As long as you feel like there is a chance the vix has significant room higher I would say yes, the problem is this vix at 13. This is the big issue for now. People are forgetting what a normal vix is. Look at how long the vix has been sub 15 the last 5 years.
Little confused by this. I use cash secured puts but you mentioned low VIX not a great time to sell puts. Are you referring to a different type of trade?
Well I traditionally up until I took my break from actively trading for the summer 6 weeks back sold outs with heavy leverage. For me, I can’t do it my way with a vix here, cash secured it makes no difference because you’re willing to take shares.
I’m trusting your perspective on this. What you’re saying about the VIX as it relates to option pricing makes sense. So I’ll stick with cash secured.
But that takes me back to the problem I have with cash secured. None of us will generate returns on your level selling cash secured puts. If I want to cash secure 10 of the JPM $125 puts, then I need to keep $125,000 cash aside. If I sell 10 for $2.85 and don’t buy the calls, then my max return is $2,850 on $125,000, which is a paltry 2.28%. I can make more putting $125k in treasuries that mature in January.
That means the risk reversal is the only strategy that has a chance of generating meaningful returns if we’re doing 100% cash secured. That requires a pretty good move for JPM, but I do agree that the chart looks fantastic. If JPM ends up at say $185 at expiry, then that’s about a ~$19k gain, which is a nicer ~15% return for those 6 months. But that feels like a pretty small return for such a big move (that requires the underlying to go up 27.5%).
The conclusion that I’m arriving at is the only way to generate the world beating returns that you’re doing is to buy calls (like you’ve got now with AMZN) or to sell unsecured puts. I love the idea of “buying calls for free” by selling puts, but if we limiting ourselves to being cash secured because of VIX, then you’re limited in the number of calls you can buy.
Between your service and other systems I have in place to find names, I’m in great shape at finding strong entry points. But I’m finding myself stuck in this loop of deciding the right instrument to enter a trade. Unsecured puts would be my preferred because I’ve generated the most success with those, but I’m following your advice and not going there. Then I go to cash secured puts, and I see their paltry returns. So I’m left with buying calls or the underlying. There are so many choices with those, and that’s when I get in a loop. I’m trying to systematize but I haven’t found the right process yet.
Well I won't generate returns like I did last year during this timeframe either. The objective is simply to beat the market. What if the market stays flat for 6 months and you sell cash secured puts at 10%? 15%? Who won? I levered up and sold puts into a high vix and an uptrend, it happens, but it was more about being in the right stocks more than anything else. You could buy stock and sell covered calls? The point is the first step is being in the right names. How/when you lever I've discussed many times you want to lever only in uptrends, fine we're in one now, but with the vix this low, you're playing with fire levering up, hence why I backed off. I wish I had an easy answer for you but markets are never easy. You see how I'm positioned at the moment and I've given my rationale on why. As long as I beat the market, the how doesn't matter. Sometimes you have to be a little nuts. If you go back to my posts last October, I was all in on Twitter I knew 100% that deal was closing from my knowledge of the legal docs. I didn't care what nonsense Elon was trying, I knew there was a 0.00% chance he wasn't closing that deal and while I was all in many kept saying "what if" and I was like guys there is no what if bc if he is let go here the definition of a contract has to change. So again how you position is more how much do you believe in what you're in?
You have to look at returns in the scope of what are you happy with. Many people are happy with 10% a year, some want 25% a year, others want 50% or more. I don't have the right answer for what I want. Could I sell cash secured puts and make maybe 1%/week? I do think I could. Would I need to be aggressive? Sure, but nice chart setups can ease concerns there. I just think comparing to others is pointless because we all have different risk tolerances. This is my trading book, so hypothetically if it went to $0 I could still be ok tomorrow, I don't get risky like this in my normal investments, but I've built this book up over the last year to a point where now its large and I can swing for a grand slam. A trading book has to be play money, if it's money you're depending on, you will always be timid. I'm a gunslinger here because I believe in myself and again Amazon is the top trending name over the last 3-4 months, so there is alot backing this thesis ie its 40% off highs, the technicals are turning, the options flow are there this isn't me blindly throwing a dart and hoping to nail something. There's alot behind this trade that gives it a higher probability.
Could also do something like a WATM play w JPM and buy Aug 18 put for 2.15 and sell weeklies for around 1.5+. Little higher risk but also higher return.
It's true there's definitely many ways to play it. Look if you want to be aggressive as hell you could sell puts at that neckline break for this week because a close below it, you probably don't want to be in the name anyhow. I just try to post very conservative ways for people to make money on these nice charts.
Good call on JPM. Was eyeing them up after stress tests.
Thanks see that’s where charts tell the truth, it was clearly showing accumulation
Still only selling cash secured puts, right?
