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Shortput

TLT Core Position (IRA)In the absence of some kind of face-ripping rally, I'm going to be assigned shares in TLT here shortly, starting with what began as an October 20th 93 short put and an October 20th 89 short put. Here, I'm using short puts as an acquisitional tool, attempting to acquire shares in multi-year weakness, after which I'll proceed to cover the shares with short calls. The short call premium, along with TLT's monthly dividend, will result in positive cash flow. There are a couple of different approaches I could utilize here to manage the shares I'm assigned, one of which is to sell a call against each individual lot I'm assigned, laddering out short calls in time as I'm assigned shares. Since I've got quite a few contracts subject to assignment, this would result in sort of a covered call spaghetti-works. Another simpler approach would be to see what the average cost basis of all the lots I'm assigned is, and then proceed to sell calls at or above that average cost basis in a single expiry. For example, the average cost basis of the two rungs shown here is (89 + 93)/2 or 91/share. With that cost basis in mind, I would proceed to sell two calls at or above the 91 strike at a reasonably delta'd strike in an expiry that's paying. Given the distance price has pulled away from my likely average cost basis, the calls are likely to be somewhat long dated. Given the fact that my highest short put strike is at 94, I'm more likely to sell calls at 94 initially, wait to be assigned everything that I'm going to get assigned, look at the average cost basis at that point and then adjust the short calls accordingly. Because of its simplicity, this is the approach I'll be going with, looking to stay in the shares and manage the entire position on a fairly long-term basis. As usual, we'll see how it goes ... .
NASDAQ:TLTLong
by NaughtyPines
Opening (IRA): IWM April 19th 165 Short Put... for a 2.10 credit. Comments: Starting to erect rungs in the second quarter (April, May, June). QQQ doesn't have an April yet, and I already have a SPY rung on out in that contract, so just doing the small caps here. Targeting the <16 delta strike paying around 1% of the strike price in credit. I'll naturally look to add in shorter duration should we get a bump in IV, but may have to dabble outside the broad market (IWM, QQQ, SPY) box to get paid something decent in shorter duration.
AMEX:IWMLong
by NaughtyPines
Opening (IRA): TLT Oct/Nov/Dec Short Put LadderComments: Targeting the 16 delta strike here in successive expiries to generate free cash flow and emulate dollar cost averaging into 20 year+ maturity paper. October 20th 89: .77 credit. November 17th 87: .76 credit. December 15th 86: .84 credit. Since these aren't paying buckets of cash on a per contract basis, I'll look to manage these on extrinsic approaching worthless either by closing them out in profit or rolling for credit and duration to reduce my cost basis further.
NASDAQ:TLTLong
by NaughtyPines
Opening (IRA): TLT Nov/Dec 86/84 Short PutsComments: Targeting the 16 delta strikes in November and December to erect rungs at strikes better than what I currently have on to emulate dollar cost averaging into 20 year+ maturity paper. November 17th 86: .83 credit December 15th 84: .79 credit Here, I'm fine with getting assigned and proceeding to sell short call against, but want to get in at the biggest discount the market will let me get away with because at some point, you know they're going to cut. Naturally, this may be months out in time ... .
NASDAQ:TLTLong
by NaughtyPines