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Conservative option strategies, what did you buy or sell today?
#21
The market is not right to sell a put on anything on my watch list today. I am off work so that is disappointing. So I present to you boring option trade of the day.

Sold a MET APR 47.50 covered call for .55. That's only about 7% annualized on the premium. It's unlikely to be exercised.

This is one of my favorite predictable stocks stuck in a trading range. $47.50 is well above the recent trading range. Took me about 6 attempts to buy it via put sale as I sold on the dips. Finally got exercised in DEC for an average cost of $41.25 (not including the $600 total premiums received along the way). I've sold calls since then that just expired worthless. I'm good with selling part of my position for $47.50 if it happens. MET pays a 4% Div so my intent is to keep some shares longterm, and try to not be called out often at dividend date. MET trades much like a Ute and it has been good to me. It's among the easier ones to manage.
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#22
(02-19-2019, 01:58 PM)fenders53 Wrote: The market is not right to sell a put on anything on my watch list today. I am off work so that is disappointing. So I present to you boring option trade of the day.

Sold a MET APR 47.50 covered call for .55. That's only about 7% annualized on the premium. It's unlikely to be exercised.

This is one of my favorite predictable stocks stuck in a trading range. $47.50 is well above the recent trading range. Took me about 6 attempts to buy it via put sale as I sold on the dips. Finally got exercised in DEC for an average cost of $41.25 (not including the $600 total premiums received along the way). I've sold calls since then that just expired worthless. I'm good with selling part of my position for $47.50 if it happens. MET pays a 4% Div so my intent is to keep some shares longterm, and try to not be called out often at dividend date. MET trades much like a Ute and it has been good to me. It's among the easier ones to manage.

Too funny, I was trading MET last week. I'm in around 43.50 avg.
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#23
(02-19-2019, 02:07 PM)NilesMike Wrote:
(02-19-2019, 01:58 PM)fenders53 Wrote: The market is not right to sell a put on anything on my watch list today.  I am off work so that is disappointing.  So I present to you boring option trade of the day.

Sold a MET APR 47.50 covered call for .55.  That's only about 7% annualized on the premium.  It's unlikely to be exercised.

This is one of my favorite predictable stocks stuck in a trading range.  $47.50 is well above the recent trading range.  Took me about 6 attempts to buy it via put sale as I sold on the dips.  Finally got exercised in DEC for an average cost of $41.25 (not including the $600 total premiums received along the way).  I've sold calls since then that just expired worthless.  I'm good with selling part of my position for $47.50 if it happens.  MET pays a 4% Div so my intent is to keep some shares longterm, and try to not be called out often at dividend date.   MET trades much like a Ute and it has been good to me.  It's among the easier ones to  manage.

Too funny, I was trading MET last week. I'm in around 43.50 avg.
I've been hyping it here for awhile.  I try to spend half my option time with companies I know.  MET is a keeper.  So is PRU but I have only made money selling puts and never been exercised.  They are about the safest financials IMO and they get no respect.  Little voice tells me to keep 100 shares forever and collect the big Div, and keep stealing money by selling puts and calls with another 100 shares.  I have no intention of stopping.  The funny thing is my GOV 401K was scheduled to be transferred to a MET annuity.  I checked it out and said oh hell no I don't like your deal!   But I'm not typical.  Most fall in line and transfer their GOV funds to MET upon retirement.  MET is solid because most are financially ignorant.
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#24
Wink 
(02-19-2019, 09:04 AM)fenders53 Wrote: 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.
Pardon me while I adjust yesterday's risk profile from low to moderate.  Big Grin   
That forward guidance was pretty rough.  Looks like I will likely be in CVS in the low 60's.  I'm OK with that as I like the Aetna merger plan and sub 11 PE.  But if I had a crystal ball I'd rather write the put contract now instead of several weeks ago.  It should be noted if this was purely an income put should have been bought back yesterday for as low as 13 cents.  The position was profitable within a few days of selling it.  Buying a stock just before earnings comes with some short-term risk.  The only thing I gained here is not paying $65.50 two weeks ago, because I highly doubt if CVS will be that high in a few days.
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#25
Do you guys track your options performance in any formal way? If so, how? I figure it is easy enough to track the return on any individual trade, but across trades where a small percentage of the puts you sell are exercised, how do you determine overall return? Seems you can only measure against hypotheticals ("well, I would have bought it at X, so the fact that the shares were put to me at Y, and commissions were Z, so I gained / lost Q....").
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#26
(02-20-2019, 10:08 AM)Kerim Wrote: Do you guys track your options performance in any formal way? If so, how? I figure it is easy enough to track the return on any individual trade, but across trades where a small percentage of the puts you sell are exercised, how do you determine overall return? Seems you can only measure against hypotheticals ("well, I would have bought it at X, so the fact that the shares were put to me at Y, and commissions were Z, so I gained / lost Q....").