As long as you feel like there is a chance the vix has significant room higher I would say yes, the problem is this vix at 13. This is the big issue for now. People are forgetting what a normal vix is. Look at how long the vix has been sub 15 the last 5 years.
Little confused by this. I use cash secured puts but you mentioned low VIX not a great time to sell puts. Are you referring to a different type of trade?
Well I traditionally up until I took my break from actively trading for the summer 6 weeks back sold outs with heavy leverage. For me, I can’t do it my way with a vix here, cash secured it makes no difference because you’re willing to take shares.
Perfect, thanks
Enjoy your Sunday James,see you tomorrow.
You too John
I’m trusting your perspective on this. What you’re saying about the VIX as it relates to option pricing makes sense. So I’ll stick with cash secured.
But that takes me back to the problem I have with cash secured. None of us will generate returns on your level selling cash secured puts. If I want to cash secure 10 of the JPM $125 puts, then I need to keep $125,000 cash aside. If I sell 10 for $2.85 and don’t buy the calls, then my max return is $2,850 on $125,000, which is a paltry 2.28%. I can make more putting $125k in treasuries that mature in January.
That means the risk reversal is the only strategy that has a chance of generating meaningful returns if we’re doing 100% cash secured. That requires a pretty good move for JPM, but I do agree that the chart looks fantastic. If JPM ends up at say $185 at expiry, then that’s about a ~$19k gain, which is a nicer ~15% return for those 6 months. But that feels like a pretty small return for such a big move (that requires the underlying to go up 27.5%).
The conclusion that I’m arriving at is the only way to generate the world beating returns that you’re doing is to buy calls (like you’ve got now with AMZN) or to sell unsecured puts. I love the idea of “buying calls for free” by selling puts, but if we limiting ourselves to being cash secured because of VIX, then you’re limited in the number of calls you can buy.
Between your service and other systems I have in place to find names, I’m in great shape at finding strong entry points. But I’m finding myself stuck in this loop of deciding the right instrument to enter a trade. Unsecured puts would be my preferred because I’ve generated the most success with those, but I’m following your advice and not going there. Then I go to cash secured puts, and I see their paltry returns. So I’m left with buying calls or the underlying. There are so many choices with those, and that’s when I get in a loop. I’m trying to systematize but I haven’t found the right process yet.
Well I won't generate returns like I did last year during this timeframe either. The objective is simply to beat the market. What if the market stays flat for 6 months and you sell cash secured puts at 10%? 15%? Who won? I levered up and sold puts into a high vix and an uptrend, it happens, but it was more about being in the right stocks more than anything else. You could buy stock and sell covered calls? The point is the first step is being in the right names. How/when you lever I've discussed many times you want to lever only in uptrends, fine we're in one now, but with the vix this low, you're playing with fire levering up, hence why I backed off. I wish I had an easy answer for you but markets are never easy. You see how I'm positioned at the moment and I've given my rationale on why. As long as I beat the market, the how doesn't matter. Sometimes you have to be a little nuts. If you go back to my posts last October, I was all in on Twitter I knew 100% that deal was closing from my knowledge of the legal docs. I didn't care what nonsense Elon was trying, I knew there was a 0.00% chance he wasn't closing that deal and while I was all in many kept saying "what if" and I was like guys there is no what if bc if he is let go here the definition of a contract has to change. So again how you position is more how much do you believe in what you're in?
You have to look at returns in the scope of what are you happy with. Many people are happy with 10% a year, some want 25% a year, others want 50% or more. I don't have the right answer for what I want. Could I sell cash secured puts and make maybe 1%/week? I do think I could. Would I need to be aggressive? Sure, but nice chart setups can ease concerns there. I just think comparing to others is pointless because we all have different risk tolerances. This is my trading book, so hypothetically if it went to $0 I could still be ok tomorrow, I don't get risky like this in my normal investments, but I've built this book up over the last year to a point where now its large and I can swing for a grand slam. A trading book has to be play money, if it's money you're depending on, you will always be timid. I'm a gunslinger here because I believe in myself and again Amazon is the top trending name over the last 3-4 months, so there is alot backing this thesis ie its 40% off highs, the technicals are turning, the options flow are there this isn't me blindly throwing a dart and hoping to nail something. There's alot behind this trade that gives it a higher probability.
Could also do something like a WATM play w JPM and buy Aug 18 put for 2.15 and sell weeklies for around 1.5+. Little higher risk but also higher return.
It's true there's definitely many ways to play it. Look if you want to be aggressive as hell you could sell puts at that neckline break for this week because a close below it, you probably don't want to be in the name anyhow. I just try to post very conservative ways for people to make money on these nice charts.