In retrospect, I think there are a few lessons learned from the adverse test for the high probability option selling strategies:
- Don't panic in the market extreme events and use trading rules to guide the reaction
- Trade a strategy only if you feel confident about it
- Keep sufficient capital to fight the adverse events (I'm still working on it)
- The high probability strategy can have large temporary losses (3 x potential profit this time)
- Profits can be earned even if price projections are wrong at times
- Refrain from over-adjustments
I had the thought of making adjustments if TLT reached and stayed above resistance level of $119. Had I done it, I would have sold TLT calls with lower strikes which would gave me larger temporary losses. It would be a bit more difficult to reach the 50% profit with the lower short call strikes. After reviewing my trades here, I think I should stick to the adjustment rule based on the Delta of short strikes, rather than support/resistance levels obtained from technical analysis.