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Old 07-05-2021, 11:55 AM   #41
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I've tried to follow the rule of thumb to sell puts at 85% strike to current price to avoid assignment, but it's rare to find 15% APY at that strike price. Maybe taking on more risk is needed?
I don't keep close track of my strike-to-current-price ratios, but I'd guess they tend to range between 85-93%. Since I'm generally not trying to avoid getting puts assigned to me (given that I can then just sell calls on those), I don't follow any stringent rules on strike/price ratios. This is especially true for dividend payers, since I'm fine with getting assigned, selling calls, and then collecting dividends while I wait to be called.
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Old 07-05-2021, 01:22 PM   #42
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I gave up on covered calls after repeatedly demonstrating to myself what a terrible market timer I am, rolling up positions after stocks rose, not wanting to realize the large cap gains I had on the underlying stock. The only good that came was short term losses which I could deduct.

The concept makes great sense. I’m just bad at it. I’m sure you’ll do much better.
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Old 07-05-2021, 02:11 PM   #43
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I started to dabble in option trading back in the late 90s, but only devoted more time to this activity for the last few years. Lemme see what Quicken tells me.

In 2015, $15,074.
In 2016, $20,439.
In 2017, $49,546.
In 2018, $105,776.
In 2019, $112,685.
In 2020, $318,313.
YTD 2021, $142,278.

So, I am a beginner myself. It may be all luck, but I will tell what I am doing.

I have around 100 stock positions, all the way from boring stocks like AA, WMT, PFE, TSN, etc..., to semiconductor stocks like MU, INTC, LRCX, etc... and biotechs.

Some stocks like PFE don't move that much, and it's rarely worthwhile to write call options on. WMT, I occasionally have a chance to make a bit of money. Other stocks like JPM are a bit better for option writing. Even health care stocks like HUM jump around like crazy.

Tech stocks are the most volatile, and that's where I spend more time watching. All my stocks have decent P/E, and I don't do unicorn stocks or high P/E stocks like Tesla.

I will only say that my investable assets are not in the 8 figures. And the money I have been making with options is in the single-digit percentage wise. This money is included in the YTD percentage gain of 17.89% that I reported in the other thread about YTD investment gain.

Every percent of investment return counts. I would be doing OK just buy-and-hold, but I like to do a bit of contrarian play. Stocks go up, I sell calls. Stocks go down, I sell puts. I am always looking for something to sell every day.

And given that I enjoy spending a couple of hours each trading day looking for opportunities, the dollar amount made per hour is not bad at all. It's a lot more than what I made doing engineering work before retirement, and my pay back then was not bad.
so you only sell options on stocks you own? no naked puts?
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Old 07-05-2021, 04:16 PM   #44
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+1

I've been selling naked puts and covered calls consistently for the past 18 months or so, with no buying of options whatsoever. The past few months, I've made in the neighborhood of $2,500 per month collecting options premiums. To do this, I am putting roughly $200k of cash "at risk" (i.e., if all my puts were assigned), which means the APY I'm getting on this cash is roughly 15%. I sell puts only on high-quality individual stocks and ETFs, the vast majority of which I would not mind owning anyway (at a discount, thanks to the put). For me, this is a great way to earn extra income each month and boost the pathetic yields I'd otherwise be getting on idle cash sitting in a bank account. I'm very happy with the results I've been getting, and it's a fun little hobby, to boot.
I don't sell naked puts, as my sales are cash secured. Too risky for me to go naked

https://www.investopedia.com/terms/n/nakedoption.asp
"Naked options refer to an option sold without any previously set-aside shares or cash to fulfill the option obligation at expiration. "
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Old 07-05-2021, 05:24 PM   #45
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I don't sell naked puts, as my sales are cash secured. Too risky for me to go naked
Hahahah... "naked" is quite a risky (or maybe frisky?) sounding word. My put-selling is technically naked since I utilize margin to free up the actual cash I'd otherwise have to leave sitting in a 0% APY brokerage account. With margin, I can have the cash in a 0.5% high-yield savings account, and it can be very quickly transferred over in case of a market crash where all (or most) of my puts were assigned.
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Old 07-05-2021, 07:35 PM   #46
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so you only sell options on stocks you own? no naked puts?
I did more of selling puts last year, when I was around 60-65% in stocks. And of the $318k I made last year, about 1/3 was from puts. All my puts are cash-covered.

