How to Buy Low and Sell High in Today Market Using Options Wheel Strategy

[Saltynuts]

options is trade in multiple of 100 shares you know that right?
1 contract of options = 100 shares when assign or exercise
so when you sell a straddle assuming you manage to sell the straddle for $23
and gme shoot to 493
you have lose $450 * 100 shares
$45000 just for trading 1 contract of GME naked call
you can sell it as 1 of the black swam or extreme event but GME give me a wake up call.
The short sequeeze on it is worse than a market crash.
market crash the market tumble 30% (when you have long position)
but a short sequeeze go up a thousand% when it is against you (that should serve as a wake up call)

and talking about diversification the more you diversified the more chance of a short sequeeze occur again. Imagine if you have a 100 stocks and 1 of this happen to be in for another short sequeeze, I couldnt imagine it

Yes, you just meant 450 per SHARE, not per contract.

45,000 is a lot, but if you sold 100 different contracts on GME and 99 different stocks I think 45k would be relatively speaking much smaller in comparison to what you gain/lost on them all cumulative. But, if you are a small time player you are correct, you are risking a lot.

 

[winstonwee]

"Just 1 contract at the peak of 493 you would have loss 450 per contract or 45k assuming the straddle can be sold for $23."


Wait, what? you say ONE CONTRACT at peak 493 you would have lost 450 PER CONTRACT, which makes sense, but they you say or 45k? How do you get to 45k total when you say only one contract and the loss is 450 per contract?

you see when you sell a naked put or covered call you know your risk upfront. selling a 130 appl put you know you put $13000 at risk, well if appl drop to 0 (it will be a very painful) but you know the risk
when you sell a naked call you do not have a defined risk, it never happen before that a stock could go up 1000% in 3 days
the move happen to quickly for GME, even if you want to cut loss it just happen to quick

if straddle is really your play than doing it on spy or etf will be a safer bet than any individual stock, gme is actually a wake up call

 

[winstonwee]

Yes, you just meant 450 per SHARE, not per contract.

45,000 is a lot, but if you sold 100 different contracts on GME and 99 different stocks I think 45k would be relatively speaking much smaller in comparison to what you gain/lost on them all cumulative. But, if you are a small time player you are correct, you are risking a lot.

emm you certainly didnt know what you are talking
straddle price becos of it nature it is naked position on both side. it require margin.
If you do it on 100 stock and all straddle position you are talking about have 500k to a millions to do this kind of trade.
yes I am a small player when you are talking about 1 millions dollar account

 

[Saltynuts]

emm you certainly didnt know what you are talking
straddle price becos of it nature it is naked position on both side. it require margin.
If you do it on 100 stock and all straddle position you are talking about have 500k to a millions to do this kind of trade.
yes I am a small player when you are talking about 1 millions dollar account

I agree completely that if you cannot easily sustain a $45k loss you should not be writing calls. But let me ask you this - if you were THAT worried about the theoretically "unlimited" risk, why not just buy a waaaaaay out of the money call to protect you? When GME was at $20 I'm sure you could have bought a $50 call, or a $100 call or whatever for almost nothing. Is that not an option for you?

 

[winstonwee]

ok that is another strategy totally than we are talking about credit spread
than we will also be buying a way otm put to protect our short put also right?
than it become a iron condor for the whole strategy

when you spend money to buy insurance for protection it lower your return so why not just stick to my wheel

I certainly cannot sustain a 45K loss in 1 single trade I am sure not many people can without a blink in the eye

 

[winstonwee]

think we have sway too far away from the original topic
the topic was how to buy low and sell high
I presented my options wheel strategy

I am sure others have other way of buying low and selling high
maybe can share you strategy here could be some technical indicator setup some pattern.
Example when the S&P drop 5 days in a row issue a buy etc etc

 

[Saltynuts]

OK then, back to your original topic winstonwee. Let me try and understand what you are thinking you are gaining there, and why is in large parts just a market timing thing.

So the first step is waiting for the stock to pull back a bit. But, why? If the market appreciates on average over time, why wait for a pull back? Stock is at $100, if you wait for a $[2] pullback, you could get such a pullback, but it might only happen after the stock goes to $[110]. The pullback just seems some market timing gimmick.

