#pietrades and skew
I have noticed over the last few weeks that a lot of tickers have one sided skew. Just something else for us to take advantage of and increase returns.
For instance, SPY and all the other indexes seem to have put skew meaning the puts are worth more than the calls. Makes sense, a lot of people are hedging and buying protection. So makes more sense to sell puts on these.
However, a lot of individual names skew to the call side. Even AAPL which drags the rest of the market has a little call skew even in the weeklies. Makes more sense to sell CC or set up #fuzzies on these. Most of the leveraged ETFs skew to the upside/call side.
So going forward the #pietrades will be set up taking advantage of this skew. In a limited back test it looks like it could result in an additional 15-25% returns annualized. Not chump change!
So in the future #pietrades will either be CC, naked puts, or covered straddles depending on direction but also where I see an edge in the put/call skew. However, where I may normally sell a put, I may do an ITM CC if it looks like the skew will give an advantage. Also if I have a strong upside directional bias may set the initial trade up as an ATM covered straddle.
If anyone else finds additional ways to suck more premium out of the market on a weekly basis please post.
Taking advantage of this with synthetics aka #fuzzy may work as well.
#pietrades for next week.
Will be assigned on AAPL today at 165, cost basis 161. Will re-load next week or when we have a little pull back (everything extended again).
Opened ERX CC at 28 strike, cost basis 27.5 on 5 contracts $260 income.
Closed XBI 85 put at 0.06, sold for 1.15.
Staying pretty close to goal of $900 a week income on 50k account.
Next week expirations wil be GILD at 72 CC, GM put at 42.5, and ERX. Will probably add another early next week. Trying to build up to 5 names, 3 contracts each.
SVXY hit 13, only 77 more points to go after calculating my avg. cost around 90! 🙂
We all know the graphs look the same but after a year of doing both I discovered something that makes a difference. I set up 1 account and have only traded CC in that account, a combination in the others mostly as #pietrades.
Interesting dynamics, both have performed well but the puts/call account did about 57.7% annualized. The CC only looks like it will be close to 88% annualized. That is a significant difference and the difference between doubling an account in 12-13 months vs. 18-24 months.
Very important now that 2 of my big IRA accounts are now little accounts from the SVXY debacle. At 88% could replace all the lost money in 3 years.
So anyway, selling ATM or even slightly ITM CC may improve returns compared to just selling puts. I think mostly because they are OTM and the ATM options have more premium. They also seem to be easier to roll down and when you roll them up you get appreciation plus extra income.
Rolled Feb. 16, 42.50 put to March 2, 42.50 for .40, basis is 126. Ex-div date is March 8, about .38, current stock price is 41.70
Rolled GM 42.5 put that expires this week out 2 weeks for 0.43 credit. CB now under 40.
XBI STO 10 DTE 85 put for 0.77. Went through fast at mid point, may be able to get more if you work the order.
SVXY decision. With the futures expiring today, my hope is that as they expire we may see a pop. However I do not expect steady gains until we are no longer backwards which may take a few weeks and probably not until the VIX is under 18. Anyway, I am holding the stock until then. Once we have some gains I will make sure it is hedged in the future, probably by setting up a #fuzzy ratio but do not want to spend extra money on this trade until it recovers even a little.
The VXX trades below look smart. I would do it if had capital left. The hedge fund book I am reading, Mark Sebastain does that every 2 weeks. Buys puts on VXX or a debit spread and rolls it to the next 2 weeks when there is a 50% profit. May be a smarter way to play #vxxgame in the future. Losses are capped but probably steady gains. The flip slide would be selling ATM call credit spreads.
I will NEVER be short VIX, SVXY unhedged in the future, lesson learned the hard way again. I think a hammer the head would have been easier.
Thanks everyone for the help/thoughts on VXX/SVXY over the last few weeks. I think going forward we are all much smarter about how to use these instruments and more importantly how not to use them. But collectively I think we will all make back most of the losses within 1-5 years (that seems like a long time at the moment) but will go by faster than any of us can imagine!
#pietrades #shortputs AMAT
Rolled Feb. 16, 57.50 put to March 16, 57.50 for .40, 4th roll cost basis of 290, AMAT hovering around 49
How Winning Traders Rebound, make a Come Back, and Never Quit
1. They accept losing trades quickly but it does not define them, they learn and try again. The next trade will be more wise than the last one.
2. They compartmentalize emotions by not blaming themselves but understanding the historical expectancy of their systems returns.
3. They have a bias toward action by constantly doing things that move them closer to their goal of being a rich trader. (Homework, chart study, reading, being mentored, back testing, etc. )
4. They change their minds sometimes, they know when to stop doing something that does not work and move in the direction of trading success through new lessons. They learn what type of trading is right for them.
5. They prepare for things to go wrong through risk management and position sizing instead of just going naively toward their goals they are ready to make adjustments as needed.
6. They’re comfortable with discomfort, they will accept losses and draw downs in their method, they are willing to pay tuition to the markets to get to where they want to be.
7. They’re willing to wait, they patiently improve each day setting themselves up for those winning trades that will be very profitable in the future.
8. They have trading heroes that inspire them to be better than they are now and give them the hope of achieving their dreams.
9. They have more than passion they are on a mission, their desire for success gives them the drive to not quit until they win.
10. They know only time separates them from their goals of success in the markets.