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

[Overnight]

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

So you sold 13 put options of SPY for Nov 20 2020 @56 cents. You've collected the premium, and so now you will be forced to own 1300 shares of SPY at that strike price of 348 if it expires in the money? That doesn't seem so bad.

What is the amount of money needed to have 1300 shares of SPY at 348?

 

[MarkBrown]

SOLD -13 SPY 100 20 NOV 20 348 PUT @.56

there is an old saying you sell the public what's attractive to them when they will pay the most for them.

if you were buying those puts would those look attractive to you as the market is ripping up?

 

[Poljot]

Hi Wise Old,
Selling them Fridays brings in two more days of premium decay.

 

[Wise Old Man]

So you sold 13 put options of SPY for Nov 20 2020 @56 cents. You've collected the premium, and so now you will be forced to own 1300 shares of SPY at that strike price of 348 if it expires in the money? That doesn't seem so bad.

What is the amount of money needed to have 1300 shares of SPY at 348?

Yes exactly, so if I get assigned at expiration I'll purchase 1300 shares at $348 each, totaling $452,400. My cost basis will be 347.44 a share due to the premium from the short puts, not factoring in commissions. From there I'll sell covered calls against it until the shares get called away. Rinse and repeat.

 

[Wise Old Man]

there is an old saying you sell the public what's attractive to them when they will pay the most for them.

if you were buying those puts would those look attractive to you as the market is ripping up?

Of course not, but due to the short term nature of my trades, I'd rather collect the immediate premium rather than sit on the sidelines and wait for the market to come back down. Remember, my goal is for market exposure. I'm not trying to time the market.

Hi Wise Old,
Selling them Fridays brings in two more days of premium decay.

The funds just cleared today. I'll be rolling the contracts forward on Friday assuming I haven't been assigned the shares.

 

[Overnight]

Yes exactly, so if I get assigned at expiration I'll purchase 1300 shares at $348 each, totaling $452,400. My cost basis will be 347.44 a share due to the premium from the short puts, not factoring in commissions. From there I'll sell covered calls against it until the shares get called away. Rinse and repeat.

So assuming you do not get assigned the shares, you put 450K "at risk" to make 700 bux? That's kinda what I figured one needs to trade a leveraged instrument at that level. Is there a margin requirement for that, or is it square because you have enough cash to cover the assignment?

 

[MarkBrown]

So assuming you do not get assigned the shares, you put 450K "at risk" to make 700 bux? That's kinda what I figured one needs to trade a leveraged instrument at that level. Is there a margin requirement for that, or is it square because you have enough cash to cover the assignment?

we use to say you put your house up as collateral to gain a bicycle lol

 

[Overnight]

we use to say you put your house up as collateral to gain a bicycle lol

Well, it will be a fun journal to watch I suppose. Not fun for me, because my brain and options just do not click. Maybe this will help "click it."

 

[newbie463]

Hey WOM,

I am sure you have, but for the sake of anyone following with more limited options exposure, did you consider scaling in? like say, instead of

-13 spy 348

maybe:
-4 spy 356
-4 spy 352
-5 spy 348

Also, how did you pick spy 348?

newbie

 

[MarkBrown]

Well, it will be a fun journal to watch I suppose. Not fun for me, because my brain and options just do not click. Maybe this will help "click it."

well there is a way to do it - you sell into the volatility so he should be selling calls not puts - you get more premium "selling people a chance the market will go up as they can see it's going up" they will pay more for the calls than anyone would the puts. he was only able to sell the puts because they were cheap for someone to buy.

if he sold calls >

then if the market spikes up he should roll forward if he has to. then as the market heads down he would leg in the puts.