You sell a put for a premium. OK. Is the cash secured piece of it just for safety, I assume?

You then say you get assigned the stock. I assume that's only if the stock goes down in value? If it does not you just keep the premium. But again, stock could go way up, meaning you would implement this strategy in the future on this stock when its at a much higher price, after you've missed out on the run. Again, market timing risk.

Then, assuming you get assigned the stock, you sell a covered call. OK. So? Stock could skyrocket after that and you'd lose all that. Again, market timing risk.

I'm just not seeing what the point of the whole thing is. Why does selling a put, followed by selling a call, have some magic that adds any "alpha" as the folk around here say? You could sell the put and the stock tanks, tanking you as well, and you could sell the call and the stock skyrockets, meaning you lose out on so much. What value does this whole thing supposed to bring to the table that makes it more than a sum of its simplistic parts?

Thanks.

 

[winstonwee]

OK then, back to your original topic winstonwee. Let me try and understand what you are thinking you are gaining there, and why is in large parts just a market timing thing.

So the first step is waiting for the stock to pull back a bit. But, why? If the market appreciates on average over time, why wait for a pull back? Stock is at $100, if you wait for a $[2] pullback, you could get such a pullback, but it might only happen after the stock goes to $[110]. The pullback just seems some market timing gimmick.

You sell a put for a premium. OK. Is the cash secured piece of it just for safety, I assume?

You then say you get assigned the stock. I assume that's only if the stock goes down in value? If it does not you just keep the premium. But again, stock could go way up, meaning you would implement this strategy in the future on this stock when its at a much higher price, after you've missed out on the run. Again, market timing risk.

Then, assuming you get assigned the stock, you sell a covered call. OK. So? Stock could skyrocket after that and you'd lose all that. Again, market timing risk.

I'm just not seeing what the point of the whole thing is. Why does selling a put, followed by selling a call, have some magic that adds any "alpha" as the folk around here say? You could sell the put and the stock tanks, tanking you as well, and you could sell the call and the stock skyrockets, meaning you lose out on so much. What value does this whole thing supposed to bring to the table that makes it more than a sum of its simplistic parts?

Thanks.

ok stock dun go 1 way up, so i wouldnt want to sell a put when the stock make a new high or all time high, it look stupid right after i sell a put and it tank
so i wait for a pull back

we can have all kind of scenario we could have spend all our life saving on gme 2 month ago and bitcoin 1 year ago and we could retire now. But what we want is as of today at this moment at this junction what is the best bet? Anybody guess

If you have bought a stock and the stock do nothing for a year or drop than you have a capital loss or the stock can go on to 1000% and you score big and can retire rich

the whole thing about the wheel that work for me is i continue to collect premium both side. by collecting premium I get to lower my average cost and when I sell a call I sell a call further away so i have some upside or course i cannot have the 1000% return when I sell a call

so ultimately it is what method suit you and my thread is devoted to how do we buy low and sell high?

if you have not watch my video on buy low and sell high i suggest you to take a look with open mind

so my question back to you is how do we buy low and sell high in today market.

 

[Saltynuts]

OK, let's take what you wrote piece by piece.

"ok stock dun go 1 way up, so i wouldnt want to sell a put when the stock make a new high or all time high, it look stupid right after i sell a put and it tank
so i wait for a pull back?"

But have you back-tested to see if "waiting for a pull-back" adds value over time on average? You seem to think you know the future - that if a stock has gone up you are necessarily better off waiting for a pull back. Do you have back testing showing this? It could well be that selling puts on stocks that have already gone up IS BETTER because stocks that are going up tend to continue going up! And if "wait for a pullback" is in fact better, what for how big a pullback? Does it depend on how big the run up was? You are just engaging in market timing, pure and simple, without (so far as I can tell) back testing.


"we can have all kind of scenario we could have spend all our life saving on gme 2 month ago and bitcoin 1 year ago and we could retire now. But what we want is as of today at this moment at this junction what is the best bet? Anybody guess"

Yea OK.

"If you have bought a stock and the stock do nothing for a year or drop than you have a capital loss or the stock can go on to 1000% and you score big and can retire rich"

Yea OK.

