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

[NilesMike]

(08-21-2020, 09:43 AM)fenders53 Wrote:

(08-21-2020, 08:32 AM)NilesMike Wrote: The only 2 ways that I have been able to profitably trade VIX options is

1) Buy a 60+DTE call when VIX trades below prior month's low. You will get a pop or at worst lose a little bit.

2) When VIX trades 12.50-13.50 buy a call with 6 months expiration. You will get a good pop.

If you OTM put becomes ITM, look out.

YMMV

If I get exercised can I not hold the VIX position like any other stock?  I don't see a lot of downside in the VIX from here.  I suppose you would have to except my thesis that the market can't go on forever not reflecting economic reality.  Seems to me some volatility is inevitable.  Am I missing something basic here? generally speaking I don't buy options. I will skip it if that is required to make a profit.

VIX Update.

I found a very interesting study that I will trade. I'll practice with the micro minis to get the mechanics down.
https://pdfs.semanticscholar.org/9377/43...b5b492.pdf

[fenders53]

(11-14-2020, 08:32 AM)NilesMike Wrote: Interesting study.

https://spintwig.com/spy-wheel-45-dte-ca...Expiration

A lot of interesting data.  It reflects my personal experience. I try not to seek confirmation bias because I am only on year three of high volume option trades and the market has rarely seen 60 days of downward bias.

If I only traded SPY puts I am convinced it's clearly difficult to compete with a pure long position.  The fact that I don't appears to have less downside risk of capital.  I attribute it to several factors.  I can cherry pick some stocks sitting near strong resistance.  I always have some trading cash avalable in rotation and can enter a desired position after a notable dip when the market over-reacts short term in the absence of an overall down market.  (i.e. tiny earnings miss).

My mind remains open regarding optimum DTE.  I continue to hold a diverse range.  When the VIX is high I have had a very good experience with options from 5 to 15 days.  I tend to close them at 75%+ profit.  The exception being when I am fortunate enough to grab 50% in just a few days which frequently occurs in short duration options.

[fenders53]

Added HRL to my rotation for parking the conservative part of my cash in puts sales. That is about the cleanest balance sheet I've ever seen in a slow growing stock. They should let their hair down and acquire something next time the market dips.

I was trading a lot of KO and T puts but KO is up and I am going to expose less new money to T. I've been tempting fate selling TLT puts for months on end. Going to stop that until I feel a little more comfortable I think I know where interest rates are headed in 2021.

[NilesMike]

(11-27-2020, 09:01 PM)fenders53 Wrote: Added HRL to my rotation for parking the conservative part of my cash in puts sales. That is about the cleanest balance sheet I've ever seen in a slow growing stock. They should let their hair down and acquire something next time the market dips.

I was trading a lot of KO and T puts but KO is up and I am going to expose less new money to T. I've been tempting fate selling TLT puts for months on end. Going to stop that until I feel a little more comfortable I think I know where interest rates are headed in 2021.

Sold KO 53.5 24DEC Calls for .84 (on 11/25), bought back today for .36

RE interest rates: where can they really go? Can't go much lower and if they bump it up the market will stall. They won't change much IMO and I don't give it much concern.

[fenders53]

(11-30-2020, 04:12 PM)NilesMike Wrote:

(11-27-2020, 09:01 PM)fenders53 Wrote: Added HRL to my rotation for parking the conservative part of my cash in puts sales.  That is about the cleanest balance sheet I've ever seen in a slow growing stock.  They should let their hair down and acquire something next time the market dips.

I was trading a lot of KO and T puts but KO is up and I am going to expose less new money to T.  I've been tempting fate selling TLT puts for months on end.  Going to stop that until I feel a little more comfortable I think I know where interest rates are headed in 2021.

Sold KO 53.5 24DEC Calls for .84 (on 11/25), bought back today for .36

RE interest rates: where can they really go? Can't go much lower and if they bump it up the market will stall. They won't change much IMO and I don't give it much concern.

I understand what you are saying as far as the general market goes, but if 10-20yr yields run up half a point on a recovery or fiscal policy I'll get stung with TLT puts going forward. The yield still won't be good if I am forced long, but I'll get stung on puts with a bad entry.  It's not good risk reward to get beat 10% on the entry if the yield is 2% for a long-term hold. I sold TLT puts for months and months with zero assignments.  Had I not slowed down that streak would have ended already.  It was a nice hedge, but lately it isn't.  I suspect the yield curve will steepen in 2021.  Once it settles I can go back to business because a rate drop is my friend. It's just not as easy as selling a KO put.

