RWM ok to hold longer than a day?

[wxytrader]

When I say High ATM IV, then it not necessarily means to sell the ATM strike.
It rather means for filtering/finding tickers with high IVs: if it has a high ATM IV, then its other strikes surely will have even higher IVs....
I already had told you about this site in the pvt thread: https://marketchameleon.com/volReports/VolatilityRankings
Click 2x on the column heading "Current IV30" to sort the list for the highest ATM IVs.
Of course throw away the penny stocks.

Try your strategy for example with the ticker SAVE and its options.

Forget your IWM and RWM They are useless toy tickers, like all ETFs, IMO

I will have to double check these results, but this is what I got when selling 1 OTM starting on DEC30 2022.


IWM 1 contract (Weekly)
Funds allocated $17,436.00
Total Premium $5,755.00
Total Realized losses -$6,600.00
Total -$1,223.48
Total Spread loss/fees -$437.25
Net Income -$1,660.73
Monthly income -$136.50


Save 1 contract (Weekly)
Funds allocated $1,969.00
Total Premium $6,005.00
Total Realized losses -$900.00
Total $5,117.45
Total Spread loss/fees -$437.25
Net Income $4,680.20
Monthly income $384.67


Save 10 contracts (Weekly)
Funds allocated $19,690.00
Total Premium $60,050.00
Total Realized losses -$9,000.00
Total $51,174.50
Total Spread loss/fees -$1,033.50
Net Income $50,141.00
Monthly income $4,121.18


The difference appears to be in assignments not in the premium. There were only a 2 assignments over the entire year if I opened selling a 19 put on Dec30 2022. The worst one was being assigned in Aug for 17 and getting called out in November for 10 for $-700. Why so few assignments is the question? Is that an anomaly? The atr is .71-1.12 versus IWM which is 3-4, so maybe that's what I should be looking at. But if atr is lower then so should the premium, but I guess that's the answer...these premiums for SAVE are jacked up currently with high IV...which would imply a higher atr, but then why so few assignments?

 

[wxytrader]

Can you pls clarify what you mean by the above. Why do you think is such an Assignment good?
IMO, to get assigned is never good.
But then you maybe do understand something different when saying "assignment", since you say "to take assignment", as nobody would say it so; one rather "gets assigned", forcefully initiated by the counterparty.
Such an assignment is usually very undesireable/unwanted by the shortseller, since it means your shortposition will be forcefully closed by the other side... Ie. remote-controlled... of course happens only when the other party makes a substantial profit, which of course means a big loss for you... Ie. happens when your position is (temporarily) in the reds, without ever getting a chance to recover... as the position got closed...

Of course the counterparty does it by clicking "Exercise" in his/her trade program.

I'm "taking" assignment because its my choice whether to accept the shares, or close out the position...unless I get an early assignment. If I say, "sell puts and get assigned" doesn't stress the fact that I am planning to accept the shares as an integral part of the strategy. Same difference, but one way gets the point across better imo...maybe not since we have spent 2 paragraphs on it lol.

Unrealized losses are better than realized losses which is why assignment is preferable imo because you can turn unrealized losses into realized gains.

If you boil it down, the only way to 100% make money in stocks is to never realize a loss.

Warren agrees!

 

[Quanto]

Example:

With SAVE Jan-19 options with Call K=15 or 15.50 or 16.50 as a CC you would make 23% proft (by taking the offered Bid! Not even using MidPrice) at expiration (means about 38% per month) if the stock stays the same.

Of course you have to buy also some Puts (try also Qty > 1 for different Put Ks) to reduce the risk. And this purchase you can finance from the credit you received fror the shortselling.

And if you can do it right by first creating a loss protection, and then when DTE gets lesser and the price of the Puts hopefully decreases (due to time decay, stock rise, IV fall etc) then you can add much more Puts for much less money (this step is important when a big rise or drop of the stock is expected as in EventTrading. Then the profit can even be increased much more should the event occur as expected. Ie. then the "V" like PnL curve helps).

Hot Tip: the initial loss protection can best be achieved by using weekly Puts, since a weekly is much cheaper than the monthlys used in shortselling... Ie. using a kind of rolling.

This is IMO a very interesting strategy, I already had talked about it in an other thread here and also in the pvt thread.
Just simulate in optioncreator or similar tool.

 

[wxytrader]

Example:
With SAVE Jan-19 options with Call K=15 or 15.50 or 16.50 as a CC you would make 23% proft at expiration (means about 38% per month) if the stock stays the same.
Of course you have to buy also some Puts (try also Qty > 1 for different Put Ks) to reduce the risk.
And that you can finance from the credit you received fror the shortselling.
And if you can do it right by first creating a loss protection, and then when DTE gets lesser and valeu of the Puts hopefully decreases then you can add much more Puts for much less money.
This is IMO a very intersting strategy, I already had talked about it in an other thread here and also in the pvt thread.
Just simulate in optioncreator or similar tool.

OK so how do you manage the long puts? Do you wait for your shares to be called away and close them? Do you adjust them along the way?


Stock trading at $20
Sell a put at $19
Buy 2 protective puts at $19 (3 months out) (.50 delta)
Get assigned at $19
Get called away at $10
Position lost $9
Protective puts gain $9 +


Stock trading at $20
Sell a put at $19
Buy 2 protective put at $19 (3 months out)(.50 delta)
Stock increases to $25
Sell a put at $24
Get assigned at $24
Get called away at $20
Position lost $4 dollars
Protective puts lost $1 -

This has always confused me. If the value of a put decreases by delta when the stock price increases, and the delta decreases by gamma, then why is it losing less value proportionately as the probability of being itm decreases?