"the whole thing about the wheel that work for me is i continue to collect premium both side. by collecting premium I get to lower my average cost and when I sell a call I sell a call further away so i have some upside or course i cannot have the 1000% return when I sell a call"

But you could get burned in both directions! You sell the put. Stock tanks. You collected a small put premium but just LOST YOUR ASS on the put overall. Now you sell the call. Stock goes back to where it was. You just collected a small call premium and LOST YOUR ASS on the call overall. All for a stock that just ended up where it started. Yours is just a timing system hoping the stock does not do something like that.

"so ultimately it is what method suit you and my thread is devoted to how do we buy low and sell high?

if you have not watch my video on buy low and sell high i suggest you to take a look with open mind

so my question back to you is how do we buy low and sell high in today market."

So, buying low, selling high, that is obviously the holy grail. I have no great answer for you. I would say, history shows that the stock market has a strong tendency to go up over time, so if you want to buy low and sell high buy stocks today and sell stocks later. But I do know there is nothing at all special with this option wheel or whatever. Your logic seems to be "if I sell a put I will buy the stock lower than the stock price today, and if I sell a call I will sell the stock higher than the stock price when I buy it", but that does NOT address how profitable you will be, or whether you will even be profitable at all.

 

[winstonwee]

OK, let's take what you wrote piece by piece.

"ok stock dun go 1 way up, so i wouldnt want to sell a put when the stock make a new high or all time high, it look stupid right after i sell a put and it tank
so i wait for a pull back?"

But have you back-tested to see if "waiting for a pull-back" adds value over time on average? You seem to think you know the future - that if a stock has gone up you are necessarily better off waiting for a pull back. Do you have back testing showing this? It could well be that selling puts on stocks that have already gone up IS BETTER because stocks that are going up tend to continue going up! And if "wait for a pullback" is in fact better, what for how big a pullback? Does it depend on how big the run up was? You are just engaging in market timing, pure and simple, without (so far as I can tell) back testing.


"we can have all kind of scenario we could have spend all our life saving on gme 2 month ago and bitcoin 1 year ago and we could retire now. But what we want is as of today at this moment at this junction what is the best bet? Anybody guess"

Yea OK.

"If you have bought a stock and the stock do nothing for a year or drop than you have a capital loss or the stock can go on to 1000% and you score big and can retire rich"

Yea OK.

"the whole thing about the wheel that work for me is i continue to collect premium both side. by collecting premium I get to lower my average cost and when I sell a call I sell a call further away so i have some upside or course i cannot have the 1000% return when I sell a call"

But you could get burned in both directions! You sell the put. Stock tanks. You collected a small put premium but just LOST YOUR ASS on the put overall. Now you sell the call. Stock goes back to where it was. You just collected a small call premium and LOST YOUR ASS on the call overall. All for a stock that just ended up where it started. Yours is just a timing system hoping the stock does not do something like that.

"so ultimately it is what method suit you and my thread is devoted to how do we buy low and sell high?

if you have not watch my video on buy low and sell high i suggest you to take a look with open mind

so my question back to you is how do we buy low and sell high in today market."

So, buying low, selling high, that is obviously the holy grail. I have no great answer for you. I would say, history shows that the stock market has a strong tendency to go up over time, so if you want to buy low and sell high buy stocks today and sell stocks later. But I do know there is nothing at all special with this option wheel or whatever. Your logic seems to be "if I sell a put I will buy the stock lower than the stock price today, and if I sell a call I will sell the stock higher than the stock price when I buy it", but that does NOT address how profitable you will be, or whether you will even be profitable at all.

I do not have the expertise to backtest if waiting for a pullback is better or not or how much of a pullback i have explain in my video i have no answer and is subjective

The wheel is nothing special and not my invention.
What i have achieve is i make over 50% in my trading account last year (no proof to show you)
I make $5000 in jan 2021 (proof see it in the first post)
Feb 2021 i can show you next week (it is up is all i can tell you)
Mar to dec 2021 i can show you when the times come

So i do not have backtest to show but have real result to show

I am certainly not making the most in term of $ or %. But my objective of achieving 50% roi a year is on track