[NilesMike]

I never traded TLT, seems too skittish for my tastes.

[fenders53]

Trades like a Ute when on an extreme end of rates. Just owning it long was a huge year like most any other long bond. A feat that won't be repeated anytime soon. It's popular because its Gov backed paper. Trades counter to equities and that was the attraction. Stocks fly and I have a place to park a few put contracts I usually didn't have to hold long. I'll have to wait for the bond market to get comfortable with new administration's fiscal tricks before I trade as many contracts again. Would I rather just play with KO and other boring stuff? Sure, after they haven't run up 10% on weak news lol. They will pull back soon enough. Not forcing trades because I want my weekly income is a bitch lol. I am getting better at waiting.

[kblake]

How are KSS, JWN, CAKE, SIX, CCL and the rest of these names keep skyrocketing lol

I'm really thinking of buying puts in companies like this. Maybe out to FeB?

Here's my question. Any companies you see playing the short side? I may wait a bit to see if they move higher and then play the downside.

Thoughts?

[fenders53]

(12-03-2020, 01:31 PM)kblake Wrote: How are KSS, JWN, CAKE, SIX, CCL and the rest of these names keep skyrocketing lol

I'm really thinking of buying puts in companies like this. Maybe out to FeB?

Here's my question. Any companies you see playing the short side? I may wait a bit to see if they move higher and then play the downside.

Thoughts?

My thoughts are it's tricky shorting Momo.  We'd probably agree SIX is actually worth $10 right now.  If things go very well for them it's perhaps a $30 stock in a year.  They are in a deep hole.  But they are about $30 now, so why not $50?  It helps a lot if the overall market pulls back at some point.  There is little assurance of that in just a few months.  Same deal with most of the others you mentioned.  

Have you ever traded call spreads on the short side?  My win rate has been FAR better, and the payoff is still decent.  I am going to make up numbers here but something like this.  SIX is at 32.  You SELL calls strike 37.50 and get paid the premium.   You BUY an equal number (or nearly so), of strike 40 calls.  Stays below $37.50 you keep the net premiums.  Your break even is $37.50 plus the amount of net premiums received.  Say it all goes bad.  You stop losing money at 40, no matter how high it flies.  Those numbers may not work at all for SIX right now.  

This works a lot better when the VIX is a little higher.  The closer you crowd the current price, the higher the premiums.  You can also kick the protective calls you have to buy a little farther out.  I actually prefer to do it with more boring stocks that have just out run their trading range a bit too much.  I did it six times in a row with DE and got bit on the last attempt.  It's broken out now and the story changed so it's not a candidate anymore.  Those Momo stiocks could work but you gotta keep the protection in tighter and that trims the profits.

Just buying puts is your best shot at a bigger gain, but you'll lose the bet very frequently, no matter how good it looks. On a side note, if you are going to short a cruise line don't tangle with Norwegian. They are the Delta or Southwest in their world. CCL is an easier target. Plus the kids will run it up for you now and then. I think the best shorting opportunities may be when they are back in BIZ a few months. They are going to choke hard on those damaged balance sheets once the pent up demand cooks off in half a season.

[NilesMike]

The only trade that looks appealing in the selection above. For me, it would CCL due to earnings coming. You can collect 1/3 the width of the strikes, short time frame (12/18 EXP).

Much wider sweet spot than buying a put, IOW a far greater chance of making $$.

[fenders53]

(12-03-2020, 05:26 PM)NilesMike Wrote: The only trade that looks appealing in the selection above. For me, it would CCL due to earnings coming. You can collect 1/3 the width of the strikes, short time frame (12/18 EXP).

Much wider sweet spot than buying a put, IOW a far greater chance of making $$.

Mike and I have chatted this up plenty.  It's a sound strategy and will only seem complicated until you plug in some "what if" numbers for 10 minutes.  With a spread you keep the duration short.  Time decay is your friend.  You can be a little wrong and still walk away with a small profit or tiny loss if you change your mind.  On a straight put the decay will kill you even when you get the direction approximately correct, or the profit is so small it didn't match the risk.  

Apologies if you know all this.  I really didn't until I went for about ten rides.  Divemnow, Guru and I all did put buys about two weeks ago.  Every one of those trades is going down in flames.  Fighting the tape is always riskier than it appears.  I have five weeks for SIX to pull back to 25 just to be about even.  If it pulls back sub 23 and I make decent money, it was still an impulsive trade with bad risk/reward.

[NilesMike]

Just sold out the 55C Jan15 on KO for $.91
This is how we do the Stock, put, call, dividend dance on a boring stock. LOL