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Sorry I missed this. I still think we could have a rally to start off next week. . I would wait for Monday to see what develops
Definitely the put values are intriguing. I sold some Jan 5 for the $33 put strike. Expiration was Jan 29 https://www.fullyinformed.com/members/morning-trade-alert-for-tuesday-jan-5-2016/
I’ll take a look Amy.
PSX remains a cash cow. It is not directly tied to the price of oil or gasoline and is in a unique position. By adding more puts you are taking a bullish stance. If you want to stay out of assignment, add more puts to a roll-down to keep the roll-down profitable. In my opinion, I lways use my cash to protect a trade I do not want shares in, by adding them in the roll-down rather than leaving some puts in the money. Depends on your thought process and your ultimate goal. Just my opinion of course.
TeddiCotta love this stock. My Super Charge Buy-Write Strategy back on Jan 5 worked out beautifully and added more puts at $32 this morning.
TeddiAre you expecting to be assigned? Personally I would prefer to just keep rolling the puts and trade them. Just an opinion.
TeddiYes. I like the chart. I will wait until tomorrow though as I want to see the stock start higher but today’s low was better than yesterday’s. I will wrote it up tonight. Thanks.
TeddiA little bullish are we? LOL. Interesting Put Selling trade at an intriguing strike. Let us know the outcome.
TeddiNice reply and definitely clear to understand. I did not assume you were proposing this as a strategy but the work did show that there are potentials to develop a strategy and the type of work you did is how a strategy gets its basis for a study and then adjustments. Thanks
TeddiSome more “food for thought”.
Another problem is the timing of when to sell the put strike. For example, Apple right now is under pressure so selling the $95 has a bit more premium 10% out than does, say AT&T Stock or even the SPY ETF or many others.Volatility plays the larger role in establishing put premiums so you could use your strategy during periods of higher volatility in a stock. That would mean setting up alerts to advise when specific stocks or ETFs you like to follow, are above their normal volatility. That would then be the time to look 10% out and perhaps apply more capital to those trades and no capital to trades with low volatility as the put premiums are too low.
This does open the prospects of placing more capital into volatile trades rather than less volatile ones, which is something I prefer not to do. I think the returns I posted this weekend in Aflac Stock is a good example of where I picked up 26% annual return on a stock with lower volatility than most but traded it based on the Weekly Wanderer Strategy which pinpointed safe put strikes for selling and the Bollinger Bands Strategy Trade which advised when to buy stock for a short-term trade back up to the Upper Bollinger Band.
Like any strategy you could probably take your approach and figure out when the best time is to apply it, or to what sectors or stocks to apply it in. Nothing is ever going to work all the time for all securities, but almost always, some strategies have their time and place. With your strategy it would be a matter of figuring that out.
Teddi
Thanks for all your postings.
Interesting data based on probability. There are a lot of probability traders in the world, that’s for sure. You can Google “probability stock trading” and get lots of hits.
In your charting, an investor could improve the odds by simply not trading when the SPX enters a major sell signal which is the 50 and 100 day moving averages falling below the 200 day. That would improve the odds of winning trades but 10% out of the money is too far out for bi-weekly trades most of the time to balance return against risk to the capital being used.The biggest problem is of course the percentage of how far out of the money you can sell. For example a 10% out of the money put on IWM two weeks out has no premium worth risking capital against.
Apple stock at $105.26 on Thursday would mean a 10% lower put is $94.50. The $95 put for Jan 15 expiry is trading for 20 to 23 cents.
The QQQ is trading at $111.86 so 10% lower would be around the $101 put strike – 2 weeks out trading for 7 to 8 cents.
The SPY ETF closed at $203.87 on Thursday which at 10% would mean selling the $184 put strike which is at 11 to 13 cents for Jan 15 expiry.
This is why I prefer using support levels and volume to pinpoint the put strikes with the highest degree of safety, like the Weekly Wanderer Strategy does since put or call premiums are higher and they still have a very high level of safety.
Selling puts requires understanding of the stock movement itself so as to determine the optimum time for selling the put strike for the highest premium. Strategies like Home On The Range Strategy, Weekly Wanderer Strategy, Extreme Options Selling, 10-20-30 moving averages and 10-30-60 moving averages are just some that follow stock movement to pinpoint when to sell a put and at what put strike to maximize return and limit risk of loss or assignment of shares.
I like your thinking on this but selling options 10% out of the money, 90% of the time is not paying me enough to risk my capital against in my opinion. Have you studied 4% or 5% out of the money and determined the best rescue strategy to use to stay profitable while waiting for a recovery for those instances, according to your chart, when you would have to rescue a trade. How often would a rescue be profitable and end successfully, would be one area worth looking at. In other words, something like a simple roll-down of naked puts perhaps, and calculating out how many additional put contracts would have to be sold and how deep a roll-down and for what time length, to keep the rescue profitable. Having that kind of information would also mean an investor would know how much capital to keep aside for rescues.
You have done some interesting work here!
Teddi
Hi Amy
The naked calls are part of the trade in BMY outlined yesterday https://www.fullyinformed.com/members/tomorrows-trade-for-dec-31-2015/I like the trade and am entering a trade on PSX. Jan 15 expiry $79 put
My amounts shown are basic without commission. The investor has a credit put spread of $460 short and $440 long for a spread of $20.00. He earned $3.10 for this trade. If the stock fell to $400, the long put at $440 will be worth $40.00 depending on how close to expiration it is but being that deep in the money would be pretty well trading at value.
The spread of $20.00 had a profit of $3.10 so the investor made $3.10 but the spread loses $16.90 for the investor when closed or assigned. The long puts can be sold for $40.00. He loses $16.90 on the spread and earns $40 on the long put.The higher we go the better this trade will look. I could of course be wrong but I think at some point the market will fall unless oil moves back up above $40 and stays there.
Thanks Bill for trading. It is a rare event when the market collapses 1000 points in a week but it can happen. There are though ways to keep your trade more protected during those periods. I will try to write-up something this week that can assist your trades for 2016. Very nice results Bill, while limited capital use. I appreciate your posting this.
Company is well-managed and should pop higher next week hopefully.
Stock is continuing to move higher. Those who averaged down should be nearing break-even if they want out.