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+--- Thread: Conservative option strategies, what did you buy or sell today? (/showthread.php?tid=1835)
RE: Conservative option strategies, what did you buy or sell today? - fenders53 - 01-05-2021
(01-05-2021, 03:15 PM)NilesMike Wrote: NICE! on the APD trade.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 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.
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.
RE: Conservative option strategies, what did you buy or sell today? - NilesMike - 01-05-2021
My cost on KO is under 42.50
RE: Conservative option strategies, what did you buy or sell today? - pdaignau - 01-05-2021
(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?
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
RE: Conservative option strategies, what did you buy or sell today? - fenders53 - 01-06-2021
(01-05-2021, 06:43 PM)pdaignau Wrote:Paul(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,
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.
- When did you write all these?
- Is there a name for the strategy you're doing?
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
I'll try to not write a novel but I probably will anyway.
I know I often get too verbose. I love to chat stocks. 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.
RE: Conservative option strategies, what did you buy or sell today? - NilesMike - 01-06-2021
(01-05-2021, 06:43 PM)pdaignau Wrote:
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
At the risk of sounding like a jerk, you need to tighten up on your usage of the terms necessary to understand what is going on with options.
I don't believe Fenders ever BUYS to open an option position. So, he never-"you simply bought PUTS and CALLS surrounding its current price." And if you bought something, you never want to-"close out positions for cheap."
When you sell to open, you receive a credit not a cost. "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."
One really needs to understand this or you WILL get so tangled up. I mentioned earlier that people overcomplicate options, it's only long or short, puts or calls. You must grasp what those things mean.
I know it may have been misuse of the words but when you have skin in the game that imprecision will cost you.
RE: Conservative option strategies, what did you buy or sell today? - fenders53 - 01-06-2021
You are correct Mike, I rarely buy an option. It is the inverse of selling and in theory I should be just as successful but I am not. Always room for improvement. I haven't given up on the idea. For whatever reason my account proves I am better at picking bottoms than tops. That works as I am looking for a good entry for long positions. But yes I will cash out when the market quickly offers a gift, and that happens often in a bull market.
You are right that terminology is important. We may come off harsh at times but I know we are trying to help others succeed. I am rough on John because he stops by occasionally and shares clearly impulsive trades. You just can't force trades and do what you wish you had done last week. You will lose money. You attempt to put the odds in your favor or just leave options alone. Every move should make sense and this requires some experience as you refine a strategy that works with your personal risk tolerance. There is no room for overly emotional moves.
RE: Conservative option strategies, what did you buy or sell today? - john - 01-06-2021
Looks like Georgia might make my ACB $11.5 calls in the money this week
another impulsive/speculative/profitable trade..
All tongue in cheek Fenders lol
RE: Conservative option strategies, what did you buy or sell today? - fenders53 - 01-06-2021
(01-06-2021, 08:17 AM)john Wrote: Looks like Georgia might make my ACB $11.5 calls in the money this weekWe just scold you because we we love you and want you to retire early. I wish somebody had grabbed me by the ear in 1999 lol.
another impulsive/speculative/profitable trade..
All tongue in cheek Fenders lol
RE: Conservative option strategies, what did you buy or sell today? - fenders53 - 01-06-2021
Ok, so the market doesn't actually give a damn who wins the election. Who knew lol??? Many of the puts I sold the last week or so need closed already. And do what with the money? I am thinking a new muscle car and pork belly futures.
RE: Conservative option strategies, what did you buy or sell today? - NilesMike - 01-06-2021
Bought CRSP Bull Call spread135/140 16JUL21
Paid 2.45, max profit 2.55
Breakeven price 137.45 @ expiration
Anyone see a 28.00 drop by July?
RE: Conservative option strategies, what did you buy or sell today? - pdaignau - 01-06-2021
(01-06-2021, 06:52 AM)NilesMike Wrote:(01-05-2021, 06:43 PM)pdaignau Wrote:
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
At the risk of sounding like a jerk, you need to tighten up on your usage of the terms necessary to understand what is going on with options.
I don't believe Fenders ever BUYS to open an option position. So, he never-"you simply bought PUTS and CALLS surrounding its current price." And if you bought something, you never want to-"close out positions for cheap."
When you sell to open, you receive a credit not a cost. "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."
One really needs to understand this or you WILL get so tangled up. I mentioned earlier that people overcomplicate options, it's only long or short, puts or calls. You must grasp what those things mean.
I know it may have been misuse of the words but when you have skin in the game that imprecision will cost you.
You won't offend me unless I feel you are purposefully being mean or demeaning. I do appreciate your concern about precision and being burned. I have a decent conceptual understanding of options, but when it comes to practically applying or writing/talking about them it takes me some time to think through all the details. Hopefully I'll get better and faster at this and figure out the standard language.
To put you at ease, I won't put any money down without a calculated plan or intent. Plus, I know, you sometimes have to lose a little to learn (a lot).
Thank you,
Paul
RE: Conservative option strategies, what did you buy or sell today? - fenders53 - 01-06-2021
You do need to risk a few bucks to learn. When the market gets roughed up snd VIXX IX higher find a 20 stock that moves as around some but is profitable and maybe a dividend. You can get some real experience on how fast the premium moves around and decays. I have several favorites but they have all run up so no good no good now.