This year, with stock AA running 75-80%, I refrain from writing more puts. And I have been trying to reduce my stock AA by setting lower strike prices on the calls.
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Old 07-05-2021, 07:39 PM   #47
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I gave up on covered calls after repeatedly demonstrating to myself what a terrible market timer I am, rolling up positions after stocks rose, not wanting to realize the large cap gains I had on the underlying stock. The only good that came was short term losses which I could deduct.

The concept makes great sense. I’m just bad at it. I’m sure you’ll do much better.
Trading inside a 401K, Roth or trad IRA does away with the concern for unrealized gains, as well as complicated tax forms. I just had my MCD shares assigned that I had had for a while (3 banger), and no worries.
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Old 07-05-2021, 07:46 PM   #48
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I don't sell naked puts, as my sales are cash secured. Too risky for me to go naked

https://www.investopedia.com/terms/n/nakedoption.asp
"Naked options refer to an option sold without any previously set-aside shares or cash to fulfill the option obligation at expiration. "

The term "naked put" is ambiguous. Out of the same investopedia Web site is another definition.

"A naked put is an options strategy in which the investor writes, or sells, put options without holding a short position in the underlying security."


However, selling a put and simultaneously selling short the stock exposes the speculator to a much higher risk than just selling the put alone.

What it does is to allow you to use the cash from stock shorting to secure the put. But if the stock moves up instead of down, and you are not quick in closing out the trade, you will lose much more money with the stock short than you gain from the put premium.
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Old 07-06-2021, 03:28 AM   #49
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However, selling a put and simultaneously selling short the stock exposes the speculator to a much higher risk than just selling the put alone.
That's because it is equivalent to selling a naked call.
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Old 07-06-2021, 11:49 AM   #50
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That's because it is equivalent to selling a naked call.
And yet, not selling short in conjunction with writing a put is called a "naked put", according to the above definition.
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Old 07-06-2021, 02:13 PM   #51
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I have around 100 stock positions, all the way from boring stocks like AA, WMT, PFE, TSN, etc..., to semiconductor stocks like MU, INTC, LRCX, etc... and biotechs.
You never told us the name & symbol of the mutual fund you manage
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Old 07-06-2021, 03:01 PM   #52
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You never told us the name & symbol of the mutual fund you manage
I surely did! Back in 2012, I made a thread to compare Wellesley VWINX and NWBGX.

That thread is here: https://www.early-retirement.org/for...bgx-59433.html.

Ever since the late 90s when I decided to be an active investor, I have always held around 100 long-term positions, not including options that are transient and expire quickly.

At one point, I thought of consolidating down to sectored ETFs, in order to reduce the number of positions. But then, I discovered that individual stocks have higher volatility, and fetch higher option premium. I went back to my old way.

By the way, people who own individual stocks know what I am talking about. The S&P index may move up/down 1% daily, but individual stocks may move 2x, or 3x. Instead of owning the S&P, you can own a cross section of it, and try to enhance the return with call options on the more volatile components.

And that's what I have been trying to do, although I do overweigh some sectors that I think will do better in the near future. These include semiconductor and energy.
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Old 07-07-2021, 11:43 AM   #53
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Put sellers! How much do you 'risk' per trade? I am satisfied with getting around $100 premiums for $8k - $10k on expirations mostly less than 40 days. But the constraint here, I believe, is mainly due to the amount of money I have for options is less than $100k. One drawback is that I don't get to play with higher priced stocks.
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Old 07-07-2021, 12:02 PM   #54
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Put sellers! How much do you 'risk' per trade? I am satisfied with getting around $100 premiums for $8k - $10k on expirations mostly less than 40 days. But the constraint here, I believe, is mainly due to the amount of money I have for options is less than $100k. One drawback is that I don't get to play with higher priced stocks.
Same here, biggest one I did recently was on QQQ , was willing to buy it for $32K and in return I got close to $500.
It was a month or so ago, and I wish I had gotten it still the $500 is a nice consolation prize

Normally I do a 10K risk for around $100 or better
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Old 07-07-2021, 12:02 PM   #55
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Put sellers! How much do you 'risk' per trade? I am satisfied with getting around $100 premiums for $8k - $10k on expirations mostly less than 40 days...
For puts, I usually look for a premium of 1% of principal per week. Of course, that often requires a strike price not too low from the current price, and it gets tricky here.

