I don't know if anyone even looks at this board anymore. Since I originally posted my updates here, I decided to do so again. As a refresher, I originally started an experiment after reading some posts on selling covered calls by the Captain. It was fairly successful... after 12 months(9/20 - 8/21) I was up 65% and it peaked at 79% after 14 months. Then came the FED!!! After dealing with falling knives for 2-3 months, I closed up shop before I lost all of my profits. I stayed out of options for the remainder of 2022. However, I didn't stop thinking about them and decided to start up again once the Fed was finished tightening. Well, I jumped the start a bit and started up at the first of the year. I did so with a significant change to my strategy.
Instead of buying a stock the selling calls on it, I sold cash covered puts. I'm able to bring in the same amount of income and I don't have to buy the stock. Of course my cash is "frozen" while the put is active. If I end up buying the stock I do so at a lower price than I would have if I just purchased the stock at the beginning.
Once I own the stock, I then sell calls until it is assigned and at that point my trade ends.
I only deal with stocks that trade their options weekly and I try to sell the options weekly also.
I usually sell a put to start a trade on Monday with the expiration date being that Friday.
I make sure that the drop from the current price to the strike price is greater than the premium.
The premium should be 1.5% - 2.0% of the current price. This is the net profit after buying the insurance puts. I just started with buying the puts. I've been spending 0.2%-0.3% so far.
Date:
6/30/2023
Open Trades
Closed Trades
Total Trades
Winning
0
6
6
Losing
0
3
3
Totals
0
9
9
Trade
Stock
# of weeks
% Put Income
% Call income
% Total income
Stock Sales
% net gain
Average % Income/week
# Puts
% / week
# Calls
% / week
1
Chewy
4
5.51%
2.10%
7.61%
0.00%
7.61%
1.90%
3
1.84%
1
2.10%
2
Upstart
11
7.86%
12.78%
20.63%
-18.92%
1.71%
1.88%
4
1.97%
7
1.83%
3
Chewy
14
3.84%
7.41%
11.25%
-29.79%
-18.54%
0.80%
2
1.92%
12
0.62%
4
Datadog
10
11.07%
5.00%
16.07%
0.00%
16.07%
1.61%
7
1.58%
3
1.67%
5
Cloudflare
7
4.11%
6.83%
10.94%
0.00%
10.94%
1.56%
2
2.06%
5
1.37%
6
Cloudflare
2
2.01%
1.59%
3.59%
0.00%
3.59%
1.80%
1
2.01%
1
1.59%
7
Chewy
4
1.78%
2.66%
4.44%
-5.71%
-1.28%
1.11%
1
1.78%
3
0.89%
8
Cloudflare
4
1.91%
2.94%
4.85%
-24.22%
-19.37%
1.21%
1
1.91%
3
0.98%
9
Upstart
7
12.53%
1.24%
13.76%
0.00%
13.76%
1.97%
7
1.79%
1
1.24%
Averages
7.0
21.45%
16.31%
37.76%
-28.67%
9.09%
1.54%
3.11
1.87%
4.00
1.36%
Profitablitly
9.09%
Profit / week
0.34%
Annual Profit
19.01%
I decided to do the update since I have a bit of time this morning, It's been exactly 6 months since I started, and at the end of last week all of my trades closed. Seemed like a perfect time to post something.
Summary: This is all on the summary sheet, but here we go. I had 9 trades... 6 were winning trades and 3 losers. On average each trade lasted 7 weeks. Overall, I'm up 9.09% which is 0.34% per week. I had 2 large loss trades which really impacted my results. They occurred during the banking crisis in April/May.
In response to the losses, I've enacted a new strategy when selling the puts. When I sell a put, I'm also purchasing a put at a lower strike price to act as a stop loss. For example, this week I sold puts on NET at 65. At the same time I bought puts at 61. Same for UPST. I sold puts at 35.5 and bought puts at 30.5. Hopefully, they will act as a circuit breaker if the stock price really drops in either one.
I've actually thought of selling puts on stocks that I want to own as an investment. I can collect premiums if the price does not drop. If it does drop, I just purchased it for a lower price than I would have just buying it. I haven't actually done this... just a thought.
Thanks for reading.
Darryl
I no longer post at NPI because the board died of the political disease.
Initially I also sold puts but they turned out to be riskier than covered calls. Your strategy sound fine but one has to realize that bear markets do screw it up. I now only sell covered calls but check to avoid falling stocks and earning season that can bring nasty surprises. Since i last posted at NPI I have further refined my Covered Call Selector app and i’m getting good results but beware bear markets.
I’ve been posting at Macro Economic Trends and Risks (METaR). Have a look…
I see that the formatting is hosed. It must have happened when I dropped the table in. Sorry about that.
I don’t know if this came through, but the main thing I’ve started doing is when I sell a put, I also buy a put further down the chain to limit the damage on any large price drops.
I have the earnings dates for all of the stocks listed in my spreadsheet. I’ve been burnt more than once. You are correct… stay away.
Not really much of an analysis. Originally I used to look up the greek ratings on stock options and used them to select stocks. I got into some real dogs doing that.
Now I just use a list of stocks that I own and my watch list of stocks I’m considering buying. Then as long as the company sells options weekly and I the premiums are decent I keep them on my options list.
As you hopefully can see from the table above, I’ve only had 9 trades since the start of the year. Each one has averaged 7 weeks long. I can sell puts and calls several times within a trade, so what I’m considering a trade is actually several trades. Anyway, my point is that I don’t look at the overall list very often. I just plug along with the open trades until one gets closed.
Denny has a much more sophisticated way of picking stocks for options.
I am new here. If you are using bear put spreads for income you may want to consider the following
1 High volatility for higher premium ( Yield)
2 A reasonable strike value for the sold put for the the amount at risk . Normally delta around -0.25 is a good place
3 I would be uncomfortable for more then 90 days or past a ER unless knew the company well.
4 Aim for 3-5% yield on at risk amount
