think of your put going into a huge barrel of identical puts. if someone wants to buy a put identical to the put you sold he just selects one out of the barrel.
If Someone Sells a Put I Sold Them...
- Thread starter cactiman
- Start date
think of your put going into a huge barrel of identical puts. if someone wants to buy a put identical to the put you sold he just selects one out of the barrel.
Thanks for a load of good ideas!
I pay my eIBD Subscription so they can find all the stocks with good Fundamentals and Uptrends for me. Don't really feel qualified to do it myself.
Then I choose a few stocks based on their charts (look for steady long term Uptrends, Bull Flags, Support & Resistance levels, etc.) and the liquidity of their Options (good bid-ask spreads, etc.).
I also prefer lower Risk Reward Ratios than most online tutors suggest. Don't like risking $90 to make $10, i.e. 9/1 ratios.
Try to have 2/1 or less ratios for Stock Credit Spreads over 2-10 months, and 3/1 or less ratios for SPY Iron Condors over 1-3 months.
After all this it's about timing, and a bit of good luck!
Quote from cactiman:
Thanks for a load of good ideas!
I pay my eIBD Subscription so they can find all the stocks with good Fundamentals and Uptrends for me. Don't really feel qualified to do it myself.
Then I choose a few stocks based on their charts (look for steady long term Uptrends, Bull Flags, Support & Resistance levels, etc.) and the liquidity of their Options (good bid-ask spreads, etc.).
I also prefer lower Risk Reward Ratios than most online tutors suggest. Don't like risking $90 to make $10, i.e. 9/1 ratios.
Try to have 2/1 or less ratios for Stock Credit Spreads over 2-10 months, and 3/1 or less ratios for SPY Iron Condors over 1-3 months.
After all this it's about timing, and a bit of good luck!
If you are going out several months for expiration dates, then looking for stocks in an uptrend is meaningless. Afterall, any trend a stock has been in has been in the past. You have no idea what the stock will do next week, let alone months from now.
Particularly in a volatile market, which we've had for the past 4 - 5 years.
I would suggest focussing your search more on L-T support and resistance levels, vs "current" trends.
A trend is only your friend.... until it ends.
Which you will only know in hindsite.
I agree the last 4-5 years have been very volatile, and we can't "know" a Trend will continue.
But Trend Traders believe there's a much higher "probability" an established Trend of higher-highs and higher-lows will continue into the future rather than stop or reverse.
So I generally enter after a Bull Flag (to a higher low), sell OTM Puts slightly below that level, choose an Expiration Month which will give me the 2/1 risk/reward ratio, and then let the Trend continue moving up and away from the Strike Prices I sold.
Sometimes the extra time hurts you (if the Trend ends and reverses later on), but sometimes it helps (giving the Trend time to recover after a big correction), so that doesn't bother me.
The definitions of "Long Term" and "Current" are important too. I look at 3 year weekly charts and want to see a lower left to upper right pattern.
If the company has good Fundamentals I feel the probability the Trend will continue for the next 2-10 months is high.
But of course one can't know this for sure.
<<< But Trend Traders believe there's a much higher "probability" an established Trend of higher-highs and higher-lows will continue into the future rather than stop or reverse. >>>
I'm sure I'm in the minority here, on the following view point, but I'll share it anyway. I'm not trying to insult anyone. Just sharing my opinion, which difers from most:
I believe a "trend follower" is someone who believes everyone already in a stock, is smarter than they are, and so they follow them.... even though they have no idea who they are, or when they plan to sell.
They like to say "buy low and sell high", but in reality buy high and hope it goes higher.
They like the comfort of investing with the crowd, because they believe in "group think", and if they turn out to be wrong, it wasn't just them who was wrong, it was everyone else too.
I think most trend followers are lazy, and don't want to waste time actually analyzing a stock for value, financial health, probability, and risk,... before risking thousands of dollars.
Their analysis centers around confirming the stock went up, and did so on good volume and conviction. Hence, common sense says, it should go up again tomorrow, next week and probably next month too.
They believe such stock analysis, that risks thousands of dollars, should only take about 15 - 20 seconds to confirm.
Hence the reasons trend followers have a tendency to panic sell when the stock drops, as they really have no idea why they got into it, or where it may be headed.
Hence the reason they often use such small % stop loss criteria.
Again, I'm not talking about anyone in particular. Just my opinion of who I think trend followers are in general. Buy high and HOPE it goes higher.
I'm sure I'm in the minority here, on the following view point, but I'll share it anyway. I'm not trying to insult anyone. Just sharing my opinion, which difers from most:
I believe a "trend follower" is someone who believes everyone already in a stock, is smarter than they are, and so they follow them.... even though they have no idea who they are, or when they plan to sell.
They like to say "buy low and sell high", but in reality buy high and hope it goes higher.
They like the comfort of investing with the crowd, because they believe in "group think", and if they turn out to be wrong, it wasn't just them who was wrong, it was everyone else too.
I think most trend followers are lazy, and don't want to waste time actually analyzing a stock for value, financial health, probability, and risk,... before risking thousands of dollars.
Their analysis centers around confirming the stock went up, and did so on good volume and conviction. Hence, common sense says, it should go up again tomorrow, next week and probably next month too.
They believe such stock analysis, that risks thousands of dollars, should only take about 15 - 20 seconds to confirm.
Hence the reasons trend followers have a tendency to panic sell when the stock drops, as they really have no idea why they got into it, or where it may be headed.
Hence the reason they often use such small % stop loss criteria.
Again, I'm not talking about anyone in particular. Just my opinion of who I think trend followers are in general. Buy high and HOPE it goes higher.
Quote from cactiman:
Does my Spread fall apart?
Probably not, so is the new owner of the 500 XYZ Put now on the other side of my trade?
Does that 500 XYZ Put have a Spread ID number, so the current owner is always involved in my Spread?
Am I informed when the owner of that particular Put becomes someone else?
I honestly don't mind dumb questions and have asked a few over the years in other areas... but this is in the top 5 of dumbest options questions in the history of ET, if not the world!
The dumbest question in the history of ET goes to falconview for directing this question to me: "Are you a professional?"
http://www.elitetrader.com/vb/showthread.php?s=&postid=3558453#post3558453
You're smart enough to not mind saying you absolutely know what the 5 dumbest questions were in the history of the world?
Anyway, most of the other posters got the gist of what I was asking and were generous enough with their comments to help me learn some more about Options. All very much appreciated.