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Anyone using covered puts
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12-03-2018, 10:39 AM
(12-03-2018, 08:32 AM)fenders53 Wrote: I can control my enthusiasm because I was eventually taken behind the tool shed for some discipline. Same here... or at least that's what I like to think. I've only been trading options for a little over a year and a half but I've gotten burned a couple of times... once very badly. But there is always some educational money to be spent when learning... and we never stop learning. :p 
Nothing substantive to add at the moment, but just want to add another thanks. I'm very inexperienced with options at this point, so hearing about both of your various exploits is super helpful!
 (12-03-2018, 10:39 AM)crimsonghost747 Wrote:(12-03-2018, 08:32 AM)fenders53 Wrote: I can control my enthusiasm because I was eventually taken behind the tool shed for some discipline. You're going to be fine because you are learning lessons early. Emotions like greed and fear, and egos, are our most dangerous enemy. The ability to admit you made a mistake and cut your losses early is helpful too. Most importantly you have to know your risk tolerance, and there is only one way to find out. Many hear the word options and immediately think casino gambling, because that is what maybe 80% of options traders are doing. Almost every option trade I make actually decreases my risk. I believe 70%+ of all option contracts expire worthless. That's all I need to know to decide which side of the trade I should be on.
12-04-2018, 11:06 PM
Those who wish to "practice" selling puts can use SPY to master the mechanics.
Benefits, 500 company diversification, no earnings surprises. The key is often when to sell them. My long term analysis still has SPY in an uptrend. Therefore,, I sell puts right below last months low as SPY will very rarely close below the prior month's low when in the uptrend. If it does I take assignment and sell a call immediately against it. ALWAYS sell puts on a down day as you will get much more premium as volatility will rise on the down move. Volatility will also benefit the call sale as the market will be unusually down at that point. I have already sold and bought back the DEC31 262 puts this month. Couple hundred bucks per contract. Practice the dance. Good luck to all.
Couldn't agree more Mike. It applies whether you are selling a put on an index, sector EFT or individual stock. In my perfect world I desire truly oversold. In the real world a big down day will suffice. I sold calls last week. Today I sold a few puts. Makes no sense to fight the market trend of the day or week.
I've been wanting an insurance company for awhile but missed the last sector dip. MET Life and Prudential got destroyed with the sector today. Completely irrational as their earnings are strong. Considered strong buys by some analysts before the slaughter. Solds some JAN puts at a fat premium. We'll see if I own them next month. This is my 4th attempt to purchase MET. I just keep collecting the premiums so far. Also sold a Vanguard REIT EFT put today. Not nearly as oversold as much as I'd like but I will roll it forward if I need to. I have puts on REITS like O but I honestly don't understand the biz well enough, and they seem overpriced some now. My current thought is I might be better off with a REIT EFT that pays a higher DIV anyway. At least for now. I have 21 options open at the moment. All of the utility puts are going to expire worthless yet again unless something changes soon.
12-07-2018, 03:25 PM
The December 21 GIS $37.50 put looks pretty compelling with a premium of $0.80 or better at the moment. Thoughts?
(And yes, I know GIS has frozen the divvy and is at a low point, but I'm comfortable buying it right now, and would be very happy with some shares at $37.50 if they were put to me.)
12-07-2018, 03:32 PM
Honestly, I like that trade. I think it probably expires worthless and even if you do get assigned GIS, you've got a yield of over 5.3%. And the best time to sell a put is on a down day. I would say go for it. If I had the cash, I would be tempted to make the trade.
12-07-2018, 05:17 PM
Looks like a good trade to me too. Most of the consumer staples are good sticks to get your feet wet with puts. These are the perfect days to sell puts. Most Stocks already down and then the market gets hammered. I have about 24 put contracts open now from DEC 21 to FEB. I finally ran out of collateral I could access without notice. Probably a good thing because the market is hard to lay off of right now.
24 options probably sounds unmanageable, or even reckless I'm sure, but none of them are in anything I consider volatile. Even after this week only a few are in the money. About 10 utility contracts + T, MO, ABT, BMY, PFE,MET,PRU,O etc. I have a feeling some MO shares are going to be assigned to me which is fine. I might roll one forward if they are deep in the money. Those are DEC 21 57.50 strike contracts. When I sold them I just knew they'd expire worthless. You just never know what Mr Market will do in a month. 
In the interest of fair reporting this has been a tough month to sell puts. Very few contracts have expired worthless with the exception of utilities. I got forced into MET-MO-KHC-BMY-ABT last week. I am mostly cool with that outcome because I have sold puts against most of them for 2-4 months. I sold a lot of puts against JNJ but missed the dip because they were overvalued just prior IMO, so I gave it a pause. It's good to be lucky.
Right or wrong I got cold feet with the KHC add. I am too fat and lowered confidence, so I flipped the new shares for more T the day they were assigned. I have more puts in the money now so we'll see what the next few onths month brings. Some month I will get pushed into a lot of utility shares. I'm definitely OK with that as I have been selling contracts since SEP in XEL-SO-AEP-D and more. They would have to dip 20% more in a hurry to make me feel bad. I am trying to stick to the plan and continue selling in the same companies I researched last fall. GIS, JPM and PRU are new to the rotation though.
Sold an SKT JAN 18 put yesterday. $20 strike makes my cost basis $19.38. I'm calling this one speculative. Sweet dividend, good balance sheet and management, and a biz trend that will require perfect execution. $2K investment is my limit no matter how it goes in the near future.
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