Recent discovery and follow-up to cover calls versus rolling puts.
With the rebound WDC I am back to break even after 3 weeks after a 17 point drop. However the covered calls have recovered quicker than the put rolls. Bottom line is that is probably more efficient to accept shares and convert to covered calls instead of continuing to roll the puts. It will still take me another 3-4 weeks to break even on the put rolls which is money that remains tied up. The CC will close next week giving me money to trade with again.
Sometimes better to sell an ITM covered call instead of a put on the weeklys especially on stocks that have an upside bias. Looking at a trade on SVXY the other day at the 76 strike, the covered call would have made $1290 on 10 contracts and the put only $1100 on the same number of contacts. The extra money would more than offset the exercise and assignments fees and just as easy to roll the calls. Plus rolling the calls usually gives you more capital gains as well.
BTFD strikes again. Or in our case SOTFD (sell options on the FD). Wish I had not been so busy this morning. Would have sold SVXY puts and some SPY/ES puts this morning at the open but was too busy.
Oh well, will close out positions in next 1-3 weeks then reload. Hopefully people keep buying SPX puts to keep the VIX up.
Rained all day here Sat. so took a few minutes to find more leveraged and contango ETFS. Here are some with decent volume on the options. Would need to work the spreads but if selling adding liquidity so could probably get them filled at decent prices.
Bears: SDS, SQQQ. That’s all I could find with weeklies with decent volume. I know some of you also trade DUST and DRIP
Bulls: SSO, UPRO, TQQQ, UDOW, FAS, ERX and some of you trade the gold leveraged and GUSH.
These are all leveraged so have great premiums and also fast decay rates. The trade off is high volatility but isn’t that the point with how most of us trade?!
Will add these to the watch list and pair with SVXY/UVXY trades.
Hope everyone had a great weekend!
I have been dissecting the XIV/VXX system marketed by one of the option companies and think I have a better version for the bistroers which many of you are already doing. As I clear out some margin I will start it with a few contracts and keep it rolling TT style. Sell 45 DTE delta 16 or so options and roll as they decay.
So when the VIX heads into backwardization like today, this service goes long VXX when it reverts to contango they close VXX and go long XIV. We can do the same with SVXY and UVXY but with a turbo because of the options.
Sell puts on SVXY and calls on UVXY after a volatility spike or both for the turbo effect. Then when we hit backwardization can sell puts on VXX or go long UVXY stock and get called out on the sold calls. As short as the spikes seem to be I would use short dated options, especially on the VXX. Or if you sold puts on SVXY just take delivery of the stock and then you are long on the reverse anyway.
I know most of you are doing this and I am preaching to the choir but thanks to all of you I am learning how to play VXX game as well and just thinking out loud about ways to keep it rolling long term and make more profits along the way.
Looks like everyone did well today, once I fixed my margin issue I had no problems and should come out ahead in a few weeks.
Rolled WDC 9/17 90 put to Jan. 2018 for 3.57 credit.
Brings cost basis down to 85 and change but allows me to stay in some other positions now. Kind of backed myself into a corner with some margin but now everything can stay open.
Don’t know about the rest of you but TOS has done some weird stuff with margin as soon as vol. picks up, even on cash secured stuff. Will need to speak with them to see what they are doing and why they all of a sudden calculate you need more money when it is clearly covered.
At least now I can leave the XBI and SWKS ladders open to let theta do it’s thing.
Rolled WDC 87.5 call this week out 1 and 2 weeks to 84 and 85 calls for 0.77-0.90 credits. Cost basis now 87 and change on assignment at 90. I suppose I could short the stock because that will make it go back up. 1 up day in 2 weeks…….
BTC SWKS 9/8 100 put for 2.05. Sold for 3.03 on a roll a few weeks ago. Break even trade. Would have let it sit but need so extra margin to take advantage of the sentiment change.
I may roll a 37 DTE WDC 90 put out to Jan 2018 for 3.45 credit just to bring in some cash for some other trades. Have to figure out where I want to move it first.
So WDC dropped 16-17 points after earnings. I had small positions on several accounts. Options Income Blueprint suggests that with a big drop like that quicker to break even by taking delivery of the stock and selling covered calls than to keep rolling the put.
So I have taken the stock on half the accounts and am rolling the puts on the other half. 3 weeks in looks like the covered calls are winning. Rolling the puts I am only able to get about 0.20 of time value each week but selling the covered calls a few strikes OTM can take in 0.50-0.70. So the cost basis is already lower on the CC than the rolled puts and with even a slight rebound can get out at even.
If you are willing to sell ATM and roll the calls can get $1-2 per week which would make break even quicker but would probably have more adjusting. Will take me about 3-6 more weeks to fix them all the way but both work.
I think the CC is quicker to recover, just ties up more capital. The bottom line is a long as you know your cost basis and eventually close out the trade above your cost basis you will come out ahead and much easier with names that have weekly options.