Retired, 450k fun money, lets see what happens - SPY Options

[bobbyo_85712]

Sound strategy to get stocks that you would buy anyway at a discount. I dont really think of it as an option strategy but a dip buying plan that pays him to wait for his price. Say the OP would buy Apple anytime it touches 100.Instead of waiting for 100 he sells a monthly at that strike for a $5 Premium. If he is assigned his cost basis is $ 95. Sure he could get assigned Apple at a much lower price than 95, but in his mindset he would of bought Apple anyway at 100 and this strategy has given him a 5% discount. Then start selling calls at target to increase profit. Now if he doesn't get assigned he collects premium while he waits for his price that he is willing to buy at. He risks Apple going parabolic without him,but you are either a dip buyer or you are not. Would not do strategy on MoMo names.

 

[qlai]

To clear things up - my goal is to be invested in the market and get a little premium on the side.

So what percentage of the account will you allocate to premium selling? Are you going to sell 450k worth of (close to) ATM puts every week or month?

 

[deltaf0rce]

Discussion
The “Wheel” is a three-part option strategy that involves:

1. Selling cash-secured puts on an underlying.
2. If/when one gets put shares, hold the long shares, and sell covered calls against them.
3. If/when one’s shares get called away, return to selling cash-secured puts.

Often dubbed as the “triple income” strategy, the idea is that a trader receives income from the short put premium, experiences capital appreciation and/or receipt of dividends on the long underlying, and receives income from the short call premium.

Despite the promise of three revenue streams and the promise of lower volatility associated with options strategies, not a single strategy outperformed the “single income” strategy of buy/hold on either a total or risk-adjusted return perspective. In fact, one strategy even went negative! Let’s take a look under the hood to see what’s happening.
https://spintwig.com/spy-wheel-45-dte-cash-secured-options-backtest/#Days_Till_Expiration

Sounds like a strategy written by a merrill lynch PMD

 

[Option_Attack]

1) This is old as the hills. Was even sold in seminars back in the day by a scammer called Wade Cook, i.e. "Rolling Stocks."

2) Results vary of course, but since Short Puts = Covered Calls then results using SPY are likely going to be similar to indices like BXM:

3) Nothing wrong with doing it, but probably be easier to just buy and hold SPY on pullbacks. Problems arise when deeper drops don't allow CC sells at strikes you need for profit on assignments.

4) Keep calm and carry on! Good luck.

 

[deltaf0rce]

1) This is old as the hills. Was even sold in seminars back in the day by a scammer called Wade Cook, i.e. "Rolling Stocks."

2) Results vary of course, but since Short Puts = Covered Calls then results using SPY are likely going to be similar to indices like BXM:

3) Nothing wrong with doing it, but probably be easier to just buy and hold SPY on pullbacks. Problems arise when deeper drops don't allow CC sells at strikes you need for profit on assignments.

4) Keep calm and carry on! Good luck.

Every time people come up with an idea like this, they should Google a charity they like and donate the notional value of the trade to it. Same end result to the user, but your benefitting Ronald McDonald house instead of citadel

 

[SunTrader]

Said by someone first, likely hundreds of years ago, trading is about controlling risk.

Gambling is about using "fun money".

Though gambling can be fun if the person acknowledges to themselves that is exactly what they are doing.

 

[john demp]

I would invest in QQQ as well - split up your investment. QQQ has better ROI then SPY. Maybe put some on DIA as well. Stay away from IWM. What delta do you plan to sell at? It's probably better if you do monthly instead and take off profit at 30% to 50%.

 

[masterm1ne]

You should check out some journals here. Some of them are really good and contain ideas outside the box. Either you have a super algo to help with your analysis, or you take a longer term approach... days, weeks, months + If I had 450k when I started 11 years ago, I probably would have lost it all.

 

[TimtheEnchanter]

To do the wheel properly, you do it with an instrument that is in the wide trading range, finding that is not so easy. But on the downdrift when is about to reach support you sell short-term ATM puts, if/when it goes further towards support you hopefully get assigned, or you can just cover the puts and start again with something else. If you get assigned YOU WAIT until SPY/QQQ reaches upside resistance, THEN you sell calls. With the last move up, hopefully, your QQQ gets called away, you rinse repeat, and start again.
The trick is to find a trading range and know when it is over, then ADJUST...

 

[Wise Old Man]

My first trade is complete for a $728 credit. Since I'm tracking my performance relative to the S&P 500, I'll put my starting balance and the price of SPY at the time of the trade:

11/16/2020 Benchmark
Starting Balance: $456,118.12
Starting SPY: $360.08

+$728 credit:
SOLD -13 SPY 100 20 NOV 20 348 PUT @.56