Selling Puts for Income stream .. Need some advice

[cyber888]

I saw a thread about this, but it was old so I could not revive the thread.

I've been thinking about selling puts as an income stream at a low strike price for stocks I would like to own at a discount - just in case the put strike price gets hit. But of course, owning the stock is secondary. I'd just like to make money on the put premiums.

3 questions:
1) Any stocks lately where you've been selling puts successfully ?
2) What's the best and cheapest online broker for doing options trade ?
3) How much cash to you tie up with the naked puts selling ?

Thanks

 

[Totoro]

Those are three questions

1) I've started with SPY put options recently, at 175 strike price (roughly -15%), expires on March 17th 2017. The yield worked out best that way for me.
2) I'm in Europe, so probably not useful which broker I use. I pay about 20$ per contract (100 units per contract).
3) Cash tie-up I'm still working out. Basically I'll only do cash covered puts. In practice I'll keep about 25% of that cash in the broker account to avoid nasty immediate side effects if I get assigned.

The other 75% rest will be parked in a high yielding savings account to boost returns a bit more. If I get assigned I'll move that cash straight into the broker account. I've got about 5 trading days to do that (before broker starts selling my other shares at random with high costs).

 

[cyber888]

Thanks, I correct it from 2 to 3 questions

Those are three questions

1) I've started with SPY put options recently, at 175 strike price (roughly -15%), expires on March 17th 2017. The yield worked out best that way for me.
2) I'm in Europe, so probably not useful which broker I use. I pay about 20$ per contract (100 units per contract).
3) Cash tie-up I'm still working out. Basically I'll only do cash covered puts. In practice I'll keep about 25% of that cash in the broker account to avoid nasty immediate side effects if I get assigned.

The other 75% rest will be parked in a high yielding savings account to boost returns a bit more. If I get assigned I'll move that cash straight into the broker account. I've got about 5 trading days to do that (before broker starts selling my other shares at random with high costs).

 

[Fedup]

Scottrade only charges $7 for trading options. They may not be the cheapest but I like their speed of execution. Maybe InteractiveBrokers has the cheapest but I don't know anything about their execution.


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[Sojourner]

1) Any stocks lately where you've been selling puts successfully ?
2) What's the best and cheapest online broker for doing options trade ?
3) How much cash to you tie up with the naked puts selling ?

1) I sold some AAPL and VDE puts recently (January) and ended up making a couple hundred bucks in the process. Looking into selling some NFLX and GOOG and maybe more AAPL soon.
2) I've only used Scottrade, since I already have an account there and I'm a very sporadic options trader. As noted above, their prices are pretty good.
3) Under $10k so far, but I'm thinking of bumping that up somewhat in the near future, and maybe doing some trading on margin. Just dislike the idea of having to tie up so much cash to sell any significant amount of puts.

 

[cyber888]

Thanks Sojourner. I'll probably sell some out of the money Apple puts now that prices have gone down. Apple was lowest at 92 a few months back. I'll probably do $8k - $10K cash to start puts trading, for cash-covered puts. I already have an Ameritrade account which I have not used for years.

1) I sold some AAPL and VDE puts recently (January) and ended up making a couple hundred bucks in the process. Looking into selling some NFLX and GOOG and maybe more AAPL soon.
2) I've only used Scottrade, since I already have an account there and I'm a very sporadic options trader. As noted above, their prices are pretty good.
3) Under $10k so far, but I'm thinking of bumping that up somewhat in the near future, and maybe doing some trading on margin. Just dislike the idea of having to tie up so much cash to sell any significant amount of puts.

 

[cyber888]

Thanks Fedup. I've used Interactive brokers for years and did some straddle before. They are cheap on a per transaction basis. But if you're not an active trade (like if you don't do 20-30 trades a month), they have a monthly maintenance fee for inactive traders. Over time, their fees piled up and I just told them 'I'm closing my account, because they have a monthly maintenance fee'.

Scottrade only charges $7 for trading options. They may not be the cheapest but I like their speed of execution. Maybe InteractiveBrokers has the cheapest but I don't know anything about their execution.


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[45th Birthday]

You don't necessarily need cash on hand, you can use margin (with no actual borrowing).

Also, if you get assigned, you can always immediately sell whatever you bought and then sell a further forward put at the same strike.

Especially starting out, you should stick to ETF's and SPY is one of the most liquid one out there, which is great for the bid/ask spreads.

Just don't get too far out over your skis.

 

[cyber888]

Thanks for the advice. Well, you need to have some cash balance to have some margin balance to borrow, but you won't actually use the cash. I tried to execute transaction in my Ameritrade margin account without cash, they don't allow it.

You don't necessarily need cash on hand, you can use margin (with no actual borrowing).

Also, if you get assigned, you can always immediately sell whatever you bought and then sell a further forward put at the same strike.

Especially starting out, you should stick to ETF's and SPY is one of the most liquid one out there, which is great for the bid/ask spreads.

Just don't get too far out over your skis.

 

[Totoro]

Just found out that I can get margin based on my stock portfolio with the same broker. So strictly speaking wouldn't need cash at all. I'll still keep some on hand though.

 

[Fedup]

Either stock or cash. I'm sure no freebie.


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