in the options department.

You may have found the most attractive small-cap stock that you are extremely bullish on and believe in wholeheartedly. But, sometimes the liquidity just isn’t permitting for options.

Bid-Ask Spreads certainly can break ya! If you have to pay essentially a 10% fee to enter and/or exit your trades, it’s really, really hard to be profitable, much less to beat the market.

Some stocks are better to simply own for now. Maybe one day their share price will soar, and with it, their liquidity. Until then, best to be bullish the old-fashioned way.

The same principle can be true for different varieties of an underlying’s options. For example, too far OTM or ITM will have less liquidity. The same goes for the extremes with expirations.

The importance of liquidity cannot be stressed enough.

Catching Falling Knives or Ignoring Trend/Momentum

“This time it’s different” are the four most expensive words in trading. When a stock is in free fall, it’s tempting to think you’re getting a bargain or that the premium justifies the risk.

Often, the fundamentals and core business deteriorate, and your “discount” becomes a trap. Just because something is oversold doesn’t mean it’s done falling.

Fundamentals shift, sentiments unravel, and technical support can fail faster than you expect. Selling puts into heavy downside momentum should be left to those with plenty of market experience.

Patience is underrated. Wait for the right moment. You don’t need to catch the bottom to profit. While you're starting, especially, the trend is your friend.

Bonus: Not Having a Plan

Building wealth (and keeping it) doesn’t happen by accident. Every consistent trader operates from a plan. Clear rules, measured risk, defined exits. Without structure, luck looks like skill right up until it doesn’t.

A defined plan turns randomness into repeatability.

Trade Mechanics

Cash-Secured Puts

Tesla (TSLA) is currently trading around $460.55. If we’d like to own shares at a bit lower price, we could sell the November 21, 2025 $425 put (~25 delta), receiving about $11.10 in premium.

If TSLA stays above that strike, the option expires worthless, and we keep $1,110 in income. This is a roughly 2.5% return in 24 days (~45.58% annualized).

If it drops below the strike, we’d be assigned 100 shares at $425, giving an effective cost basis of $413.90.

Clean, defined, and patient.

2.0 Version: The Covered Strangle

If we already own 100 shares and wouldn’t mind selling at a slightly higher price, we could pair that short put with a covered call. We could sell the November 21, 2025 $515 call (~25 delta) for about $9.80 more in premium.

That brings the total collected premium to $2,090. This is a return of about 5%, annualized to ~111.5%. Not too shabby.

At expiration, if TSLA is:

• Below $425 → we buy more shares at $425 and keep the premium income.

• Between $425 and $515 → both options expire worthless; we pocket the entire $2,090.

• Above $515 → we sell our existing shares at $515 and still keep the premium.

The setup balances income from both sides, but it isn’t without risk. A sharp drawdown can tie up capital for months, and a runaway rally caps upside.

Manage size, respect margin, and stay alert.

This is for educational purposes only—not a trade recommendation. Remember to always do your own due diligence and consult a financial advisor before making investment decisions.

Throttle Q&A

Expected Returns of Selling Options Compared To Dividends

Dividends typically provide steady, reliable income, with yields ranging from 1% to 4%, depending on the industry. They are considered lower-risk but offer more predictable returns.

Options premiums can provide higher returns, especially in range-bound or volatile markets, as they depend on factors like stock movement and volatility. Many options sellers shoot for a return of ~2-3% a month, though not always achieved due to the volatile nature of options.

Basically

• Dividends: Steady income, moderate returns.

• Options Premiums: Potentially higher returns, higher risk.

“I Have a Small Account; How Can I Get Started?”

1. Build capital patiently. Give yourself enough cushion to sell options responsibly and strategically. Building big things takes time.

2. Focus on consistency. Stack small wins instead of chasing big paydays. Remember that it is a marathon, not a sprint. Let time and compounding do their thing.

3. Keep learning. The more you understand the mechanics, the more disciplined you’ll become in your efforts.

Note from the Editor

This edition was intentionally shorter than usual.

Theta Throttle typically runs around a 12-15 minute read. However, this week we decided to condense the information, focusing on clarity and key takeaways.

If you liked the tighter format (or prefer the deep dives), let us know—your feedback helps shape future editions.

Either way, don’t worry. The quality and level of detail will not be lessened.

Onward.

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Disclaimer

The information provided in this newsletter is sourced from reliable channels; however, we cannot guarantee its accuracy. The opinions expressed in this newsletter are solely those of the editorial team, contributors, or third-party sources and may change without prior notice. These views do not necessarily reflect those of the firm as a whole. The content may become outdated, and there is no obligation to update it.

This newsletter is for informational purposes only and does not constitute personal investment advice. It is not intended to address your specific financial situation and should not be construed as legal, financial, tax, or accounting advice, or as a recommendation to buy, sell, or hold any securities. No recommendation is made regarding the suitability of any investment for a particular individual or group. Past performance is not indicative of future results.

Options come with inherent risks. We strongly advise you to consult with a financial advisor before making any investment decisions, including determining whether any proposed investment aligns with your personal financial needs.