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Sorry I didn’t see your question on Nov 4 but I closed many trades ahead of the elections. Most of those I discussed when placing trades. I also tried to place trades with expiry dates before the election. If after the election expiry, I tried to sell a lot lower put strikes in most socks to try to build some protection. While in hindsight it was not needed, it is always prudent to setup trades with enough protection to try to withstand these types of major events. This is why I close short put trades in most stocks ahead of their earnings and then restart a position after earnings are released. Thanks for your question and sorry to have missed it.
However, if you want to own shares, then holding the short puts longer makes sense if that is your interest. Each trade often has its own exit strategy being employed depending on the movement after employment numbers are known.
Hi Rob;
It’s the other way around. I normally buy back the short side first.
Teddi
Looking at the September trade the cost for the put side was a Debit Spread of = $15.00
Cost = $7,500.00. As this is a debit spread the cost is easy to determine.The call side was a debit Spread of $12.00 with a cost = $14,150.00
As the trade unfolds, because these are debit spreads the cost is in basic terms the difference of the spread cost. There will be a few dollars here and there that change but for the most part the real concern is a lack of a move and the long side not earning enough to cover the cost of their respective sides.
Again in basic terms, if the SPY moved enough and placed the long side, either put or call into the money, even deeply, the short side loss would still be covered by the long side. The spread determines the extent of the profit and helps control a loss should there be one.
I will attempt over the next couple of weeks to update a few of the recent trades done around the non-farm payroll numbers to show the handling of the trade. There are some already posted but I think they are back a couple of years. Most members ask for trade setups and not outcomes since they control their own trades once setup. As I only have so much time in a day to post, I focus on trade ideas and their setups which is what members have advised they want as the priority.
Thanks Elvis for your best wishes.
Hi and thanks for your question.
For the SPY ETF trades ahead of the Fed and for non-farm payrolls, I keep the short positions in place until the longs are gone.
Sorry but not sure which you are referencing. Apologies. Any chance of linking the article you read.
I’m sure by now you saw they are paying a $3 billion fine. LOL. That definitely impacted the stock and will for a few days.
Thanks for your question. Are you referencing the SPY ETF Hedge Portfolio?
I base the price on an estimate from the prior few days but check the prices at the start of the day.
Sorry to have missed this. Rolling the position out a couple of weeks to Oct 11 expiry and down to $277.50 or if you want to sell a few more put contracts, then the $275 put strike would be an idea.
Earnings are Oct 22, so I would try to roll into an expiry before then and then if needed, roll again, but if rolling after earnings I would go out two or even three weeks after earnings. That would be Nov 8 or Nov 15 expiry.If you took assignment of shares, selling slightly in-the-money covered calls would be worthwhile.
If you took shares assignment but do not want to hold shares at all, then reverse the trade back to a Put Selling trade by selling the shares and sell the $277.50 put strike to cover any loss and then roll the trade forward while waiting for the stock to rally back to $280. Stay ahead of expiry dates and roll early to avoid being assigned shares again.
I refer to the Put Options Selling Tool Analysis and look at the various ratings. As well I look at the moving averages and try to stay at or below the 100 or 200 day moving averages. The 200 day is often hard to sell put options against as it can be quite a way below where a stock is trading.
Thanks for your questions. It’s hard to remember back to Sep 6. I will try to write-up some of the trades more often but did you read through these articles:
https://www.fullyinformed.com/members/category/spy-etf-hedge-strategy-learning/
There are a lot of articles that answer your questions in there.
On your question of exiting, I often will sell out a few options at a time during a move but lately I have been so busy with a lot of new members and assisting as many have not sold put options for income before, that I find I just sell out in small groups at a time, such as 10 or 5 each time.
I used to trade the SPY ETF Hedge by watching it daily but now with so many other trades and members to work with, I keep the SPX monitor on all the time and if I spot a trade coming up I jump in and then try to watch for 10 or 15 minutes to exit out. It’s not so much the strategy as it is seeing the opportunity and taking it for both entering and exiting each trade. On some days when there is larger movement in the markets, I try to take more time to follow the SPX for the SPY trades but on days when the index is moving more sideways or with smaller swings in the market, I tend to not watch as much but focus on other trades instead.
I like the SPY trades as they can generate a lot of income daily but it takes a lot of time and you have to be watching the SPX. Overall selling put options with the Put Options Selling Tool Analysis is super easy and I prefer that. I can usually make $2,000 to $5,000 a day selling put options which is comparable to the SPY ETF Hedge but with a lot less work and less monitoring positions throughout the day. There are a large number of members using the SPY ETF Hedge for doing trades at the opening of the day and 12:00 PM and again at 2:00 PM and 3:00 PM. We have found that’s when the SPX is often most volatile. Therefore doing 4 or 5 trades at most in a day in the SPY requires a lot less work and still are profitable.
