Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Conservative option strategies, what did you buy or sell today?
(01-04-2021, 08:09 PM)fenders53 Wrote: When I am looking to be conservative, I am usually selling options on a day when the premium is going up.  Like you said John, you meant to do this last week when it was a better bet.

Actually last week when T was lower, the call premium is also lower. The puts would have been elevated. The play the was to just sell the put @ 28 for around .88 (now they are .60).

Sell puts when you think the stock is down, sell calls when you think stock has run a bit too far.

Like my KO trade last week, bought it back today for 50% return.
Reply
Right but I thought he bought the stock after it jumped as well.  If not then good.  I occasionally buy shares then sell a call immediately but generally not in a low premium stock where a little SP movement helps.
Reply
(01-04-2021, 08:26 PM)fenders53 Wrote: I posted a lot of option trades on the big thread today.  Trade of the day was an ALE covered call at strike 65 JAN 15 for 1.10.  That's a good premium for a financially solid utility stock with a highish div.  There is usually no trading volume unless I make it and it takes hours lol.  I am averaging about two round trips covered calls a month.  A few covered puts as well.  One of these days my puts will get exercised and then I'll own 200-300 shares.  Then maybe I can be the ALE option WHALE.  Smile  The spreads on ALE options are just stupid. Like no bid/$10.00 to get things started.  It might take a day but eventually somebody gets impatient and pays what I regard as way too much.  I better not mind getting assigned because I won't be dumping a contract in a hurry.

I prefer to be the anonymous pilot fish.
Reply
I am the whale of nothing lol. I have never really tried to trade options on a stock with zero volume. It is just odd I can get a fill at a good price but it's happened pretty consistently. Like I mentioned it's a process. I generally have to adjust the offer a few times and wait half a day. It might be impossible if I was trying to trade 3 or more contacts. I sure wouldn't make it the core part of a strategy.
Reply
Closed an APD strike 250 JAN 15 put. Sold on DEC 21 for $319. Just bought it back for $31. That's an 85%+ return in two weeks. It's important to take a profit when it presents itself. It will almost surely expire worthless if I hold it 10 more days but I don't have limitless funds for this strategy. This frees up $25,000 now. I can far exceed the $31 premium left on the table gave up even if I just sell some very conservative out of the money puts that expire in a few weeks.

This was just meant to be informative to new options traders. You get to pick when you cash out whe it goes well in a hurry. Some cash out with a 50% profit and that works too. Over time you pick your strategy. If I am confident in owning the stock I will wait for 75% return on average. I also let some expire worthless if I don't need to free up capital if I have no immediate plans that require capital. Occasionally you get a short term gift when you guess right. I truly did want to own 100 shares of APD at $250 but that's not going to happen short of a real hard pullback. Just going long would have been better but I'm here now.
Reply
NICE! on the APD trade.

I am surprised ho low the volatility is on APD especially with earnings coming pretty soon.

You picked up the equivalent of nearly 2.5 dividend payments there. Very nice indeed!

On the divvy stocks that I have I try to get the equivalent of 12 dividend payments per year via options to augment the 4 the stock pays. Roughly 3X the dividend yield. And the fun of doing it.

Makes dividend stock investing a bit more interesting.
Reply
(01-05-2021, 03:15 PM)NilesMike Wrote: NICE! on the APD trade.

I am surprised ho low the volatility is on APD especially with earnings coming pretty soon.

You picked up the equivalent of nearly 2.5 dividend payments there. Very nice indeed!

On the divvy stocks that I have I try to get the equivalent of 12 dividend payments per year via options to augment the 4 the stock pays. Roughly 3X the dividend yield. And the fun of doing it.

Makes dividend stock investing a bit more interesting.
We pursue a very similar return.  If you pick your spots you can make a nice return on a stock that goes nowhere for a year.  With valuations stretched I just can't get inspired in a 2% yield and a 30 PE unless I think the stock has some legs in the share price.  The risk reward is just not there.