Not formally, but I compute the ones that are exercised and I am almost always selling puts a few percent out of the money so that number will always be cheaper than if I just went long at time of put sale.  Mostly I just look at i.e. "I just bought MO or KHC for $300 above current market price".  I like to beat myself up and contemplate if I made a bad decision on the company overall, but it's short-term of course.       

As far as the strategy the number I watch is the monthly income it generates.  Lately I have about $100K committed to the strategy.  Monthly income from option sales, after subtracting any I may have bought back for whatever reason is my return.  Commissions subtracted of course.  Goal is 2% monthly profit, or $2000 just from options.  These are covered so the collateral is drawing about 2.4% annual while it's idle.  I've been under the goal a few times.  I've also had months that exceed $3500.  Several times in the last 6 months which I am thrilled with that as it blows away my dividend income on a percentage basis.  Even 1 1/2% would be acceptable accept during an extremely strong bull market year when just being long is better.  This mostly ends during a prolonged down market as you now own the stocks long.  A little cover call writing happens then if it makes sense.
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#27
(02-20-2019, 10:08 AM)Kerim Wrote: Do you guys track your options performance in any formal way? If so, how? I figure it is easy enough to track the return on any individual trade, but across trades where a small percentage of the puts you sell are exercised, how do you determine overall return? Seems you can only measure against hypotheticals ("well, I would have bought it at X, so the fact that the shares were put to me at Y, and commissions were Z, so I gained / lost Q....").
As a pure trading strategy, it's easy enough to calculate as I'll get an entry and exit price, usually not more than a week or two apart. Add the premiums, commissions, possible taxes and you should be done.

Now if you use a put to enter a long term position with no plans of letting go off the shares, then it might be a bit more complicated. But I guess then you should count it like you do with the rest of the portfolio that has unrealized losses/gains. Buy price is X, premium is Y, current price is Z so Z + Y - X = unrealized profit. It's no different than the rest of your holdings.

For yearly returns, I make it simple for myself. I have a certain amount that I'm willing to use for options trading, sometimes (like now) I have zero options so I'm not using that money, and sometimes I might go a few thousand above my own limit. But I just calculate it as if my set amount would be used 365 days a year, since it essentially is there only for these trades, whether or not it's actually used or just lying there on my account waiting.
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#28
No formal tabulation just a feel for what is and isn't working.

Spec play alert: Bought 6MAR19 15 Call on VIX looking for it to revert back to 18 or so before expiration.
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#29
(02-20-2019, 02:31 PM)crimsonghost747 Wrote:
(02-20-2019, 10:08 AM)Kerim Wrote: Do you guys track your options performance in any formal way? If so, how? I figure it is easy enough to track the return on any individual trade, but across trades where a small percentage of the puts you sell are exercised, how do you determine overall return? Seems you can only measure against hypotheticals ("well, I would have bought it at X, so the fact that the shares were put to me at Y, and commissions were Z, so I gained / lost Q....").
As a pure trading strategy, it's easy enough to calculate as I'll get an entry and exit price, usually not more than a week or two apart. Add the premiums, commissions, possible taxes and you should be done.

