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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.Thanks for your posting.
Your positions are too large is you do not want to own shares and especially if you do not have the capital to own t
You should be working on reducing the number of positions you are holding.
For example, focus on trades that are going to not cost much to close out. The 10 citigroup. Remember that if you are assigned shares you can sell them and immediately return to setting up put options again. Look for bounces to close trades for either a profit or for limited losses.
Even closing a few and then going to the leaps can help but it needs to be based on a clear picture of available capital to actually hold shares and sell covered calls.
When I looked last the Citigroup puts would cost $4.00 to close. A total cost of $4000 less the $3.00 or $3000 you made. To recover the $1000 loss, you can sell 2 puts for Jan 2026 at $50, if you are willing to own 200 shares.
This reduces your capital commitment from $60,000 to $10,000 without a loss.The trade this morning in Merck after earnings were released should cover your questions.
https://www.fullyinformed.com/members/goal-of-80-return-for-merck-stock-mrk-trade-ahead-of-earnings-strategy-setup-for-mon-jul-29-2024/Crowdstrike Stock (CRWD) will bounce around and I think eventually work itself out. I would take your time and roll-down when opportunities present itself. There is no rush on roll-downs but if the goal is to never own shares, wait for a bounce, roll lower and fpcus on making profits on each roll.
If you want to buy some protection stay short-term, such as a week or two out and pay as little as possible.
Work from the Investing Strategy Notes each morning to setup your trades. Often I am busy intraday with other trades including closing some and answering a ton of email daily. I post trades as time permits which for some trades is after the close.
This trade should work well today as Netflix shot higher. Even if you decided to roll early, you should be able to close your trade and lock in profits at some point shortly.
I would wait to see if the stock drops. Since tomorrow is expiry, you could start the day before the open offering an amount to close the trade. That way if the stock spikes at the open you may get taken out. I think if the stock falls on Friday you should have an opportunity to roll-down but at $605 you are at a decent level.
I’m sorry I missed your post. When I place trades I place a stop-loss which is usually double what I earned. On Jul 10 I was stopped out of the trade at $1.65.
What are you presently holding and I can offer some ideas.
I agree. As we saw, the initial reaction was lower but now the stock is starting to move higher. That’s the beauty of this strategy. The trade is out a month which often allows enough time to profit from both sides of the trade.
The easiest way to look at this “schedule” is to setup the trade that when it reaches a specific percentage then you wait to see if it continues to rise or falls back.
Basically use the percentages as guides for closing the trade early.
If you have secured 50% of the profit, then 75%, then 80% but then the stock changes direction and suddenly the put premium begins to climb and costs more to close. If the profit falls back to 75% for example, I buy back the put option and lock in my profit.
You can use any set of percentages or use actual values. For example you sell a put for $1.00 and it falls to 15 cents to close but the next day it jumps to 25 cents to close, I buy it back and end the trade. I don’t wait to see what the stock might do next. I close the trade, take the profit and open another trade with my freed up capital.
A good rule is to always close any trade that has earned 90% or more of the original put premium received when the put option was sold. That means if you earned $1.00 when you sold a put option and it falls to 10 cents, buy it back and end the risk of the trade changing direction. I have seen many investors hold a trade that fell to 10 cents only to see the stock plunge and the put sold suddenly is $3.00 or $4.00 to close. Stocks are volatile and closing early and locking away profits is an excellent way to keep profits pouring in and reduce the risk to the capital being used in the trade.
Normally a support level has to be tested a few times by investors before it becomes support. I would say $190 is not support yet.
To my knowledge you can only do covered calls or option buying. You cannot short options or stocks as far as I know. I have not looked into RESP in years so the rules may have changed,
The trade table for the Hedge trades are on each day. Notes on the strategy are below. Trade notes show entry time and exit time. I used to show prices and do once in a while but investors wanted entry and exit points and it’s a lot of work to do up prices, returns, etc etc. I therefore focus more on showing entry and exit times so investors can learn how to trade the SPY intraday.
Hi and thanks for your question. You can open a new membership for him. You can create the account, give it a username and password, make the payment and then present it to him. If he decides he wants to stay but wants a different username, he or you can let us know and a new name will be created and setup. It would be great to meet your son in the forums!
It depends on the stock. With those I am not interested in owning I use a stop-loss.
Thanks for your question. In a number of articles you will see content regarding stop-loss use with selling options. The retiring easy portfolio has a stop-loss section in each trade. Here is from the June 4 2024 trade:
Consider a Stop-Loss
For investors who would not own shares or not want to roll a position forward, a stop-loss is an idea to consider in a market sell-off. This strategy sets up how much of a loss an investor is willing to take before getting out. For example, if a put contract was sold for $1.00 an investor might be willing to take a 50% loss. The stop-loss would therefore be set at $1.50. If the put contract reaches $1.50 then the investor is “stopped” out, locking in a loss but also limiting the potential for further losses if the stock continued to fall further.
Call your broker. The $182.50 is trading for Jun 28 expiry.