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Optionstrategies

Rolling (IRA): SPY February 18th 335 to 362... for a 1.21 credit. Comments: Adjusting a rung of my longer-dated premium-selling strategy in SPY* to lock in realized gains and take advantage of this higher volatility environment. I've collected a total of 18.03 (See Post Below) + 1.21 or 19.24 with rolls with this contract relative to a current short put value of 3.66, so have realized gains of 19.24 - 3.66 or 15.58 ($1558) so far. Will generally look to roll at 50% max. * -- The basic strategy is to sell the shortest duration premium in SPY at 16 delta or less that is paying at least 1% of the strike price in credit and to roll intraexpiry (as I did here) or from month to month at 50% max (i.e., when the short put reaches 50% profit).
AMEX:SPY
by NaughtyPines
Rolling: KWEB December 17th to January 19th 43 Short Put... for a .56/contract credit. Comments: Rolling out at >50% max here for a realized gain and a credit and without taking on additional risk. I originally filled this a 1.04/contract credit (See Post Below), so have collected a total of 1.56 relative to a short put value of 1.04 (i.e., realized gains of 1.56 -1.04 = .54/$54). Implied remains relatively decent here at a 30-day of 45.4%. If it had dropped below 35%, I'd probably just take profit and move on.
AMEX:KWEBLong
by NaughtyPines
The Weeks/Months Ahead: DCA Using Short Puts/Short Put VerticalsNow that I'm retired (whee!) and in the process of rolling my employment-based retirement account into my IRA, I need to think about deploying that buying power somewhere. Traditionally, I've sold primarily short puts in broad market as a way to emulate dollar cost averaging (DCA) into the broad market versus just buying shares and, if assigned stock, proceeded to sell call against at or above my cost basis. I'm pretty much going to continue doing that here, along with getting into some high implied volatility exchange-traded funds (e.g., ARKK, See Post Below). SPY, after all, isn't paying all that richly here, with the September 17th 400 short put paying around 4.00 or 1.01% (5.42% annualized) in premium as a function of notional risk, which isn't exactly going to rock anyone's world. In comparison, the ARKK September 17th 102 short put is paying around 1.99 or 1.99% (10.68% annualized) in premium as a function of notional risk. Naturally, that September 17th 400 short put is around the 17 delta, so I could conceivably sell closer to at-the-money to force a bigger credit, but my basic philosophy is one of consistency: Sell the 16 delta. It pays what it pays. Sometimes it will pay more. Sometimes less. We're just in a "less" phase at the moment. Additionally, I'm at a stage where I'm less concerned about ROC %-age and more concerned about "Is this making enough in pure dollar and cents terms?" If 5.42% annualized does the trick, well, then, I'm totally fine with that, even if it isn't the kind of returns people want to see out of their retirement portfolios. Granted, SPY now qualifies as a "large instrument," so short putting it isn't going to be an option or desirable for the vast majority of individuals, particularly when the ROC %-age isn't all that sexy. Enter the short put vertical, which is easier on the eyes from a buying power perspective and has better ROC %-age metrics. Slap a long September 17th 395 long put on that 400 shortie, and -- voila -- you get a defined risk setup costing 4.53 ($453) to put on with an ROC of 10.4% at max (55.8% annualized). Too weenie? Go SPX 50-wide, with the September 17th 3950/4000 paying 4.50 at the mid on a buying power effect of 45.50 (9.89% ROC at max). Up to this point, I've been doing a mix of both, reserving the 50-wides for <45 days' duration (See Post Below for one of my standard 50-wide SPX spreads) and the short puts for longer. In the very small account I've been posting trades for (See Post Below, QQQ August 13th 327.5/332.5 Short Put Vertical), well, I'm pretty much relegated to spreads, since there's little buying power available to do much else. From a trade management standpoint, I've been doing the following: (a) Rolling the broad market short puts at 50% max and, if assigned, taking on shares and selling call against at the strike at which my short put was. For underlyings that are less liquid, I lean toward taking them off on approaching worthless, even though this generally ties up buying power for longer. On occasion, I've been rolling the short puts up intraexpiry, (See Post Below, rolling the December 240 to the December 297); on others, out in time. (See Post Below, rolling the August 20th 381 to the September 30th 378), with where I roll primarily having to do with what the 16 delta strike is paying. If it's paying <1% intraexpiry, I've generally been rolling out. (b) Taking profit on the short put verticals at 50% max, loss at 2 x credit received. One of the reasons I just take loss on these is that rolling a spread -- particularly one that is in the money -- can be pesky if your aim is to receive a credit on roll. If it's in the red, you're going to realize a loss on roll anyway, so you're generally better off just taking it and then reentering with a higher probability setup. Naturally, there are some potentially subjective elements to that decision-making process (e.g., what is the probability of profit at that juncture in time, how much time is left in the setup, how do the strikes set up relative to support/resistance, etc.), but I like to stay mechanical and taking loss at a given metric makes for a "clean" decisional process. (c) On approach of lengthy vacations, my tendency has been to flatten out of the spreads, since they're not nearly as "set and forget" as the short puts. Since I have to be fine with getting assigned shares on any given put contract, I can walk away for lengthy periods of time, after which one of two things happen: (1) the contract expires worthless; or (2) I'm assigned shares. Naturally, if I'm away and get assigned and don't cover immediately, I'm potentially out of some short call premium, but it's not the end of the world. You do not want to walk away from a spread that could end up in the money and convergent on max loss, particularly if you're not prepared for the buying power effect of being assigned shares on the short option leg of the spread. There isn't assignment risk with SPX options (they're cash settled, after all), but still, waiting to take something off that is convergent on max loss is no bueno. As usual, we'll see how things go. 2020 was fantastic for anything "bullish assumption," with 2021 being more of the same through the first half of the year. Naturally, I don't need broad market to continue ripping higher to make money with these basic strategies; sideways will also do.
