Put Writing timing

Did you really think none of us knew who your were from day one?
Are you posting your "conservative" trades on a new forum yet?
Love the new name.
Very creative!
But also very obvious from day one last month.
 
I don't know if this will be useful to the OP but I constructed it this AM just at open for a trade I was considering.
GIS:
Compare APR 37 short put with Apr 37/35 bull put spread with GIS at 40.06
naked short APR 37 put = put
37/35 bull put spread (sell the 37 buy the 35) = Spread

...................Cash Return................Required Margin.............% Yield..............
Price.............put...........Spread........put.............Spread..........put............Spread.............Probability
30................(635).........(175).........3,635............174.............(17%).........(100%).................99%
35.................(128).........(175)........3,635.............174............(3.5%)........(100%)..................95%
40..................65...............26..........3,635............174..............1.8%...........14.9%.................50%
45..................65...............26..........3,635............174..............1.8%...........14.9%..................8%
Short Put
Expected Value = .5(65) - .05(128) - .01(635) - .44(381) = 32.5 - 6.4 - 167 = $-141
Spread
Expected Value = = .5(26) - .05(175) - .01(175) - .44(175) = 14.3 - 8.75 - 77 = $-71.45


By these numbers neither is a good investment but the spread gives you 8X the yield and is half as risky as the short put...i.e. you're likely to lose half as much. If you look at the Expected Value computation this is a result of the much larger loss for the short put at low prices. If I would cut the table off at $35 the result would be different as it would if I extended the table even lower. It depends on how much of recent history you find 'relevant'. This is not a remarkable conclusion it simply reinforces the nature of the trades and is well known and understood by (almost) everyone who trades options. You can read this exact computation in any of McMillan's books.

z
 
Yet another typical DanShirley ridiculous trade example.
Once again the annualized % return is ridiculous.
Once again there is no theta.
Once again the stock is trading near it's all time high.
Once again the "probability" formula used for this 6 month trade is 100% meaningless.
Once again, a spike in VIX will hurt this wide spread gap, much more than a more narrow gap, if closing the trade.
Once again, if the stock drops a mere 12 - 13% over the next 6 months, the spread investment is wiped out.
Once again, the otm safety cushion for the spread trader is an "illusion",... as he dare not let the stock drop more than a mere 7% over the next 6 months.... let alone 12 - 13%, before closing it down.
Once again, the trader will be using massive margin leverage for this trade, if he wants to consider buying the stock, vs closing it down for a loss.
 
Well that was quick wasn't it.

Put master is just plain crazy. Instead of reading what I wrote and understanding it he simply reiterates the same remote 'points' as always... with drool comming out of his mouth. In fact I don't like this trade as I pointed out and I posted it just as a comparison between short puts and put spreads.

The table is correct and one can make of it what one will.

Talk about a mindless troll

images


:-)

BTW: Who is DanShirley????? Whoever he it does not serve anyone's interest to rage these emotional wars over what are simply facts.
 
<<< I don't like this trade as I pointed out and I posted it just as a comparison between short puts and put spreads. >>>

Only DanShirley would post a trade comparing 2 trades even he doesn't like.



<<< BTW: Who is DanShirley????? >>>

He is just an "old nemesis" I once knew.

LOL!
 
Well that was even quicker.


I know put-master's problem.... like most trolls he has no life.


Here's an idea... If put master contests that table he should post a corrected one... instead of slavering out argumentum ad hominem.

...................Cash Return................Required Margin.............% Yield..............
Price.............put...........Spread........put.............Spread..........put............Spread.............Probability
30................(635).........(175).........3,635............174.............(17%).........(100%).................99%
35.................(128).........(175)........3,635.............174............(3.5%)........(100%)..................95%
40..................65...............26..........3,635............174..............1.8%...........14.9%.................50%
45..................65...............26..........3,635............174..............1.8%...........14.9%..................8%
Short Put
Expected Value = .5(65) - .05(128) - .01(635) - .44(381) = 32.5 - 6.4 - 167 = $-141
Spread
Expected Value = = .5(26) - .05(175) - .01(175) - .44(175) = 14.3 - 8.75 - 77 = $-71.45

This is not a remarkable conclusion it simply reinforces the nature of the trades and is well known and understood by (almost) everyone who trades options. You can read this exact computation in any of McMillan's books

:-)

hey here's a place where PM could actually be of use: what's the plural of argumentum ad hominem???
 
The example and tables oldnemesis (DanShirley), posted for discussion, are all either useless, meaningless or stupid.
Only DanShirley would want to draw investors into such a ridiculous discussion.
I'll just read in amusement, if others want to participate in Danshirley's (oldnemesis) discussion.
As always, I'll allow him the last word, as he will keep this silly banter going for weeks if I don't.
 
Will Put_Master really give me the last word.... can he control himself that much??

Lets see.

The table we are talking about is:

GIS April 37 short put vs April 35/37 bull put spread (9:30 Am Oct 18th)

...................Cash Return................Required Margin.............% Yield..............
Price.............put...........Spread........put.............Spread..........put............Spread.............Probability
30................(635).........(175).........3,635............174.............(17%).........(100%).................99%
35.................(128).........(175)........3,635.............174............(3.5%)........(100%)..................95%
40..................65...............26..........3,635............174..............1.8%...........14.9%..................50%
45..................65...............26..........3,635............174..............1.8%...........14.9%..................8%
Short Put
Expected Value = .5(65) - .05(128) - .01(635) - .44(381) = 32.5 - 6.4 - 167 = $-141
Spread
Expected Value = = .5(26) - .05(175) - .01(175) - .44(175) = 14.3 - 8.75 - 77 = $-71.45

Which he says is ... what ...useless, meaningless, stupid etc. I hope not.

I construct at least a dozen such tables a week and make most of my trading decisions based on such tables.
 
Quote from Put_Master:

Yet another typical DanShirley ridiculous trade example.
Once again the annualized % return is ridiculous.
Once again there is no theta.
Once again the stock is trading near it's all time high.
Once again the "probability" formula used for this 6 month trade is 100% meaningless.
Once again, a spike in VIX will hurt this wide spread gap, much more than a more narrow gap, if closing the trade.
Once again, if the stock drops a mere 12 - 13% over the next 6 months, the spread investment is wiped out.
Once again, the otm safety cushion for the spread trader is an "illusion",... as he dare not let the stock drop more than a mere 7% over the next 6 months.... let alone 12 - 13%, before closing it down.
Once again, the trader will be using massive margin leverage for this trade, if he wants to consider buying the stock, vs closing it down for a loss.
More...
-----------------------------------------------------------------------------------

Lets do a Dan type of analysis

Take the last trades, that you have entered in the last few days , that are still open and post them along side of similiar stocks spread with a max of 5 strike on the long side. (Think or Swim has historical option prices if needed for this back test
Show todays results into NOV experation if they are not closed.
Looking forward for your mastery of the less dangerous naked puts

cheers
john
 
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