And that means shopping carefully for stocks I do not mind owning if I get assigned. Also, if getting assigned means I will have too much of that stock, or too heavy a concentration in that sector, then I want to be sure that the stock is not likely to go down further. It means looking for stocks that have been down for a couple of weeks or even a month, and a rebound is likely or at least not a further deep decline.

Because I stay diversified across different sectors, I often find opportunities due to sector rotation, when investors dump an entire sector to flock to another one. If I don't find a "good deal" to my liking, I don't sell. I rarely commit more than 1/3 of my cash holdings. About 1/2 is the highest I have gone, I think.
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Old 07-07-2021, 01:35 PM   #56
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Old 07-07-2021, 01:55 PM   #57
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Put sellers! How much do you 'risk' per trade? I am satisfied with getting around $100 premiums for $8k - $10k on expirations mostly less than 40 days. But the constraint here, I believe, is mainly due to the amount of money I have for options is less than $100k. One drawback is that I don't get to play with higher priced stocks.
I play 20-25k per equity and play 2-3 a time. I was getting 1.5-2% weekly on some more volatile stocks. Looking like I will be assigned 25k worth of stocks to sell calls on
this Friday.
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Old 07-07-2021, 03:31 PM   #58
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For puts, I usually look for a premium of 1% of principal per week. Of course, that often requires a strike price not too low from the current price, and it gets tricky here.

And that means shopping carefully for stocks I do not mind owning if I get assigned. Also, if getting assigned means I will have too much of that stock, or too heavy a concentration in that sector, then I want to be sure that the stock is not likely to go down further. It means looking for stocks that have been down for a couple of weeks or even a month, and a rebound is likely or at least not a further deep decline.
Good pointers! Thank you! I hopefully learned my lesson back in Feb. when I got too complacent being a novice put seller and got assigned MTLS, a component of ARKK and ARKQ. MTLS.. 3-D printing my foot!
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Old 07-07-2021, 03:31 PM   #59
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Put sellers! How much do you 'risk' per trade? I am satisfied with getting around $100 premiums for $8k - $10k on expirations mostly less than 40 days. But the constraint here, I believe, is mainly due to the amount of money I have for options is less than $100k. One drawback is that I don't get to play with higher priced stocks.
I do not consider the premium much other than to evaluate if it would earn 10-12% annually on my money as a minimum, since the idea is to be able to pick up a stock I want at a favorable price.

At the end of the day I will track to categories, stocks purchased under the put program and how I do on those long term, which will be the put price less the premium deducted from the final disposition price in the future. that will give me my equity return

Then I will have the put premium on the cash in my account allocated for puts and that will give me a return on my cash. We'lll see how this plays out, but the comments so far are very helpful.
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Old 07-07-2021, 09:01 PM   #60
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Jumped hard on the covered calls bandwagon in the last month (which is probably a negative indication[emoji14]).

1st covered call result was very good, but I also left a lot on the table. AMD, bought at 1000 shares at 80 on 7/16, sold 10 07/02/22 86.5 calls for 1.11 on 6/28, stock got assigned away yesterday for strike price.

Initial investment:$80000
Profit after 20 days: $7600
Return: 9.5%
Return annualized: 173%

Profit lost due to stock price ($94.70) when assigned: $7100[emoji22]

I know I could have made almost double if I just held, but hard to be upset with a 173% annualized return...
AMD closed today at $90.54, down from when you got assigned, but still higher than your $86.5 strike price. It may drop some more.

Here's a chance for you to sell puts to buy it back. Put options at $86.5, expiry Aug 6, paid $2.60. Tomorrow, the premium may be higher.

When I have 1000 shares in one position, my style of trading is to sell 1 or 2 contracts, then if the stock keeps going up will sell another 1 or 2 contracts at a higher strike price, possibly with a later expiry. By laddering the covered calls, I will not lose all of my good stock at once, and hopefully get more money from the covered calls. Again, I only hold stocks I want to keep long term, so of course I think of them as "good stocks".

Occasionally, I would lose the good ones, and they kept rising. But by chasing after them with puts, I managed to recover some of the money I left on the table.

As Koolau always says, YMMV.

PS. Laddering the calls gets me more money when a stock is rising. It gets me less money when the stock is in a decline, but still more than if I did nothing.
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