My problem (may not bother you though) is that if market corrects 10/15/20% and I get stuck with all my capital, I won’t be able to sell more puts and selling calls so far OTM will not bring enough. So my only income would be dividends. Sometimes you may not see new highs for years or decades. And I would hate to miss opportunities that may come up during those times.
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Retired, 450k fun money, lets see what happens - SPY Options
- Thread starter Wise Old Man
- Start date
So far the market has been boring and uneventful. I rolled my puts forward another week and to the 353 strike. Still on the sidelines waiting for SPY to pull back and I get my entry but it seems the market has no jitters. I'm glad we're all in such a risk free and perfect economy, or at least that's how the market sees things. I'll be quietly collecting premium waiting to be assigned shares. Money's money I guess.
+$481
tIP SOLD -13 DIAGONAL SPY 100 (Weeklys) 11 DEC 20/4 DEC 20 353/347 PUT @.37
+$481
tIP SOLD -13 DIAGONAL SPY 100 (Weeklys) 11 DEC 20/4 DEC 20 353/347 PUT @.37
Glad we're finally seeing a small amount of volatility in this market. Moved the puts to 360 and out another week for nice credit of $3142. I was only able to sell 12 contracts instead of 13 this week as I moved my puts to the 360 strike. Hopefully next week the market continues to move lower.
+$3142
SOLD -1 12/-13 CUSTOM SPY 100 18 DEC 20/11 DEC 20 360/353 PUT/PUT @31.42
+$3142
SOLD -1 12/-13 CUSTOM SPY 100 18 DEC 20/11 DEC 20 360/353 PUT/PUT @31.42
+$2184
SOLD -12 DIAGONAL SPY 100 (Weeklys) 24 DEC 20/18 DEC 20 365/360 PUT @1.82
SOLD -12 DIAGONAL SPY 100 (Weeklys) 24 DEC 20/18 DEC 20 365/360 PUT @1.82
I've been trading this strategy 1 month so far and have an overall profit of $7242 as of today's close, which equates to 1.6% growth. So far I am underperforming SPY, which has grown 2.5%. Disappointing, however it is expected until I get the assignment I'm looking for. I'll likely do these P/L updates relative to the SPY once a month.
Exactly - and one better is to do XSP options - the same size as SPY, 1/10th of SPX.If you are going to be doing SPY options, you might as well doing SPX options. Higher premiums, no pin risk, no assignment risk. Everything cash settlement, what you win/lose is what you get.
Exactly - and one better is to do XSP options - the same size as SPY, 1/10th of SPX.
That would be completely counterproductive. The point of this strategy is I want to get assigned shares. It’s the triple income strategy.
I earn premium by selling cash secured puts at a price I wouldn’t mind going long. Once I get assigned shares, I will sell calls at a higher strike price earning more premium while waiting for an exit. When the shares finally get called away, I’ve made a nice profit from the capital appreciation.
TimtheEnchanter’s post explains it pretty well. My twist on the strategy is to sell very short term and close to the money options hoping for an assignment. But so far the latter part of his post holds true and I am underperforming the SPY. I’m still experimenting with which strike I’m selling the puts at, trying to find that sweet spot where I’ll get assigned shares. My hope is to get assigned shares and take advantage of the mini pull backs in the market while it continues to breach new highs. This is my twist to the strategy that will hopefully lead me to outperform the S&P’s, but so far I have been unsuccessful in doing so.
Discussion
The “Wheel” is a three-part option strategy that involves:
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.
- Selling cash-secured puts on an underlying.
- If/when one gets put shares, hold the long shares, and sell covered calls against them.
- If/when one’s shares get called away, return to selling cash-secured puts.
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
Yes, I understand - I was merely, though perhaps misdirectedly, affirming the point made by JSOP, in that if you were to have adopted his strategy, it would be better to do so with XSP options rather than SPY, if one wanted to avoid assignment. Having read the rest of the posts, I understand your strategy and I agree, it sounds like an ideal multiple income stream. If you want to be more guaranteed at getting "put to" as the option term describes, you'd be better off setting your put strikes higher, and risk a bit of more drawdown after assignment. Or, just buy the SPY when you feel it has bottomed, if it hasn't reached your put strike yet. I don't know how proficient you are at chart reading, but it sounds like optimizing that is the way to maximize your gains, by better choosing of the tops to sell the calls, and better choosing of the bottoms to sell the puts. For me, recognizing support/resistance and other candle pattern breakouts are key.That would be completely counterproductive. The point of this strategy is I want to get assigned shares. It’s the triple income strategy.
If you want to be more guaranteed at getting "put to" as the option term describes, you'd be better off setting your put strikes higher, and risk a bit of more drawdown after assignment. Or, just buy the SPY when you feel it has bottomed, if it hasn't reached your put strike yet. I don't know how proficient you are at chart reading, but it sounds like optimizing that is the way to maximize your gains, by better choosing of the tops to sell the calls, and better choosing of the bottoms to sell the puts. For me, recognizing support/resistance and other candle pattern breakouts are key.
This is what I’ve been trying to figure out... that sweet spot where I get put shares yet still have room for appreciation. I’ve been tempted just to outright buy shares but I think I need a bit of patience. My puts opened in the money this morning but the market quickly turned around and they are OTM again. We’ll see how the rest of the week plays out.