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.
# of weeks
% Put Income
% Call income
% Total income
% net gain
Average % Income/week
% / week
% / week
Profit / week
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.
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…
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