Conservative option strategies, what did you buy or sell today?

[fenders53]

Kerim suggested this might be a good idea.  By now most of you are probably aware that NilesMike and I employ an income strategy that involves selling covered puts and calls.  Done correctly it can be very lucrative.  We are still DGI investors.  I truly feel like I am intruding on the "What did you buy today thread" with my put sale posts.  I can't help but think many of you believe we are just gamblers.  It isn't so.  I first explored this idea when I learned Warren Buffet frequently employs this strategy at Berkshire when entering positions.  But this isn't a strategy thread so much.  If anyone wants to share a highly speculative option purchase, please share the risk of your trade as this is not a gambling forum.  

I have sold about 135 options since SEP 18, 44 sells in 2019 already.   Most of mine expired worthless yet again last week so I'll be active here starting this week as I have a lot of cash to deploy. I'll post up a sentence or two explaining why I sold an option, and my assessment of the risk of my trade.  I do hope others will ask questions as we go.  I'm not a pro for sure, but I have done this through horrendous up and down months and feel comfortable I can adequately assess risk reward.  Hopefully this makes more sense as we proceed.  Let the market pullback some and you'll see me attack this strategy with a vengeance.

Please post this thread often NilesMike, for better or worse.  I will share my mistakes as well as my victories.  This is about sharing and growing knowledge.  I enjoy the socialization but I'm not here to impress anyone.  I am going to build my DGI port with our shared strategies.  Everyone knows the market is overbought right now.  It was stupid easy after DEC pullback but it doesn't get much harder than now.   Let's show them that it's turns out OK, and less risky even when it isn't easy, as long as you keep your head. 

I truly do hope people challenge my decisions so I can defend them.  Transparency is good.  Bragging after the fact not so much.  I welcome challenges from others that are not even playing with their own money yet.  Let's see how this goes.

[NilesMike]

3 option positions open currently
KO 21JUN19 45 P Sold 2/14 for $1.44 per contract. (.27) currently underwater.

C Covered call put on 1/25/19 before ex date. Captured dividend, collected 1.02 (bought back for .54), sold another call for 1.38 . Stock was 63.94 when executed initially.

SPX 22FEB19 P spread 2705/2695
Strictly a weekly probability trade-not always puts.

[fenders53]

I'll start with a few of mine that have not been well discussed already on the other threads. In the future I'll provide the stocks price when trade was made. For now at least the open date and it can be looked up easy enough. I can look backwards on these to some degree.

CVS- On JAN 29 I sold a FEB 22 Strike 64 put for $1.42 after commission. CVS traded around 65.50 at the time. About 69 today and this one likely expires worthless on Friday. If I needed the cash for a better trade or stock purchase I'd close this one out now. 2.2% return for 21 day hold. I'd like to hold some CVS shares so barring a pullback this one got away for now. But I won't go broke taking income like this. Low risk option IMO.

XEL- On JAN 18 sold a MAR 15 Strike 50 put for $1.10. Utilities have been strong for 6 months and I sell puts on every dip. The first 27 positions all expired worthless. 1 to 2% monthly income and no new shares yet. Very low risk option.

T-On Jan 30 sold Mar 15 Strike 29 puts at .72. Probably fairly near the money based on the premium of 1.65% monthly income. Moderate risk option IMO. I'm not convinced T has found a bottom yet.

I am currently underwater on some MAR and APR MO puts with strikes of $50 and $52.50. They are complicated to describe because I rolled previous unprofitable puts forward into these new positions. I haven't collected enough income to be pleased with an exercise at 52.50. Whether option sales, or just going long, MO has been a rough ride because I came to the party late. Thankfully nowhere near the top though.

[fenders53]

Might as well throw up my spec play and see how it ages. I am going to post my thought process on some of these so I can revisit it later. I try not to make the same mistakes more than 3 or 4 times lol.

SIX- On FEB 14 sold a JUN 21 Strike $52.50 at $3.37 after commission. 6.4% return for about 4 months so 19% annualized. I called it a spec but consider this to be in the moderate risk range, though on the high end of moderate. SIX has dipped at the end of the third quarter for about 8 consecutive years. It is seasonally cyclical, as well as economically cyclical IMO. Point being I think I get another chance to buy this later if the stock runs up soon. Leisure stocks get beat up during recessions as well so I would never consider this a low risk stock or option. The dividend is about 6% so I am definitely good with owning some shares at some point. But I have no illusion this is DISNEY safe to own or trade.

[crimsonghost747]

(02-19-2019, 09:04 AM)fenders53 Wrote: T-On Jan 30 sold Mar 15 Strike 29 puts at .72.  Probably fairly near the money based on the premium of 1.65% monthly income.  Moderate risk option IMO.  I'm not convinced T has found a bottom yet.

Again I'm not too sure what your strategy is with T, are you planning on keeping it or not? If you can get in at $29 then I'd say it looks good for both long and short term.

As a pure trading strategy I've been selling covered calls with T, starting from between $29.50 and $30.00 and then selling either the first or second out of money call. Premium has been around 1% per week plus whatever you manage to make on the price appreciation.

[fenders53]

(02-19-2019, 09:28 AM)crimsonghost747 Wrote:

(02-19-2019, 09:04 AM)fenders53 Wrote: T-On Jan 30 sold Mar 15 Strike 29 puts at .72.  Probably fairly near the money based on the premium of 1.65% monthly income.  Moderate risk option IMO.  I'm not convinced T has found a bottom yet.