AMEX:SPYLong
by NaughtyPines
5
Rolling (IRA): GLD July 16th 166 to July 23rd 166... for a .36/contract credit. Comments: Here, just rolling the short option leg of my GLD diagonal (See Post Below) while price is right at the short call strike to bring in a little bit more credit, reduce cost basis further, and improve my break even a smidge. I originally filled this for 14.24 (See Post Below), so my cost basis is now 14.24 - .36 or 13.88 and my break even 150 (the long call strike) + 13.88 or 163.88. Max profit potential now the width of the spread (16) minus my cost basis of 13.88 or 2.12.
AMEX:GLD
by NaughtyPines
Rolling (IRA): SPY August 20th 381 to September 30th 378... for a 2.04 credit. Comments: Mechanically rolling at 50% max. Here, I'm rolling out to the quarterly expiry strike that pays at least 1% of the strike price in credit (the September monthly is getting kind of crowded), which happens to be a lower strike. Credits collected so far: 16.31 (See Post Below) + 2.04 = 18.35 relative to a current price for the September 30th 378 of 3.77, so I've realized gains of 18.35 - 3.77 = 14.58 ($1458).
AMEX:SPY
by NaughtyPines
Opening* (Small Account): SPY July 30th 397.5/402.5 SPV**... for a .52 credit. Comments: A continuation of my "small account" thread, utilizing short put verticals to emulate dollar cost averaging into the broad market. (See Post Below). Sold the 20, bought the 17 to receive a credit >10% of the width of the spread, immediately doing a "good until cancelled" order to take profit at 50% max. Trade Metrics: Max Profit: .52 ($52) Max Loss/Buying Power Effect: 4.58 ($458) ROC at Max: 11.4% ROC at 50% Max: 5.7% ROC at Max/50 Max as a function of Net Liquidity: 2.45%/1.22% ROC at Max/50 Max as a function of Net Liquidity Annualized: 19.0%/9.5% Current Net Liquidity: 2126.22 Current Available Buying Power: 1216.21 Percentage of Buying Power Deployed: 42.8% * -- Late Post. Opened on 6/11. ** -- Short Put Vertical.
AMEX:SPY
by NaughtyPines
Opening* (Small Account): SPY July 23rd 393/398 SPV**... for a .54 credit. Comments: While I'm waiting on various setups I've got hanging out there, I figured I'd start up a thread of sorts for a small account that is on the other end of the account-size spectrum from my IRA/retirement account posts: a small account I opened for a future grandkid or grandkids. There isn't much in it at the moment (around $2000), so naked short putting most instruments will be out of reach. Consequently, I'll have to use other tools in the tool kit. Here, to emulate dollar cost averaging into the broad market, I'm using a short put vertical in SPY and shooting to receive at least 10% of the width of the spread in credit, much as I've done with SPX 50-wides in my retirement account. These are just a smaller version of those. Right out of the box, however, I ate up about 22% of the overall buying power in the account (($446/$2000) = 22.3%), so the other thing I won't be able to do here is put on a ton of trades in it; it'll basically accommodate around four 5-wides max at the moment, assuming I wanted to be super-aggressive with it and deploy all of the available buying power. One thing you'll notice by looking at the metrics of the spread, however, is that I could consider just doing one of these at a time and potentially still beat long-term average broad market returns. Even at 50% max, the ROC is 1.27% as a function of net liquidity -- 10.3% annualized. Consequently, for those just starting out with 40 years to go until retirement, this is one thing to consider; how "big" you want to go in terms of total buying power deployed, particularly here where we're bumping up against all-time-highs in an implied volatility environment that is on the low end of its 52-week range (i.e., not the greatest time or "spot" in which to start selling bullish assumption premium in the broad market). Here, though, since any future grandkid is basically playing with "house money," I'll look to be a tad more aggressive than that on percentage of buying power deployed. The metrics of this particular spread: Max Profit: .54 ($54) Max Loss/Buying Power Effect: 4.46 ($446) ROC at Max: 12.1% ROC at 50% Max: 6.1% ROC at Max/50 Max as a function of Net Liquidity: 2.54%/1.27% ROC at Max/50 Max as a function of Net Liquidity Annualized: 20.6%/10.3% As with a lot of my trades, I'll look to take profit at 50% max and redeploy in the expiry nearest 45 days until expiry. On the take loss side, I'll look to take my lumps at 2 x credit received. * -- This is a late post. The spread was opened on June 4th, and is currently worth .3750. ** -- Short Put Vertical.
AMEX:SPY
by NaughtyPines