Meteoxx is right, spread your risk off. There is not much covered in this combination. By buying stock and selling the 10 calls you are synthetically short the 10 puts. So you are basically short the 10 puts synthetically and the 7.5 real puts. Another way to look at this position is you are short the 8.75 puts ( i know there is no 8.75 strike), just another way to look at things. This kind of trading could blow you out one day. If you really want to be covered by the 5 put against this position.
covered combination question for option pros
- Thread starter Free Thinker
- Start date
If these puts are out of the money, IMHO, this is incredible. How many puts have you written in the las two years? How far out of the money are they percentage wise from the stock?
Too many would about sum it up. Last year in terms of both put and call premium I wrote about $30,000 in total. Most of the damage was done on the QQQ. Especially after September 11. The other lesson I learned from that experience was not to put too much time on the call side. This kept me locked in to some positions that I would have other wise gotten out of.
But in terms of what I have outstanding now, and keep in mind I play these pretty small.
VTI December 100, written when it bounced from Feb low now in the money.
IBB June 65, figured it would hold the September Low, who new?
SMH AUG 40, how bout that 40 Level holding
SWH AUG 35, yep pretty sure that'll hold
IWO AUG 50, and we have a winner so far
I think the year before last was the year I stopped writing stuff on individual stocks for the reasons you cite.
With volatility so low (last two weeks excluded) it is just not the same as it was in prior years. I figure this year I may write half of what I wrote last year.
Sorry for your loss, but glad you are still around to post. To me it is very valuable for people who post questions and read the forums to realize that it is not all about 20% monthly returns and blah blah. Part of the reason I write the way I do is because managing risk is crucial to survival. And when someone posts a question like this where the numbers look really good, sometimes you end up with the steak knives instead of the caddie.
Signed a former Piggy Piggy
Too many would about sum it up. Last year in terms of both put and call premium I wrote about $30,000 in total. Most of the damage was done on the QQQ. Especially after September 11. The other lesson I learned from that experience was not to put too much time on the call side. This kept me locked in to some positions that I would have other wise gotten out of.
But in terms of what I have outstanding now, and keep in mind I play these pretty small.
VTI December 100, written when it bounced from Feb low now in the money.
IBB June 65, figured it would hold the September Low, who new?
SMH AUG 40, how bout that 40 Level holding
SWH AUG 35, yep pretty sure that'll hold
IWO AUG 50, and we have a winner so far
I think the year before last was the year I stopped writing stuff on individual stocks for the reasons you cite.
With volatility so low (last two weeks excluded) it is just not the same as it was in prior years. I figure this year I may write half of what I wrote last year.
Sorry for your loss, but glad you are still around to post. To me it is very valuable for people who post questions and read the forums to realize that it is not all about 20% monthly returns and blah blah. Part of the reason I write the way I do is because managing risk is crucial to survival. And when someone posts a question like this where the numbers look really good, sometimes you end up with the steak knives instead of the caddie.
Signed a former Piggy Piggy
I'd love to be doing all this fancy options stuff but theres a small problem. Where's the EDGE?
Fantisizing about fictitious annualized returns doesn't cut it. You have to be able to show that there's an imbedded profit in the trade, not just that IF you get lucky, and the stock doesn't go to hell, you make some money.
Anyone have a strategy that isn't a sitting duck?
Fantisizing about fictitious annualized returns doesn't cut it. You have to be able to show that there's an imbedded profit in the trade, not just that IF you get lucky, and the stock doesn't go to hell, you make some money.
Anyone have a strategy that isn't a sitting duck?
I don't consider myself the be all end all of trading edges, but I do have a few thoughts on why I would rather sell puts and hold cash than holding stocks outright.
When I started trading I was working full time, and I used to write covered calls as a way to generate extra returns without having to monitor my positions. Somewhere along the line I figured why not just sell the put, it is the same thing essentially. Of course I got a little too cute and paid for that, so now I try to use a sensible approach.
Since I don't have a steady income I always feel that I need to have some cash in the bank to fund whatever comes up. So what I do with part of my money is to write puts against cash. The edge I suppose of doing this is that the market doesn't have to go anywhere to make money.
In my previous example I wrote Puts on QQQ, SMH, VTI, IWO, IBB and SWH. With all of the strikes I am on the hook for $40,000 and collected $2260 in premium. This is about 5% + the interest and a free toaster. 1/2 will expire by aug all except the 04QQQs expire by Jan 03. If we rally, then decay goes in my favor and I can cover. If we drop another 10% I can wait and if necessary take delivery or roll the contracts over. For instance I have the JUN 65 IBB put, since it is in the money I could roll it to December 60 for a basic scratch trade. If I had bought outright my only choice is to CUT AND RUN if my stop price is hit.
This is not the only thing I do while trading, but it makes you feel good when you get to throw a few expired put or call trades on the pile at the middle of the month.
When I started trading I was working full time, and I used to write covered calls as a way to generate extra returns without having to monitor my positions. Somewhere along the line I figured why not just sell the put, it is the same thing essentially. Of course I got a little too cute and paid for that, so now I try to use a sensible approach.
Since I don't have a steady income I always feel that I need to have some cash in the bank to fund whatever comes up. So what I do with part of my money is to write puts against cash. The edge I suppose of doing this is that the market doesn't have to go anywhere to make money.
In my previous example I wrote Puts on QQQ, SMH, VTI, IWO, IBB and SWH. With all of the strikes I am on the hook for $40,000 and collected $2260 in premium. This is about 5% + the interest and a free toaster. 1/2 will expire by aug all except the 04QQQs expire by Jan 03. If we rally, then decay goes in my favor and I can cover. If we drop another 10% I can wait and if necessary take delivery or roll the contracts over. For instance I have the JUN 65 IBB put, since it is in the money I could roll it to December 60 for a basic scratch trade. If I had bought outright my only choice is to CUT AND RUN if my stop price is hit.
This is not the only thing I do while trading, but it makes you feel good when you get to throw a few expired put or call trades on the pile at the middle of the month.
looks like the window closed on these trades.most are a strike higher now which makes the play more risky unless we get a pullback.