Driving across I76 toward Denver listening to all my rowdy friends have settled down sold Oct. 24 call for 4.95, bought for 2.40,currently unhedged by chance only, KR up big after earnings
Some observations as I closed out another week. Good 3 weeks 🙂 the pull back a few weeks ago really helped.
1. Critical mass on accounts seems to be around 50k. At that point the compounding really starts to kick in and the account becomes self sustaining for positive theta, #pietrades, income trades. Trades that need to be adjusted do not seem to affect the account value as much at these levels as well. Trading 6 different accounts with different values, lowest $3500 so can really see the difference. Each contract adds a lot more cash each week. 5-10 contracts is where the income really starts to compound and pay off. Even 3 contracts is a lot better than 1 unless talking AMZN or PCLN.
2. Some names are just better than others. GM is out as soon as it closes this week. Names with perceived high volatility but don’t really move around a lot and have good premiums (0.5-1% per week minimum) do the best and are easier to adjust.
3. I try to suck all the time value out of an option but once down to 0.2 roll it for better theta decay.
4. defending trades, easier to do it before the option goes way ITM or better yet, roll it before it even gets there. You will loose a little in time value but by rolling earlier you can stay ahead and continually bring in credits. Now if it is sitting right ATM I will wait until the last minute to roll it but if there is any time left, easier to roll early.
5. Taking a slight directional bias really increases returns. Allows to sell puts closer to ATM and also time call sales better.
6. For small accounts the #supercharger seems to work the best. Better ROI than credit spreads, less adjusting, less risk overall (defined) and more cushion for pull backs as you are already deep ITM. However, have to work the spread on entry or the exit is not as profitable. For any of my accounts under 10k I will be doing a lot more of these. 10k and up probably #pietrades with some #fuzzies thrown in. Occasional #spycraft as well but to be honest the #supercharger are doing much better when we have pull backs and more consistent gains.
Sitting on my hands until Fri. Hopefully we have a pull back, at least a little one where no one gets crushed 🙂
I have a general question about putting together an equity portfolio. After speaking with several investment advisors, I realized that all of them have a very limited understanding of using options as investment strategy. They understand ETF’s and stocks, but that’s about it.
This portfolio is separate from the rest of the investments, so allocation for bonds, etc.. is not an issue.
Most portfolio ideas are around proper allocation between stocks, using high quality companies and dividend payers. Well, many dividend aristocrats have a nasty looking charts, like PG and JNJ. Also, the market is at the high level at this point for many stocks.
If you would be starting a new portfolio, what would you do?
- Value 100K (to make it simple)
- Time horizon 10+ years
- Preferably low maintenance portfolio, because of limited time for monitoring.
- Would you use ETF’s, stocks (growth or dividends), options or a mix of everything?
- I am thinking of PIEtrades as a starting point.
- How would you allocate the funds?
All opinions are welcome.
Premium dried up but could still find a few trades that would make at least 1% in a week, 10% in a month or more.
1. 4 DTE MU 51 CC for 50.10 based on friday prices, that will change some at the open but it will be around there. That is my disclaimer for all of these, based on Friday prices.
2. MAR 132/129 put credit spread for 0.37 or so for 6.8.18 expiration
3. AAL 42 put for 4 DTE for 0.45 and puts and calls are at parity. Maybe @fuzzballl can save a few gallons of fuel and the price will go back up.
4. SMH 25 DTE #supercharger 90/95 call spread for 4.5
Question for @fuzzballl on #fuzzies. What delta do you usually start with on the LEAPs on the long term fuzzies? You going deep or more like a calendar? I find easier to adjust as a calendar but obviously a deep ITM LEAP is going to behave more like a CC.
Here’s an early expiration report. I’ve been thinking about @hcgdavis Chris’s #PieTrades ever since his first post. I never really got serious about them, despite being intrigued. I finally decided in the last few weeks that I absolutely needed to build a portfolio strategy and not just a trading strategy. What better way than his? Of course I probably don’t follow the rules straight down the line, but here’s a report for some Pie-like trades this week:
1. AMZN: On Wednesday when the stock was at 1600, I purchased 100 shares and sold ATM calls for $11.35. Assuming AMZN closes above 1600 today shares will be called away for total profit of $1071 in 3 days. I will sell an ATM put for next Friday at the close today. AMZN is inching down and might be shooting for a 1600 pin….it would be fun if the shares aren’t called and I can roll calls into next week.
2. CVX: Nice dividend next week, so I sold ITM puts last night for assignment. I sold $129 strike for .76, closed them this morning for 87% profit. With next week being div week, I will sell puts before Ex-Div to be virtually paid the dividend immediately.