I sold my first KO put in awhile.  Had to go out to FEB because I only want to pay $50 max for KO.  I took a break because I am almost sure their next quarterly is going to be weak.  Very reliant on their "keg" sales and that just can't be good with restaurants and bars throttled back again.  KO is one I feel comfortable getting bold with when it gets in the bottom half of the trading range.
Reply
My cost on KO is under 42.50
Reply
(01-04-2021, 09:20 AM)fenders53 Wrote: PUT Strike  28  EXP 1/15  Premium received 51.  Currently 41   Up 10
PUT Strike 29  EXP 1/8        57/86  Down 29
CALL Strike 28 EXP 1/15      60/65  Down 5
CALL Strike 30 EXP 1/8        38/11  Up 27
CALL Strike 32.50  EXP 1/22 54/3   Up 51

This is all about consistent income for me.  I have no emotional attachment to T.  T pays a div this week so that is mostly locked in.  I have collected $260 premium up front on these contracts and the extrinsic values should fall rapidly as expirations approach.  This doesn't have to work out perfectly to be a win.  We'll see what happens.    


It took me a few minutes to understand what you meant by "Up" and "Down" on each option.  It's the difference you would make if you closed out the position by buying the same PUT/CALL.

A few questions to help to me better understand,
  • When did you write all these?
  • Is there a name for the strategy you're doing?
It seems, because AT&T was in the middle of a range and/or it was a "boring income stock", you simply bought PUTS and CALLS surrounding its current price.  Then, when the stocks price fluctuates enough, you close out positions for cheap.  I'll have to see what your thinking is on rolling these forward for small losses.

My quicky-and-easy take-a-way would be to watch the two Cash Secured Puts (CSP) I wrote for Feb. 5th for an opportunity to close them out for a fraction of the cost I made.  If lucky, I could free up my cash sooner allowing me to write more CSPs.

Thank you for sharing,
Paul
Reply
(01-05-2021, 06:43 PM)pdaignau Wrote:
(01-04-2021, 09:20 AM)fenders53 Wrote: PUT Strike  28  EXP 1/15  Premium received 51.  Currently 41   Up 10
PUT Strike 29  EXP 1/8        57/86  Down 29
CALL Strike 28 EXP 1/15      60/65  Down 5
CALL Strike 30 EXP 1/8        38/11  Up 27
CALL Strike 32.50  EXP 1/22 54/3   Up 51

This is all about consistent income for me.  I have no emotional attachment to T.  T pays a div this week so that is mostly locked in.  I have collected $260 premium up front on these contracts and the extrinsic values should fall rapidly as expirations approach.  This doesn't have to work out perfectly to be a win.  We'll see what happens.    


It took me a few minutes to understand what you meant by "Up" and "Down" on each option.  It's the difference you would make if you closed out the position by buying the same PUT/CALL.

A few questions to help to me better understand,
  • When did you write all these?
  • Is there a name for the strategy you're doing?
It seems, because AT&T was in the middle of a range and/or it was a "boring income stock", you simply bought PUTS and CALLS surrounding its current price.  Then, when the stocks price fluctuates enough, you close out positions for cheap.  I'll have to see what your thinking is on rolling these forward for small losses.

My quicky-and-easy take-a-way would be to watch the two Cash Secured Puts (CSP) I wrote for Feb. 5th for an opportunity to close them out for a fraction of the cost I made.  If lucky, I could free up my cash sooner allowing me to write more CSPs.

Thank you for sharing,
Paul
Paul

I'll try to not write a novel but I probably will anyway. Smile  I know I often get too verbose.  I love to chat stocks. Smile  If I don't answer thoroughly enough just speak up and we'll expand on it.  I sometimes have 30+ options open simultaneously.  I could cherry pick some that make me look like an option rock star.  That is not why I am bothering to type here.  What I shared is more real world.  I don't know exactly how it ends but I know how I got here.  It occurred as T moved around.  This is NOT an option straddle, but in affect I am straddling some long shares selling covered options to boost income.  I've done this for years with T-KO-MET-WY etc.  Had the share price not cooperated, I might have a couple covered calls and zero puts.  I try not to "fight the tape".  I try to sneak up on a position if I am not thrilled with valuation or anything else of concern.  My mindset is I am not interested in buying T at 30+.  I'll take a chance at 29.  At 28 I am interested.  At 27 or less I am willing to own a few too many shares.  T is not risk free if interest rates rise or they keep screwing up major acquisitions, but mostly I am optimist they sort it out and the dividend is awesome.  YOU decide your comfort zone.            

