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

[john]

T currently trading @ ~$33
Selling April 17 T put @40 strike are $7.50 
Selling Jun 19  T put @40 strike are $8.00
T hasn't traded above $40 in three years the 20 year chart only shows it above $40 a few times.
This would be "chasing premiums scenario" 
However if you got assigned it would mean the market vastly improved?
Please critique my theory
edit to add I own T already mostly purchased around $33

[fenders53]

(03-17-2020, 09:33 AM)john Wrote: T currently trading @ ~$33
Selling April 17 T put @40 strike are $7.50 
Selling Jun 19  T put @40 strike are $8.00
T hasn't traded above $40 in three years the 20 year chart only shows it above $40 a few times.
This would be "chasing premiums scenario" 
However if you got assigned it would mean the market vastly improved?
Please critique my theory
edit to add I own T already mostly purchased around $33

No, selling a put on T is NOT chasing premium provided you are completely comfortable adding some more shares.  

Pull up this example.

Weyerhauser  (WY)  The stock is volatile as hell.  

Check out an APR 17 Put, or anything a little out of the money from 2-4 weeks out.  See that 5-10% instant return?  A stable stock during times of low volatility only yields 1-1 1/2% return for your risk assuming it expires worthless. There is a good reason you are getting that big premium.

John doesn't desire to own 100 shares of WY.  He is just chasing the big yield.  John might be trying to dump the stock  before it's even assigned lol.  John is just gamblng for option premiums.

fenders53 is building a position in WY, (BTW he just loves WY at this price with the huge Div for a leader in the building materials industry).  It took me five tries to own WY with my initial shares.  Every time it dipped I sold a put in a bull market and collected a lot of premiums.  These assigned shares are down now but I'm still good.  

When you get assigned shares you didn't want it's a completely different story.  Hope that helped.  When the market is is freefall you WILL get assigned.  Be 100% OK with that outcome up front and you're just collecting premiums and getting shares cheaper eventually.  "I'll just sell a covered call and maybe escape" will fail you if you sell puts on junk regularly.

[NilesMike]

(03-17-2020, 06:52 AM)fenders53 Wrote:

(03-17-2020, 06:37 AM)NilesMike Wrote: Anyone for an AAPL put spread in the 1580 or 1600 area?

No, I am exhausted from trying to determine which of my 45 stocks is going bankrupt next month so I can average down on the good ones about every two hours lol.  I'll correct this problem in the future.  

But what you got in mind?  I've always got time to check out your latest option idea Mike.

Tried selling a 1570/1580 Put spread for 3.50. Never got it. Now I could have bought it back for 1.55 aaaaaarrrrrgh

[NilesMike]

What I do when volatility is high, I go much farther out. Out to where the return is in the 1.5-2% return for the period. Particularly if it's something one doesn't really want.

High volatility allows you to choose between more premium or being farther away. You make the call. (Old IBM commercial-LOL)

[fenders53]

(03-17-2020, 01:43 PM)NilesMike Wrote: What I do when volatility is high, I go much farther out. Out to where the return is in the 1.5-2% return for the period. Particularly if it's something one doesn't really want.

High volatility allows you to choose between more premium or being farther away. You     make     the   call. (Old IBM commercial-LOL)

I try to avoid writing options on junk period, but we all have a weak moment.  Market volatility expands our choices enormously.  I try to be cool under fire, but a port full of junk I don't want to own that is way down doesn't make it for good decisions later.

[NilesMike]

(03-17-2020, 09:33 AM)john Wrote: T currently trading @ ~$33
Selling April 17 T put @40 strike are $7.50 
Selling Jun 19  T put @40 strike are $8.00
T hasn't traded above $40 in three years the 20 year chart only shows it above $40 a few times.
This would be "chasing premiums scenario" 
However if you got assigned it would mean the market vastly improved?
Please critique my theory
edit to add I own T already mostly purchased around $33

You will be assigned the stock at the $$ of your put $40 if it's 39.99 or less at expiration, so no the market doesn't have to "vastly improve" T could be $30 at expiration.

The DITM puts have less Implied Volatility than the OTM puts. So you're receiving LESS premium relationally than you could if you sold the OTM put, and since it's ITM you'll get less decay available to make a profit before expiration.

Sell the July 28 Put for $2.00 and if assigned, your cost is $26.00. Stcok closes at $34, I keep $2
Sell the July 40 put for $8.00 and if stock goes to $28, your cost is $32.00. Stock closes ate 34, you keep $2

I don't like the DITM put idea but it's your trade.

[fenders53]

(03-18-2020, 07:03 AM)NilesMike Wrote:

(03-17-2020, 09:33 AM)john Wrote: T currently trading @ ~$33
Selling April 17 T put @40 strike are $7.50 
Selling Jun 19  T put @40 strike are $8.00
T hasn't traded above $40 in three years the 20 year chart only shows it above $40 a few times.
This would be "chasing premiums scenario" 
However if you got assigned it would mean the market vastly improved?
Please critique my theory
edit to add I own T already mostly purchased around $33

You will be assigned the stock at the $$ of your put $40 if it's 39.99 or less at expiration, so no the market doesn't have to "vastly improve" T could be $30 at expiration.

The DITM puts have less Implied Volatility than the OTM puts. So you're receiving LESS premium relationally than you could if you sold the OTM put, and since it's ITM you'll get less decay available to make a profit before expiration.

Sell the July 28 Put for $2.00 and if assigned, your cost is $26.00. Stcok closes at $34, I keep $2
Sell the July 40 put for $8.00 and if stock goes to $28, your cost is $32.00. Stock closes ate 34, you keep $2

I don't like the DITM put idea but it's your trade.

Agree with Mike.  The best premium is never that deep in the money  I almost always sell strikes fairly close but out of the money.  If T were currently at $26 I might entertain an ITM put around 28-30 because T has proven to have fairly strong support when it dips below 30  Truth is I would probably be better off owning T at that price though.  Huge yield and likely to bounce off that level. I'm rarely selling 90 days out in a normal market. No chance I am doing it now T drops $5 and you might just get assigned those 40 strikes just a couple weeks from now I've had puts assigned to me way before expiration lately. It does happen.

[fenders53]

Mike,

I probably could have googled this first but I just sold a MO strike 37 expires Friday. It goes ex-div on 24 MAR which is next Tuesday If assigned I would get the Div right? Options exercises confuse me on when you become the shareholder of record. In any case the $1.30 premium was sufficient.

[NilesMike]

(03-18-2020, 09:37 AM)fenders53 Wrote: Mike,

I probably could have googled this first but I just sold a MO strike 37 expires Friday. It goes ex-div on 24 MAR which is next Tuesday If assigned I would get the Div right? Options exercises confuse me on when you become the shareholder of record. In any case the $1.30 premium was sufficient.

Yup, you'll be the owner by Monday at the latest.

[fenders53]

Thanks, the weekend confuses me because I get notifications which seem a little random sometimes.

[john]

on 3/16 sold a WEN put for .57 12.00 strike for 3/20 got assigned
today 3/23 sold WEN covered call 1.63 12.00 strike for 4/17

[fenders53]

(03-23-2020, 09:53 AM)john Wrote: on 3/16 sold a WEN put for .57 12.00 strike for 3/20 got assigned
today 3/23 sold WEN covered call 1.63 12.00 strike for 4/17

Looks good.  I've been keeping my options very short duration lately.  If you get a chance to buy that back for half price in a week do it.  WEN is highly likely to remain volatile and you'll find a new entry that makes sense.