The log of all the unusual options will be amazing in the next few months. Very excited! Been doing a similar thing on the notes section of Trading View, but only with limited names that I like and/or notice flow patterns on and has been working nicely. Have a nice trip!
Selling long dated puts in a bear market, are you really just relying on decay latter half of the year? How long do you typically hold these contracts before buying back?
1. The price action is not that of a bear market, I've said that for months now, the downtrend break we just saw on the SPY earlier this year had not happened in over a year. The economy is in shambles but stocks aren't the economy.
2. I follow trends, I follow option flows directionally. So when you're selling puts into strength, you aren't holding onto a broken chart. I also sell puts at key levels on charts, levels where activists took stakes, lower even, and frankly at levels that wouldn't even make fundamental sense. So the likelihood of assignment is extremely low and its more a matter of managing my margin properly, but since I've done this for many years, I know what I'm doing and am comfortable.
3. I tend to close a trade at 15-20% return on margin. When I sell puts I aim for 30-50% return on margin and close typically when it dips below that threshold. The reason being is there is no sense holding when I can sell puts somewhere else and get that same 30-40% return on the margin utilized.
4. As long as you follow the flows, you will do fine at this game, that table I post everyday gives alot of direction on institutional money. The calls bought/puts bought are often hedges so I pay less attention to that than say the puts sold or the risk reversals. Those are not hedges.
Thank you, super helpful. What % of your trades are cash covered? I only ask about the long dated puts and the "typical" hold period because if cash covered, obviously ties up the money for awhile.
So here's how I look at it. There is no need to be 100% cash covered. The reason being is all my trades are short puts on already cheap equities at even lower sillier valuations. Let's say hypothetically 80% of the trades work and 20% don't, then I have the cash to take those. Let's say catastrophe strikes and it's more than I can handle, I can always rollout the short puts down and out lower at a further time away.
So step 1 is never sell puts on an overvalued name at a bad level, this is the key, always at a silly valuation. Step 2 is just let time happen and manage your margin accordingly, the down days squeeze your margin requirements, try to stick around 20% available should be more than enough. Step 3 is to always remember you can always roll down and out if need be. So if you look at my open book on mondays, the levels I sell at would be steals either way because of valuations,activists,etc. Combine those things with options flows directionally and you have the recipe for being in strength, not weakness, which is the key to winning on shorter timeframes.
I can't answer that bc there is no set amount, i go with the flows I'm seeing and as I stated I try to maintain a 15-20% cushion level in my margin for the down days where it starts get messy
You can't really answer that because every situation is different. I post my book every monday, you can see something like my NET 30 puts I sold for 4.44 and they closed at 2.94 and now the stock is up 10% AH today, those will be up a ton more tomorrow. At this juncture here, if i didn't make another trade this year, even if the market fell 15%, the likelihood i would end the year up over 50% is pretty substantial because so many of my short puts are over 50% away in good names that have taken off.
Again the key is to try to sell them into beaten up sectors/names with support from valuation for the sector and into the options flows that I post. When someone is selling puts/buying calls Im paying attention and looking for repeated flows to sell into.
The log of all the unusual options will be amazing in the next few months. Very excited! Been doing a similar thing on the notes section of Trading View, but only with limited names that I like and/or notice flow patterns on and has been working nicely. Have a nice trip!
I think so too, it should be very handy.
Selling long dated puts in a bear market, are you really just relying on decay latter half of the year? How long do you typically hold these contracts before buying back?
Couple things
1. The price action is not that of a bear market, I've said that for months now, the downtrend break we just saw on the SPY earlier this year had not happened in over a year. The economy is in shambles but stocks aren't the economy.
2. I follow trends, I follow option flows directionally. So when you're selling puts into strength, you aren't holding onto a broken chart. I also sell puts at key levels on charts, levels where activists took stakes, lower even, and frankly at levels that wouldn't even make fundamental sense. So the likelihood of assignment is extremely low and its more a matter of managing my margin properly, but since I've done this for many years, I know what I'm doing and am comfortable.
3. I tend to close a trade at 15-20% return on margin. When I sell puts I aim for 30-50% return on margin and close typically when it dips below that threshold. The reason being is there is no sense holding when I can sell puts somewhere else and get that same 30-40% return on the margin utilized.
4. As long as you follow the flows, you will do fine at this game, that table I post everyday gives alot of direction on institutional money. The calls bought/puts bought are often hedges so I pay less attention to that than say the puts sold or the risk reversals. Those are not hedges.
Thank you, super helpful. What % of your trades are cash covered? I only ask about the long dated puts and the "typical" hold period because if cash covered, obviously ties up the money for awhile.
So here's how I look at it. There is no need to be 100% cash covered. The reason being is all my trades are short puts on already cheap equities at even lower sillier valuations. Let's say hypothetically 80% of the trades work and 20% don't, then I have the cash to take those. Let's say catastrophe strikes and it's more than I can handle, I can always rollout the short puts down and out lower at a further time away.
So step 1 is never sell puts on an overvalued name at a bad level, this is the key, always at a silly valuation. Step 2 is just let time happen and manage your margin accordingly, the down days squeeze your margin requirements, try to stick around 20% available should be more than enough. Step 3 is to always remember you can always roll down and out if need be. So if you look at my open book on mondays, the levels I sell at would be steals either way because of valuations,activists,etc. Combine those things with options flows directionally and you have the recipe for being in strength, not weakness, which is the key to winning on shorter timeframes.
Thanks. On a given week, whats your typical equity to margin?
I can't answer that bc there is no set amount, i go with the flows I'm seeing and as I stated I try to maintain a 15-20% cushion level in my margin for the down days where it starts get messy
Assuming a reasonably flat stock or slowly increasing how long would you expect to hold to get your 30-50% selling puts?
You can't really answer that because every situation is different. I post my book every monday, you can see something like my NET 30 puts I sold for 4.44 and they closed at 2.94 and now the stock is up 10% AH today, those will be up a ton more tomorrow. At this juncture here, if i didn't make another trade this year, even if the market fell 15%, the likelihood i would end the year up over 50% is pretty substantial because so many of my short puts are over 50% away in good names that have taken off.
Again the key is to try to sell them into beaten up sectors/names with support from valuation for the sector and into the options flows that I post. When someone is selling puts/buying calls Im paying attention and looking for repeated flows to sell into.
Thanks! Safe travels and have fun ;)