Now if you use a put to enter a long term position with no plans of letting go off the shares, then it might be a bit more complicated. But I guess then you should count it like you do with the rest of the portfolio that has unrealized losses/gains. Buy price is X, premium is Y, current price is Z so Z + Y - X = unrealized profit. It's no different than the rest of your holdings.
You'd really have to do as Crimson has stated and isolate the option.  Then isolate entry and exit for the stock.  The other part is where we debate.  I think it's a big deal to get into every position a little cheaper as that savings can be invested.  He contends we miss being long in some stocks that will run to the moon and we missed the bus.  In fairness that's a defendable position.  With this current six week market run you could have outperformed my income strat by just being long, and cashing out some shares about now.  But the market is still down some since I started this with a high volume of put positions.  I am not down through all this.     

Not to repeat myself, but for me it's total option premiums received, minus the few I bought to close out through the month, minus commissions.  That is cash in the account I can split into other investments.  Call it what you want but I am re-investing a lot of it into shares of whatever, so it's a form of DRIP in my mind.  Option premium or a dividend is cash money right?  I own a lot of DGI as well and it does it's DGI thing over time I hope.   I find every way I possible can to diversify, including my strategies.  I would never commit all my money to and idea.  But this is the golden method of entering position Crimson.  Don't ever forget that Mike and I are right lol.

I had to run off to work this AM but Mikes goal of 1 1/2% monthly is more reasonable.  I mentioned a couple 3 1/2% months during the past 6 months.  Here is how that happened.  JAN was a straight up month and it was just easy as you could sell a put almost in the money and it was worthless in a matter of a week.  OCT-NOV was very volatile and acting on the extreme dips was instantly rewarded in many cases.  I sold puts in AAPL, MMM, HD etc.  Stock would launch and you could buy it back for a lucrative profit, then recycle the money into another put sale a week later.  Yes this is just trading but a few stocks were cooperating fully.  The opportunity presented itself repeatedly and there was little logic in sitting on a highly profitable position for another 3 weeks for little reward. It was not likely the put would ever exercise so far out of the money.  I was forced into plenty of long positions through all this so no regrets.  I have a long list of stocks I want to own long the next year or two.  I'll probably let the market decide which order as long as I am somewhat diversified.  I'm inclined to keep doing this strategy until it fails me.  Some of my long positions took a horrible beating and this kept me in the green except DEC.  Only way you were green in DEC is if you were shorting everything.
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#30
Forgot about this position from last week. I'll share it publically and we'll see how it goes. Some may not regard this as conservative but I have followed the company off and on for decades. Owned them back in the 1990s. The company is Newell Brands. bet you haven't heard of them? I'm betting you have heard of Rubbermaid, Elmer's, Graco, Sharpie, Papermate, Sunbeam, Ball, First Alert, Coleman Outdoors, Yankee Candle, Oster etc. Their business plan since forever is acquiring famous brands that come up for sale. It worked fairly well since forever but they screwed up when they bought Jarden Brands a few years ago. I am an avid fly fisherman, and excuse my French, but they overpaid for a bunch of mostly has been fishing brands that are now commodity Wal-Mart fodder. They can't dump some of this stuff fast enough to get rid of debt. Stock has taken a beating but it is my belief they will survive with their stable of consumer product brands. I may have jumped early but they dropped hard on a bad earning report. They aren't going out of business IMO. We'll see if they right the ship fast enough to save my puts. I believe they will or I wouldn't have sold them. I don't normally sell long options but they clearly need a few quarters to restore any confidence. NWL is an accidental high yielder with a current Div of 5.4%. It's safe for now IMO, though I won't be collecting it soon with puts. It offers some downside protection though IMO. Anyway, well see how wise or foolish my reasoning sounds in a few months. Here are the trades.

Current price is $17.15

JUN Strike 16 puts. $1.12, 20% annualized return

SEP Strike 17 puts, $2.20, 21% annualized return.

Only $3300 worth of capital tied up collecting MM interest for now, minus the $332 in cash already in my account. Doubt I leave these alone until expiration but we'll see. Cash them out if it bounces significantly, or roll them forward and sell more time. I'd like to own NWL longer term but I don't want to be exercised until it is near the true bottom, whenever that is. NWL is at the top end of my risk tolerance range. I would never risk a lot of capital as they are a mistake or two away from a dividend cut. They are going to need to divest a few more brands and not give them away so they can lighten their debt load.
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