fuzzballl 8:32 am on Thursday, April 1, 2021
Tags: ShortPuts ( 4,763 )

LABU

#ShortPuts – Closing and opening. Filled on the bounce and filled on the dip.

Bought to Close LABU APR 1 2021 75.0 Put @ .05 (sold for 2.80)

Sold LABU APR 16 2021 72.5 Puts @ 3.00

Eric 8:43 am on Thursday, April 1, 2021

How do you typically handle stops? Do you put a stop in based on the stock price or based on the option price? The more risky approach would be to just put a market sell order in if the underlying hits 72.5, but I see others on here typically putting the SL at 2 or 3X of the option price.
- fuzzballl 4:00 pm on Thursday, April 1, 2021
  
  When I sell a put I never use a stop. I handle the risk by position size, strike selection, and scaling in gradually. On most of the lower price stocks I use I actually want to see it continue dropping after my first entry since I like to add lower and lower.
  
  Of course the higher priced stocks are generally one contract with a plan to own it if I need to. As of this weekend I will be back to owning zero shares of stock in any account…just how I like it!
- fuzzballl 4:08 pm on Thursday, April 1, 2021
  
  I have people ask me all the time how I decide what to sell as far as puts go. Here’s my standard form letter response I send. Just a general overview of some of the things I’m thinking about….
  
  =======================================================================
  
  When I’m looking for a put to sell the first thing I’m after is a good company that’s selling off for temporary bad news. Either the overall market is pulling it lower or maybe another company in the sector got some bad news that’s dragging them all down.
  
  The stock dropping cures a lot of issues. It drives up the put prices, increases IV and obviously allows a better and safer (lower) entry.
  
  Once I see the stock selling off I then go to the chart and look for basic support levels. Where would I not mind owning It? 50 day moving average? 200 day moving average? Where did it bottom the last time it really sold off hard? Once I decide on that I then go to the option chain and start searching for strikes near that level. Once I find a strike and timeframe I’m happy with I cross check that with the expected move which TOS clearly displays in all their chains.
  
  The expected move in my opinion is THE most important number. That takes into account pretty much everything. Anything that could move the stock gets factored into that. No need to worry about IV or anything. The more uncertainty in the market the higher the expected move will be and the higher the option premiums will be. It covers pretty much everything and it’s simple!
  
  So if the strike I picked is at or near the expected move (preferably even outside the expected move) then I’ll place the order. Also I will rarely go all in on a full position. Once I’ve done all this and decide a 5 lot is max size I might only sell two. That way if the stock overshoots to the downside I can add at even better prices. If I never get a chance to add that’s good too. Trade is working.
  
  Incorporating earnings dates into all this is a another conversation altogether. Always be aware of earnings. My ideal setup is to sell the week before. Then you still have the high IV to roll into earnings if you need to or sell a covered call if you received stock.
  
  Anyway, that’s the basic Fuzzy overview. We should all meet for a beer and look at it closer. LOL
  - walter6871 4:17 pm on Friday, April 2, 2021
    
    nice/yes expected move is usually spot on. It correlates to about .20 delta.
  - Ramie 2:27 pm on Monday, April 5, 2021
    
    I like the overview, well laid out.
    
    Now about all of us meeting for a beer and looking at it closer. ANY TIME!!! Just let me know LOL.