Oh, come on. You're going to try holding me to some arbitrarily high level of precision when other people are spewing raw bullshit? That's just getting silly, in a thread where "getting in at a low price", etc. fairy-dust magic is being bandied about. If I am looking at a solid stock that I consider to be below its normal price range, and ATM premium looks overpriced to me, that's what I'm going to sell. I did say, rather clearly, that I use a "tuned for me" version of the wheel - not something you get to define for me.
How to Buy Low and Sell High in Today Market Using Options Wheel Strategy
- Thread starter winstonwee
- Start date
Oh, come on. You're going to try holding me to some arbitrarily high level of precision when other people are spewing raw bullshit? That's just getting silly, in a thread where "getting in at a low price", etc. fairy-dust magic is being bandied about. If I am looking at a solid stock that I consider to be below its normal price range, and ATM premium looks overpriced to me, that's what I'm going to sell. I did say, rather clearly, that I use a "tuned for me" version of the wheel - not something you get to define for me.
You had already exposed yourself as a clueless moron; now you're taking up screen space reserved for human beings with an actual brain. Blocked.
Can you please elaborate on these steps?
What does “a bit” mean to you?
What would make you roll? I assume you will only roll for a credit?
If anyone is trolling it must be you, because several people have explained the flaws in your dismissal of the strategy, yet you still keep insisting on your factually wrong views. Your example of "stock dropped from 40 to 20 and you bought it at 20" doesn't show anything. First, because when you sold the put the stock was at, say, 60, so if you thought at the time that the stock was a good buy you should relish the opportunity to buy it for (40 - option premium). It doesn't make sense to compare the price of the stock now with the price of the stock later the way you are doing, as if you had a crystal ball; for any trade you can always find a-posteriori a better trade, but so what? Second, your "argument" (if it may be called so) could apply equally well to anyone buying the underlying stock at the time, without trading options (even more so in fact, because you do not get the premium discount), so it is totally irrelevant. Third, selling the put does not prevent you from buying even more stock at 40 if you want and have the capital available. Fourth, this situation happens with very low probability anyway; most of the time your option expires worthless or you buy at a dip at effectively nearly market price on expiration. (And btw, you didn't have to guess when the dip would happen to benefit from this, the market selects it for you.)
About the call-selling part: this doesn't need to be an essential component of the strategy. I only do this when I want to take profit or get rid of the stock, in which case it makes perfect sense. Have you never set a sell order to take profit of a stock you own? Then selling a covered call is strictly superior to simply selling the underlying, because you are effectively putting a sell order at the strike, plus getting the premium anyway.
Finally, you seem to think that the strategy only allows to collect pennies but this is nonsense. Sure if you pick a low-volatility ETF the premiums will be low, but you can easily check that they are quite large for stocks with a volatility above, say, 70%. And volatility does not affect the success rate of the trade if you select the strike price accordingly; it only affects the value of the puts before expiration. Selling puts is a high success probability trade that can result in great returns (and the occasional big drawdown), as anyone can verify for himself.
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hi
ok I want to collect 1% premium when I sell a CSP if we look at NIO now at $50
I want to collect at least 0.50 and sell that put that will be about 46 put expiry this friday for 0.55
If I am assign I want to sell a call for 1% premium and if you do that the call is actually very far away and that give you some upside capital gain. Again selling a call cap your upside no doubt about it. But if the stock do nothing and keep moving sideway I earn my 1% a week and suddenly the stock decide to move and break thru my sell call than i gain even more.
anyway above is my current trade
I did sell a call yesterday at 58 strike for 3.10 (next friday expiry) that itself i get about 6-7% premium and if nio go above 58 I would be happy to
you can watch my yesterday video on youtube "search for winston wee"
and also my NIO is a double wheel
so I roll my this friday 50 put to next friday 45 put (credit of 30+ cents)
options offer a lot more flexibility than just trading stocks outright
What was the delta and duration of the original put at day of sale vs. delta and duration of the new put at the time of the trade? Thanks.
How many permutations may you do? Every new wheel gets your average price adversely away from current price. I assume you use same size for consecutive wheels (not martingaling it).
I dont look at delta but it is around delta 30
I look at the premium of the strike and go for it 1% a week
I only average down once (opening a double wheel if i am bullish on the stock) never double up in size
so far only did double wheel on nio and all other stock is just a single wheel on it
winstonwee (sorry for quoting your quote of him JSOP), let me try and come at this with a slightly different angle. You keep saying your system lets you buy low and sell high, and asking if people have a better solution for this. I don't think there is a better solution, because like I, JSOP and others are trying to tell you, your option wheel strategy is just a timing thing, and your timing could be good or bad. So, take as an alternative to your strategy, waiting for a pullback, as is in your strategy, but waiting for a BIGGER pullback, the price you would by at if you sold the put, and it got exercised, for example. Then buying when it hits THAT price. Or heck, even waiting until it hits a LOWER price. Then, when you buy, don't sell a call, wait for the stock to go EVEN HIGHER before you sell. Thus buy EVEN LOWER and sell EVEN HIGHER, making more money!!! Thus a much better strategy!!!
Of course, we both know that just the fact that you might have (potentially, if the right buy/sell conditions arose) bought lower, and sold higher, in that alternative strategy is far from conclusive as to whether it is better than your strategy - it just depends on the stock price action. Who knows. What I think all of us are trying to tell you is that your strategy is absolutely, positively nothing special. There is absolutely no reason your strategy should generate better positive risk-adjusted returns in the future versus any number of alternative strategies, like the one I made up above. If the market price action works one way, its great for your strategy. If it goes another way its horrible for your strategy. There is no "alpha" in your strategy at all, as I think so many around here would say.
Not that you can't make money off it, just that there is no particular reason to think you'd make more money with it over any other strategy.
But, if its working for you, keep doing it and keep sharing your results!!!!