New trades were done today (Aug 29 2024) after earnings yesterday, in the Walk That Profit Home to Momma Put Selling Strategy. You can see that the concept is to eventually own shares but use the profits made to pay for them rather than my own capital initially. The trade is up 84%. If by chance it there.
I’ll update the trade but it does not expire until Sep 20 which leaves lots of room for more movement and profits.
I think they will beat estimates. Remember this strategy’s final goal is to own shares but not until profits have been made to help pay for those shares.
Trading Options for Dummies is an interesting read. Option Volatility and Pricing is intriguing. The Bible Of Option Strategies is quite good.
Right after the pandemic rally. When stocks collapsed on news of the pandemic I did more naked puts. Once stocks rallied strongly, such as at present, I usually change to credit put spreads as stocks are more prone to sharp moves lower. The long puts can often provide additional profits. When stocks are sitting at “rock bottom” like in the 2008 09 credit crisis, there is often little downside left. Normally I use naked puts at those tmes.
Sorry to have missed this before the open Alvin. I don’t think this is the end of the world. There should be bounces and opportunities to close trades for lock in whatever profit is made. If your outlook is negative at this time then I suggest not setting up more trades until the MACD technical indicator indicates a confirmed up signal. I will be posting that when it happens.
The concept behind this strategy is to end up owning shares. I plan to just keep rolling, lower and higher depending on what the situation is with the stock and eventually I will be assigned shares but I expect it will be sometime in the future.
If the goal is not to own shares then selling in-the-money like the Walk That Profit Home to Momma Put Selling Strategy does, is not the strategy to use. You need to use credit put spreads out-of-the-money and reference the Put Selling tool analysis.I show the outcomes of trades that have adjustments within the original trade alert at the bottom under heading Outcome. If there is a specific trade you want more info on just let me know.
About all you can do is to buy to close and take the loss if you think the stock will disappear or be delisted. I don’t follow this stock for Put Selling. I would stay with larger cap stocks and use credit put spreads.
Thanks for your comments. They are appreciated. I show the times of trades and explain how to enter the two sides. In a spike buy the long puts and sell the calls. On a dip sell the puts and buy the long calls. By showing the time and explaining the setups, I feel investors who follow the strategy month after month can figure out that timing can make a difference. Other investors don’t worry about the timing and from the emails I get they seem to do quite well. I think timing of selling out and the long time frame of usually more than month is equally important. I will see if I can add further content for the strategy but it is the same strategy for trades ahead of the Fed. Again thanks for your comments. I do appreciate them.
On the other trades the same types of strategies can be used but remember that credit put spreads are better to use if you have limited capital and especially if you do not want to own or pay for shares.
If selling put options far out such as 2025 and 2026, stay with monthly or bi-monthly options for buying long puts. While your positions are still considered naked puts by a brokerage, the cost to pay for the long puts is far less and will be at higher put strikes which oft en can provide better insurance against a pullback and even bring in profits in a pullback.Your goal if you are unwilling to own shares is to work to reduce the number of shares you may be assigned. Each put strike that you close is one further 100 shares of stock that will never be assigned.
I had a member who had sold 10 put options on a stock that plunged. He no longer liked the stock and picked a different stock. He paid the price to close his losing trade. Then he sold 2 put options high in-the-money out two years in a stock he liked better and decided he would own. He then stopped selling so many put options and focused on repairing this trade. In the end after two years the stock rose almost to his short put position. He accepted 200 shares and sold in-the-money covered calls to get out of the stock with some profit. He focused on reducing the amount of capital needed for his trades.
Last I would suggest stop selling naked puts and focus on credit put spreads and reduce your position sizes. Selling 2 or 3 put options is much easier to repair and having long puts often helps and can bring in profits in a market or stock collapse.
Thanks for your questions
Teddi
For Qualcomm Stock (QCOM) you are in at $190 for 12 positions. You made $26.82 and it is trading for $36.00 when I checked it last.
Cost to close 12 put positions is $43,200 less $32184 = $11,106 loss. You could move to Jan 2026 at the $145 put which is at $21 when I last checked. Selling 6 puts earns $12600 which covers the loss and reduces your capital required from $190 X 12 = $228,000 to $87,000.Another method is to roll to Jan 2026 but sell less put options at a higher put strike, for example the $170 put strike for $33 X 3 = $9900.00 and then sell 3 more puts but down at $110 put strike or lower for $9.50 = $2850. This brings in $11,850 which covers the loss from the roll out and reduces capital needed to $170 X 3 = $51,000 and $110 X 300 = $33,000 = $84000 if assigned shares. But if you were assigned shares in both positions your actual cost is 600 shares at $140.00.
At the same time, if you are assigned on the $170 put strike but not $110, you can sell another 3 put options below the $170 put strike to continue to bring in capital while having to pay for just 300 shares at $170. Remember to sell covered calls if assigned stock.