 

[Quanto]

OK so how do you manage the long puts? Do you wait for your shares to be called away and close them? Do you adjust them along the way?

You have to know the PnL curve, ie. you need to engineer it to your liking by adding LongPuts, if it makes sense also LongPuts with different strikes, and also increasing the Qty of the LongPut(s) can have a big impact on the PnL chart.
If the shares get called away then you can close the rest.
The PnL chart tells you in advance the result for any Sx and/or IV.

Stock trading at $20
Sell a put at $19
...

Man, in these things you have to be very exact!
Your above action lacks the premium (actually the most important amount!), ie. how much credit did you get for the ShortSelling?
W/o knowing this, analysing the rest is just useless and futile...
Do your homework first, and be very very accurate, man! Double-check everthing

Get assigned at $19
Get called away at $10

Aeh what? What's that supposed to mean?
Man, as said: you need to present complete examples!
Please enter your trade into optioncreator. Only that way is an analysis possible.

 

[wxytrader]

You have to know the PnL curve, ie. you need to engineer it to your liking by adding LongPuts, if it makes sense also LongPuts with different strikes, and also increasing the Qty of the LongPut(s) can have a big impact on the PnL chart.
If the shares get called away then you can close the rest.
The PnL chart tells you in advance the result for any Sx and/or IV.


Man, in these things you have to be very exact!
Your above action lacks the premium (actually the most important amount!), ie. how much credit did you get for the ShortSelling?
W/o knowing this, analysing the rest is just useless and futile...
Do your homework first, and be very very accurate, man! Double-check everthing


Aeh what? What's that supposed to mean?
Man, as said: you need to present complete examples!
Please enter your trade into optioncreator. Only that way is an analysis possible.

Yes I know how a P/L chart works...but the one on options creator is calculating @ expiry or today...same as my spreadsheet. It can't tell you what the price will be at x price in x days. If you use a dynamic P/L like on option strat or tos, they have a static delta. The value of the option at a certain price in the future will not be delta adjusted. Also, you will have to adjust for delta on the fly to add or remove contracts to make the position delta neutral which will add costs.

As far as the numbers for last year, if you bought a 20% deep itm put, then it would have lost 90% of its value by years end. If you went cheaper then it didn't protect you from the large drawdown in March, where you realize large losses when your shares are called away at 175 well below your assignment price of 191. You also can't keep adjusting it weekly to atm, because the adjustments will negate the premium collected.

Example. You could have started the year getting a long atm put @ 173, and if you just continued the strategy of selling 1 otm, eventually be assigned at 195, and called away at 192. You just realized a $300 loss on the stock, and how much value has your long put lost as well?

Forget the P/L chart...run the actual numbers.

It makes sense that all the prices are geared so if you don't have a directional advantage you are just chasing your tail. I will instead be selling puts at the strike I want to take shares at during a retrace, and will sell calls on those shares as the trend resumes. If I get below my break even I will sell more puts to average down until the point where I just throw my keyboard against the wall and walk away.

 

[Quanto]

I think you mean you get exercised. You don't get assigned shares away lol. I refer to getting assigned for short puts, and distributed for short calls. When you get assigned shares you will have a B/E price.

Actually you have replied to an old draft of my posting. I had later deleted that passage.
And you are really doing eveything the hard way. I said CC, but you go and use instead a CSP .
You are really a crazy person, man!
I'll now design a construct consisting of a CC + LPs in optioncreator and post it then here, by using the data from YahooFinance. I have even intraday 15-minute snapshot data of it from TDA. Will see...

 

[wxytrader]

Actually you have replied to an old draft of my posting. I had later deleted that passage.
And you are really doing eveything the hard way. I said CC, but you go and use instead a CSP .
You are really a crazy person, man!
I'll now design a construct consisting of a CC + LPs in optioncreator and post it then here, by using the data from YahooFinance. I have even intraday 15-minute snapshot data of it from TDA. Will see...

CSP because I have to obtain shares at some point to start the wheel, might as well start off with collecting some premium...and since I will only be buying (selling puts) during a retrace I will get in at around the price I want based on TA.

Yes I realize some people consider selling puts a bullish strategy when the market is trending up, but that is just nonsense. I want to be selling puts when fear is high.

 

[Quanto]

Yes I know how a P/L chart works...but the one on options creator is calculating @ expiry or today...same as my spreadsheet. It can't tell you what the price will be at x price in x days.

You are wrong, as usual ! B/c in OC you can very well specify the day in the field "Days from Today". And just right of that field, you can also specify the Volatility (IV) for that very day. Enjoy!
At the bottom (x-axis) you can walk all possible stock prices to read the corrosponding blue curve (for the above said day x) or the orange curve (for at expiry)...

 

[wxytrader]

You are wrong, as usual ! B/c in OC you can very well specify the day in the field "Days from Today". And just right of that field, you can also specify the Volatility (IV) for that very day. Enjoy!
At the bottom (x-axis) you can walk all possible stock prices to read the corrosponding blue curve (for the above said day x) or the orange curve (for at expiry)...

oh so it does. I don't use it frequently. Still faced with all the same problems of not knowing future volatility or delta. You could use orats or market chameleon for delta.