Since we are on experiment discussion below again, here is one I have been paper trading. A twist on #pietrades. If we need a new term we could call them #lizardpies.
So obviously with the market rout all my #pietrades went ITM and to prevent a meltdown in margin I converted them all to #fuzzy. Which is great, has controlled the volatility and still have 111 weeks to manage them. But as @fuzzballl points out below, they are expensive. Cheaper than stock but my EXPE puts are now trading at 22.40 and 19.50. Not chump change.
The #pietrade idea is sound for income generation and even some capital gains long term as long as you sell the call ATM or OTM once assigned the stock. You also are typically only selling 1 side and as Karen the supertrader (now scam artist) figured out, selling the other side is what really improves long term returns and consistency. She may have been using some creative accounting but the idea is sound and has been proven by tasty trade.
So here is the tweak I have been playing with. When you set up the trade, start it as a #jadelizard but set it up ATM. For example with XBI currently at 78.02 I would sell the 10 DTE 78 puts naked (cash secure) and then sell the 78/79 call credit spread. Total credit 2.55. No upside risk, downside break even is 75.55 which is lower than where I probably would have just sold the put.
3 possible outcomes
a: below 78 assigned shares on the put at 78 but cost basis 75.55. Can sell a next week call or call credit spread if you think rebound, then uncapped upside
b: Between the strikes max profit and you may be assigned on the call but can exercise your long call if needed.
c: above 79 everything cancels out and you keep the credit minus $1.
Here’s a graph on a 10 lot.
I have been trading it on paper and it would have had better loss control on the #pietrades than straight put sales the last 2 months.
Thoughts, holes in the strategy, other ideas to tweak it or make it better? If you wanted to be more conservative could sell strangles OTM instead or straddles ATM on the short sides but then less credit. Since my premise is income, I am trying to bring in as much credit as possible on the front end.
GILD rolled 4 DTE 70/70 out to 25 DTE for 1.02 credit.
Cost basis now 10.31 and still have 112 weeks to manage.
Starting to agree with @fuzzballl, the extra time on these makes it a lot easier to ride out market volatility.
However, I am trying to trade them #pietrades style to keep cash coming in. Seems to work, I doubled my cash balance in the core account with just 2 trades this morning (was not much to start with, only $1100). But now I have enough to add some more contracts somewhere at better prices 🙂
#Earnings This doesn’t appear that it will stop. Of course, once one decides that, that’s where it will stop.
But I’m looking for this to go higher. I looked at the lifetime chart, and every gap up is NOT filled… stock continues higher and never revisits the opening low on post-earnings day. This, however, is a gigantic move. I’m going to look to sell some OTM puts, and then wait for higher prices to try to sell calls or strangles.
BTC $TWLO Nov 9th 85 calls for 10.55. Strangles sold yesterday for 1.96.
#LongLEAPs I sold my stock and Jan 2019 60 calls on the 5th, when $SQ was at 94.50. Man, what a drop! Now looking to leg in long again.
Bought to Open $SQ Jan 2020 110 call for 7.40.
Sold $SQ Oct 26th 80 call for 1.50.
I play this one a bit differently than @fuzzballl, going fairly far OTM rather than ATM. SQ topped out at 101.15 on Oct 1st, and this LEAP was going for 19.00 and higher.
10/9….BTC WYNN 12 OCT 18 130 Calls @.04….STO 10/4 @1.42….Selling against Jan 2021 125 Calls needing $0.25 per week to cover so off to a good start..
10/9…STO 19 OCT 18 125 Calls @.94
Thankyou @fuzzballl for the idea… #fuzzy #leaps
$BA BTO 11/23 385/395 BUCS at 4.62
$ARNC STO 11/16 19/24 BUPS at 1.75
$SOXL STO 12/21 90 put at 3.51 Thank you @fuzzballl
STO VIX Nov 20/30 call credit spread @ .60 on today’s spike. Selling against longer-dated VIX longs per my strat. @fuzzballl I know I owe you the details for this strategy. Sadly, it’s a black box trade. If I tell you the secret, I will have to (blank) you. Didn’t want to fill in the blank for fear of being censored. lol.