Put Selling

Chewy, my only problem with this trade is that you have chosen to sell the puts when the VIX is at a "relatively" low level... low 20's. Selling puts on a stock or index that you WANT to own is fine. However sell them when the VIX or IV is at a relative high level NOT low.
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Well said. I agree.
 
Quote from chewbacca:

isn't put buying or call buying useless unless expecting a huge move?

and if expecting a huge move then why not just taking an outright directional position in the underlying....if conviction is that strong?
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You did not understand what was suggested to you: buy a put for each put you sell, so that you limit the loss if any.
 
my crystal ball shows the following..........

op will get lucky a few months and think he's a pro.

op then borrows from his credit card and family.

op will leverage more and more.

op blows up.
 
Quote from RichardRimes:

Chewy, my only problem with this trade is that you have chosen to sell the puts when the VIX is at a "relatively" low level... low 20's. Selling puts on a stock or index that you WANT to own is fine. However sell them when the VIX or IV is at a relative high level NOT low. With the vix at such a low I'm looking to buy a put or put spread with an eye to legging in to a B-fly or just taking profits when the vix moves back up. Of course my guess on the vix could be wrong and it moves down to the teens and your position could be just fine.
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We can't bog ourselves down with insignificant details like vol can we? :)
 
I am not a big fan of bull put spreads. The "insurance" leg doesn't seem to offer much protection. For example, let's look at a recent trade: an ATM put from Thursday close going into Friday of last week. The ATM put was sold for $14.00, and an OTM put was bought for $7.00. The ATM put closed on Friday at $30.00, and the OTM put closed at $16.00. In one day, this spread widened and lost about $7.00 per spread. If the "insurance leg is closer to the ATM put's strike, then it tracks better. Yes, the insurance provides a stop loss, but still at a high price.
 
Quote from jwcapital:

I am not a big fan of bull put spreads. The "insurance" leg doesn't seem to offer much protection. For example, let's look at a recent trade: an ATM put from Thursday close going into Friday of last week. The ATM put was sold for $14.00, and an OTM put was bought for $7.00. The ATM put closed on Friday at $30.00, and the OTM put closed at $16.00. In one day, this spread widened and lost about $7.00 per spread. If the "insurance leg is closer to the ATM put's strike, then it tracks better. Yes, the insurance provides a stop loss, but still at a high price.
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Let me see if I got this straight. ATM put was sold for $14.00 on Thursday close versus the Put spread sold for $7.00.

ON the close of Friday, according to your numbers, the ATM put closed at $30 for an unrealized loss of $16.00.

On the close of Friday, according to your numbers, the Put Spread has an unrealized loss of $7.00.

So you prefer the one day loss of $16.00 over the hedged position which losses only $7.00 for the same move.

It is fine if you do but I am not sure you realized what you said.
 
Quote from blackjack007:

my crystal ball shows the following..........

op will get lucky a few months and think he's a pro.

op then borrows from his credit card and family.

op will leverage more and more.

op blows up.
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LOL! That's the story.
 
Quote from chewbacca:

but i am bullish right now short term (4 weeks) and bearish long term (4 months) so i was going to buy calls instead and realized that buying calls is pretty dumb unless you're expecting a huge move - which i'm not........i think all call/put buying is useless unless expecting a huge move
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Just noticed this thread & pulled up a chart. No real comment on your original premise. However, you should consider some additional chart work for your entries. At the time you entered the trade, there were a number of short-term bearish signals - which you either didn't see or decided to ignore. Doesn't seem like a good idea to start your trade from a hole ....

R
 
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