These trades occurred over the past month or so but it's not that important.  T premiums are usually not there to just decide, "I'll buy 100 shares at 30 today, then the same day sell puts below and calls above 30".  The trades come to me or I try to have enough discipline to leave it alone for now.   Before I forget, I usually try to have some puts expiring shortly BEFORE ex-div in this strategy.  Go ahead and assign me a 1 1/2% dividend check for a three day wait and I'll sort it out after that happens.  If you leave an option open and the math makes sense, somebody WILL snipe your dividend.  It's always a risk if you are snoozing around Ex-div time.  I've even been exercised a month before expiration.  It's rare but anything is possible.  You just move on.  I have some stocks I have some attachment too. You can't fall in love with everything you own or this doesn't work.  They are just digital stock certificates.  

Back to the trade, the  strike 28 call is trouble now, and maybe even the 30.  If the math works I will probably roll one or both forward today.  I can't wait for ex-div.  A few days before ex-div and other's make decisions.  I'll show you the trade and the math when I execute the move.  

I am currently at step one with KO on this strategy.  I was called out of my shares a few months ago in the 51-52 range.  Before that I collected over a dozen option premiums and made money on shares I was assigned in the 46 range.  Made well over $1000 on a stock that went nowhere all of 2020, and I never owned more than 100 shares, but I was willing to be assigned many more at the right price.  I only owned shares near the bottom of it's trading range.  It was as safe as the stock market gets.

As far as closing out an option early....  I discussed this at length with NilesMike and I made a change.  I used to ride them all out to expiring worthless.  There are times I still do if I don't have a new good idea for the money.  Always keep an eye on things.  Do this enough and sometimes the market smiles on you.  If you are sitting on an option you just collected 9-% of the possible premium on, why would you hold it two more weeks for a potential gain of ten more dollars.  Anything can happen in the stock market.  Bad news happens and stocks drop 20% in days.  But that option back for $10.  Take the $10K which is now risk free.  Sell another option and get $100 or ore in new premiums.  At least you are being paid something for putting capital at risk.

You have to do this for awhile and get punched in the face to truly understand the downside.  MAR 2020 comes and suddenly I am forced to buy 2000 shares at 10% over current share price.  It stinks but at least you got some discount with out of the money option sells.  Nothing completely protects you when the market free falls.  It's happened to me twice in 30 months since I went hog wild with the strategy.  The overall return is excellent.  It's a long game.

There is much more to options trading than T and KO.  You can get 5% return in a month but always understand the risk.  It's never free money in the end.   Some of those even have good balance sheets but there is always a reason for the volatility.  Cyclical, political risk, etc.  Start watching the VIXX index.  It's the volatility index.  When it rises, option premiums rise with it, even in boring income stocks.  I wait months with a little too much cash and pounce when it happens.  Option premiums are a little better this week for the first time in awhile.  Low market volatility + boring stock = poor premiums.  Sometimes so low it's not worth the risk even though it's low.  You'll get a better feel for this when you feel comfortable enough to tackle a stock that moves around a little more than T.             
                      
Regarding your last comment, yes buy them back weeks early if you have the opportunity.  It will cause a new trade.  More experience sooner will shorten the learning curve.  If it turns out it costs you $10 the education is worth it.  Just trading T options is a great start I would recommend, but it won't teach you everything.  I hope the market gets hammered this week so I can sell some more puts.  That is the twisted mindset of a conservative options trader.  My core long positions will be fine in the end, but if I can make another $1000 in safish income this week I will call it a good week.  I can buy more shares with that income. 

Told you I type too much.  Smile
Reply




Users browsing this thread: 5 Guest(s)