Expiration early

A lot of WDC shares will be assigned tomorrow at 84-86 strikes, that will free up a lot of cash for next week. I am trading a chunk of my account as trading reserve perpetual income engine style. Basically take 3 names each week and sell weekly calls or puts with the expectation of being assigned and then roll and repeat. I held these for a while because the premiums leading up to earnings was great but now so far ITM better to let them call out and start over. The current tickers I am doing this with are EOG, WDC, and XBI but I switched to GILD. Should have stuck with XBI. GILD now #longputdiagonals. Works best with names that stay in a range with good weekly premium. I will also use SWKS, EXPE, AAL, FSLR, GS, TMUS, VLO, ANDV (used to be TSO), UAL, LUV, AAPL, GS and looking at MON but have not watched it long enough and hoping IBB will work after the split. Basically anything that will get me close to 1% return per week on risk on weekly option sales. I stick with the same 3 names until they break out of their range or the premiums drop then move on to another 3. Stupid simple but very effective.

Rolled SVXY this week to 12-8, 100 put for 4.25, sold for 1.79, one for the team. if assigned cost basis will be 94.65.
SVXY Dec. 55 put to Jan 18 for 0.85
50 put same for 0.70

TQQQ rolled 120 this week call to 12-8 for 1.2 credit sold for 1.81

Should have a lot of trades Monday and will start the SPY credit spreads/iron condors @jeffcp66 style as well for anyone that wants to follow. Start out 3-4 weeks (21-28 DTE), 3-5 point spreads in a small account so only 2-6 contracts then add a new one each week until 3-4 weeks of ladders. Goal is to double the account in a year and if I can bring in even $125 a week and control the losses should be attainable (it is only a $6500 account). Will adjust anything that goes ITM as @jeffcp66 does, either roll or reverse and offset difference with additional spreads. I may try adjusting them as soon as they hit the short strike to see if that would limit the losses but will keep enough cash on had to convert to calendar, diagonal, or butterfly if we have a 3-5 STD move like Aug. 15. Should be an easy enough experiment and will know how well it works in about 3 months.

Happy Thanksgiving for those checking out early and travelling!

Old school style hedge

GILD is being my PIA trade. Down from 84.75 to 70.63 in less than a month. Usually I can roll to keep up but this thing has violated every support level over the last 6 months and keeps dropping even with institutions starting to buy it now. And the premiums are not high enough to keep up with the drop so each roll was just giving me higher margin requirements.

So anyway, I hedged it to limit my losses to $2851 but is fairly complex. Still short 8 puts at various strikes and expirations over next 17-31 DTE from 78-72. Bought 8 Jan 19 77.5 puts so those are now calendar and diagonals spreads and will roll the puts as the time value evaporates. They cost 12.26 and have over 60 weeks left so should be able to cover those with put weekly put sales and aggressively rolling down to get back to even but will need to add 4-6 to cover the rolls on the puts already. So I need to collect $18 in premium over the life of the LEAPs.

Also rolled 12/1 76 call to 71.5 and converted to synthetic short to cover my 300 shares from a further drop. Will roll the synthetic each week until we have a true reversal and will try to get a credit each week.

Credit of 1.04 on the call roll then BTO the 12/1 71.5 put for 1.80.

So now my losses are capped to what I am already in the hole and hope to make that up with weekly sales and rolling.

Ultimate goal is now just to break even. Learned long ago I don’t need to be right, just want to make $ trading.

So this will be a #longputdiagonals trade until I can scratch it. I may convert the calls to LEAPs with next roll for a true #longputdiagonals.

Also freed up a lot in margin so can now add some other trades.

#VXXGame #LongPutDiagonals I have a…

#VXXGame #LongPutDiagonals

I have a question about VXX and delta.

During this wild bull market, I’ve been buying SPX calls and VXX puts. I buy the calls at about a 60 delta with a 200ish DTE. On the TOS and TastyWorks platforms, the PITM percentage is similar to delta. I use PITM because several years ago Sosnof made the case PITM is a better estimate for the probability of expiring in-the-money than is delta.

So this brings me to VXX. Delta and PITM are not even close to the same. At 200ish DTE, they are about 25 points apart.

My question is why are PITM and delta so different for VXX, and which is a better estimate of the probability of expiring in-the-money? I ask because it clearly affects strike selection and potentially affects when to roll or close.


#LongCallDiagonals -Not in this yet…waiting for 2020’s but here’s what I’m looking at based on Jan 2019 numbers

1. Sell 23 puts and buy 23 calls (synthetic long stock)
2. Buy 20 puts for protection for disasters

All of that for a .75 credit so max loss of 2.25 so only need to sell 3.5 cents per week to cover max loss. Anything above that goes straight to profits.


VXX game

#VXXGame My #LongPutDiagonals have my account leaning short volatility. This means it costs me to sell volatility, but credits me to buy it. I cleared a couple short positions to preserve powder for more spikes:

BTC $SVXY Dec 15th 47.5 put for .89. Sold in May as part of a strangle for 12.90, pre-split.
BTC $UVXY Dec 15th 91 call for .39. Sold yesterday for .725

VXX game trades today

#VXXGame #LongPutDiagonals In chronological order:
Sold $VXX Dec 15th 30 call for 7.50, adding to my position… switching the failed covered puts to calls, which have much better chance of surviving.
Closed $SVXY Jan 2018 97.5 call for 13.10. Sold for 3.125 (effective price) in January.
#Rolling the above to March 104 call for 13.35. Likely have to be rolled again, but at least I got it higher.
Closed $VXX Oct 27th 44 put for 6.75. Sold for 5.85 on Sept 29th as a roll.
Sold $UVXY Dec 15th 91 calls for .70 and .75

#vxxgame experiment 2 Was out…

#vxxgame experiment 2

Was out on a bike ride before sunset and a thought hit me (almost hit a squirrel and a bald eagle eating road kill as well). I was doing intervals so there was some lactic acid and oxygen debt involved but during one of my recovery periods had a thought about the VXX/VIX trades. Income without capping the upside if set up correctly since these trades are generally so directional.

I will set up some trades next volatility spike but here is the idea. I can’t take full credit, I saw something similar on a webinar once.

SVXY go synthetic long, UVXY/VXX synthetic short or buy XIV stock if you want to play it from that side.

SVXY example. Buy the ATM leaps and sell the ATM put leaps. Buy a put 10 points or so OTM for disaster protection. Then instead of selling a weekly call against the long call, sell a credit spread. You will still bring in a little credit but then you are net long calls about 2:1 ratio so will not cap your upside. The short call is covered by the LEAP so effectively you have free calls with no out of pocket expense except the cost of the disaster put.

You could also reverse it on the downside. Buy a put debit spread or just add another few long puts to your short, then would have a ratio back spread and good gains to the downside.

I think it would solve the problem of a runaway stock but still bring in a credit which is something 99% of the people here like to do. You would still be able to sleep at night when 8/24/15 hits again and the VIX spikes to 100 and SVXY drops to 25. Loss capped to 10 points or wherever you set your short put.

Thoughts, suggestions? Anyone want to set up the opposite on UVXY next vol spike and we will see which one does better? I may do both for a supercharger effect. You could also use all leaps then have a set and forget trade like @ramie77 suggests.

The SVXY experiment has worked well except the short calls cap the gains, I know @fuzzballl and @jeffcp66 are having the same issues on the UVXY diagonals. I have $500 left in time decay over 23 days, once my shorts expire I will close all the positions for a great gain and set up the above if/when we ever have a volatility spike.

#longcalldiagonals, #longputdiagonals