Again I'm not too sure what your strategy is with T, are you planning on keeping it or not? If you can get in at $29 then I'd say it looks good for both long and short term.

As a pure trading strategy I've been selling covered calls with T, starting from between $29.50 and $30.00 and then selling either the first or second out of money call. Premium has been around 1% per week plus whatever you manage to make on the price appreciation.

Don't follow this one too close or you'll get a headache.  I have quite a few shares of T.  Some sit there long, and when it runs I have some potentially up for sale while grabbing some extra income along the way.  On most every hard dip I throw up an offer for shares via put.  This one is hybrid long investment / swing trade.  Never any attempt to day trade it.  The market gets a vote and adjusts my share balance a couple hundred shares from time to time. T is not a DGI stock to me, just a high yielder.

To answer your question in a little more detail. I desire to maintain a T share balance of about 300-400 shares (and collect the dividend). $12K is a full position for me. I'm mostly OK with 600 T shares but I am looking to sell a few and a small profit is OK. I haven't been exercised much because I have played the swings pretty well. If I find myself much below 300 shares you will see me sell puts extremely close to in the money with a couple week expiration, because I desire to be long and real soon. But I want that put sale premium. As Kerim said, it's just a no brainer to enter this way. T offers weekly otions so it is MUCH easier to navigate than a Ute that only sells quarterlies. (i.e. XEL) XEL is one of my favorites and tough to play the option game with, but I find a way that makes some sense.

[Kerim]

Thanks for getting this started!

The only move I'll likely make in the next few days is selling a call on the last 100 shares of COP that I still hold. I've been working toward selling all of it, so I won't be upset if / when the call is exercised. This will be the third go at it with these same shares. My approach has been to wait for an up day, then sell the call at a little above the current price. Both times the price fell, I pocketed the premium, and kept the shares. Fun!

I know if I really want out I can sell at a lower strike, but I'm enjoying the practice!

[fenders53]

(02-19-2019, 09:51 AM)Kerim Wrote: Thanks for getting this started!

The only move I'll likely make in the next few days is selling a call on the last 100 shares of COP that I still hold. I've been working toward selling all of it, so I won't be upset if / when the call is exercised. This will be the third go at it with these same shares. My approach has been to wait for an up day, then sell the call at a little above the current price. Both times the price fell, I pocketed the premium, and kept the shares. Fun!

I know if I really want out I can sell at a lower strike, but I'm enjoying the practice!

Good way to sell IMO.  I regard myself as a much more effective buyer than seller lol.  By selling well out of the money calls, the market gets a vote, and you don't feel too bad when the market informs you that you were trying to sell too cheap.  I'm a happy guy when it takes me six months to leave while collecting income.  I sells calls on my AAPL and HD position. And I try to pick dates so I don't miss a dividend payment. Oh what a tap dance that is! But the premiums are very good so I can't help doing it.    

Bottom line is the obvious, you gotta sell a little extra time or push your luck with the strike price to get a better premium.  We never know what the market will do in the next few months.  I pretend I do though. 

[ChadR]

Glad this is started. My last option expired worthless a few weeks ago. Was happy that my GE put expired worthless as it was a play for the option income and I didn't want the stock. Yes it was gambling I will admit. I don't trade options much, but will occasionally. Happy to post the few that I have here.

[fenders53]

(02-19-2019, 10:35 AM)ChadR Wrote: Glad this is started.  My last option expired worthless a few weeks ago.  Was happy that my GE put expired worthless as it was a play for the option income and I didn't want the stock.  Yes it was gambling I will admit.  I don't trade options much, but will occasionally.  Happy to post the few that I have here.

Glad to have you aboard Chad.  I must surely sound like a Vegas gambler with my forum rantings by now.   That is NOT how it is.  Your GE trade was a violation of rule #1 on my conservative options trading list.   I learned that hard lesson when I was a rookie trader 25 years ago.  Never ever, ever, ever put yourself in a position where the market can force you to own a stock you won't be comfortable owning for at least a few years.  You'll be inclined to do something foolish like sell it for a loss now, or even worse hold onto a dog stock praying you just break even in five years.  Both are a very poor allocation of capital.

[NilesMike]

    I have not traded utes outside of T so fender got me thinking of trading XLU. I', looking at a weekly chart with 3emas and it looks like this may be the start of a pretty good strat.

Green bars; wait for a lower week then sell puts.
Red bars: wait for an up week and sell calls.

In addition to income for myself, I'm trying to develop mechanical type strategies for my young adult children as an additional income stream they can execute without the learning curve that I've needed.

[fenders53]

(02-19-2019, 11:01 AM)NilesMike Wrote: I have not traded utes outside of T so fender got me thinking of trading XLU. I', looking at a weekly chart with 3emas and it looks like this may be the start of a pretty good strat.

Green bars; wait for a lower week then sell puts.
Red bars: wait for an up week and sell calls.

In addition to income for myself, I'm trying to develop mechanical type strategies for my young adult children as an additional income stream they can execute without the learning curve that I've needed.

The trouble with UTEs is they are now at the top of their valuation for a sane entry, or they have fleas you need to research.  Any idiot could have prospered selling quality Ute puts the past 6 months like I did.  There is a day it becomes a bad idea.  Time to be selective or patient IMO.  I am going to slow it down now until a dip comes.  Somebody please let me know when that is going to happen because the smart investors are cautious after this dramatic run up.  Utes are about as safe a place to hide out as any.  Right up until you overpay.