3. IBM: I did the same div play mentioned above for CVX this week for IBM, sold the put priced with added div premium, could have taken 100% profit, but closed it yesterday for 80% profit. I already have 100 shares with calls sold for next week. The income stream on IBM from #Pie has completely covered the post-earnings decline in underlying.
4. NFLX: This will be my first assignment in a long time. Earlier this week I sold 1 $330 put for $3.10. It’s dancing in and out of profit today, but I’d like to take the shares and sell a juicy call for next week.
5. NVDA: I sold ITM puts at the open this morning and later covered them for 83% profit. I sold 257.5pfor next week @ 4.34.
6. SPY: I sold ITM (272) puts last night for either a scalp or assignment today. They were covered at 50% profit.
7. CRM: I sold ITM puts yesterday ($131) for assignment, I will seek 70% profit on those today or assignment.
8. MA: I sold several puts on MA this week and took 70% profit, but I’ve got 190 (@.94) and 192.5 (@1.60) lined up for next Friday.
9. I’ve got 1×2 spreads on for next week on BABA and LMT. In a choppier market I like the idea of 1×2’s for a wider downside range. But in an uptrend, straight naked puts are better for higher premium collection.
It’s just in my blood to cover these puts at a 70%+ profit level vs. taking the shares, even when I know it may be more lucrative to get the shares and sell the call side. I’m progressing! BTW I’ve started using IBD scores to find my #Pie candidates. Of all the stocks listed above probably IBM, CVX, LMT are the weakest in regards to IBD scoring.
Sometimes it takes blowing out an account (or 2 on SVXY) to really make you focus. I have always learned more with a 2 x 4 to the back of the head than with a gentle nudge. So I went back to the drawing board, looked at all my trades that worked, what didn’t, and some alternative ways to trade and it has allowed me to concentrate on what works since Feb. 6, 2018. You would have thought I would have kept something in my head from Aug. 24, 2015 but apparently not.
So here is what I have going forward in order of how I am trading in the future.
#pietrades. This is my bread and butter, pays the bills, making some of the losses back, easy to roll and adjust and works week in and week out no matter what the market does. Occasionally get stuck with one for a while, currently GM but can usually roll them to even.
#supercharger. Works better than credit spreads for really small accounts. I have learned how to adjust from @jeffcp66 and from the options for edge book, but because of my schedule I can’t always make the adjustment in time before they go ITM or breach the short strike. By then you are already controlling losses not making money. They expire for full profit most of the time because you set then up deep ITM, if assigned on the short strike easy to exercise your long, and very easy to convert to a #fuzzy or calendar leap if they explode. Then fairly easy to work back to even or profit.
#spycraft will be rolling some of these out on the mid size accounts again but found that the ones that were farther out in time were easier to manage. So these will be 21-45 DTE in the future, mostly using spy but some qqq, iwm and maybe even dia. 3-5 points between strikes so I can manage by buying in between the strikes when needed and will not let them go to expiration, will close at 50% profit or any profit that is decent.
CC straddles or strangles if have just taken assignment on a short put and at a support area.
CC return more on a cash basis than puts so with my #pietrades will be selling puts a lot closer to the money with the hopes of getting assigned so I can immediately flip to CC.
#fuzzies are a great way to convert losing trades into break even or winners.
The higher the premiums the easier it is to roll. So I am looking at the history of how often the move is exceeding the expected move. GM is a good example, expected move exceeded almost weekly but the premiums were crap so I have been rolling it for 15 weeks now. The higher premium names even when exceeded were usually back to break even in 2 weeks. Less work + more money = more free and fun time!
Never being short unhedged volatility again!!!
Sticking with those tactics and keeping it simple and profitable until the market changes and these no longer work and have to adjust again, but I think these are tactics that can work in any market condition.
With that said, bunch of rolls today and was assigned early on a few.
ERX #supercharger 20/25 assigned for full profit. Put on 21 days ago for 4.55 debit closed at 5 credit
EXPE 104 put expiring worthless :). That account will open #spycraft on Monday.
Smallest account AAPL 145/150 ITM call debit spread. 3 contracts max gain $207 for $1293 at risk. That is a 16% ROI if AAPL anywhere above 150 or 206% annualized. I will be doing a A LOT more of these going forward on the smaller accounts now that I have seen how they work for 8 weeks and even adjusted 2 to #fuzzies.
FAS 65 CC in 3 different accounts. Rolled for 1.14, 1.1, 1.15 credits and cost basis now 57.92, 55.74, 61.33 with FAS at 64.03.
Hope everyone has a good expiration and great weekend!