You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Seeking advice on writing (and covering) short options
- Thread starter noregrets
- Start date
What is really sad here is you are doing all this "analysis" 10 ways from Sunday forward and backward and yet you still are afraid to just buy the shares of companies that you swear are great. What's worse is all this analysis to make a bullish call and collect pennies on your "prediction". Just buy the shares already and if you tell me it's too risky I'm going to hit the roof.
Quote from atticus:
<<< He has his own statistical measures while berating an actual probability derived from what he's selling. The OTM% is meaningless in comparison to what the vol-figure suggests (unless equal). The delta is an acceptable QND measure and far less dirty than what he's offering. If he's willing to sell the put he should understand the market's assumptions explicit in that sales-price. >>>
I've never suggested anything different than what you stated.
Again, % otm is merely one of many variables I consider.
It is certainly not more relevant than a stocks vol.
% otm is merely a choice.
<<<... he's got the "putmaster'isms" that are silly. Use an annualized return, but not if the position is under three weeks duration. C'mon. >>>
Would you seriously annualize a % return on a one day trade?
How about two?
So the point is, one needs to made a decision as to where to draw the line on annualization.
I selected not less than 3 weeks, because 1 - 2 weeks ALWAYS show a much larger annualized return then the more common 1 - 3 month trades do.
Thus, those unusually high % return results, lack proper context and relevance.
For such short trades I focus more on actual dollars earned.
Suppose you do ONLY 5 day trades, annualizing them through the year.
Suppose they all earn 40% annualized.
At year end, you're likely to have earned closer to 20%.... if you're lucky.
So what was the point in annualizing such S-T trades, if they lack context and relevance?
Were you hoping to impress someone with those super large meaningless % returns?
<<< He has his own statistical measures while berating an actual probability derived from what he's selling. The OTM% is meaningless in comparison to what the vol-figure suggests (unless equal). The delta is an acceptable QND measure and far less dirty than what he's offering. If he's willing to sell the put he should understand the market's assumptions explicit in that sales-price. >>>
I've never suggested anything different than what you stated.
Again, % otm is merely one of many variables I consider.
It is certainly not more relevant than a stocks vol.
% otm is merely a choice.
<<<... he's got the "putmaster'isms" that are silly. Use an annualized return, but not if the position is under three weeks duration. C'mon. >>>
Would you seriously annualize a % return on a one day trade?
How about two?
So the point is, one needs to made a decision as to where to draw the line on annualization.
I selected not less than 3 weeks, because 1 - 2 weeks ALWAYS show a much larger annualized return then the more common 1 - 3 month trades do.
Thus, those unusually high % return results, lack proper context and relevance.
For such short trades I focus more on actual dollars earned.
Suppose you do ONLY 5 day trades, annualizing them through the year.
Suppose they all earn 40% annualized.
At year end, you're likely to have earned closer to 20%.... if you're lucky.
So what was the point in annualizing such S-T trades, if they lack context and relevance?
Were you hoping to impress someone with those super large meaningless % returns?
Quote from Maverick74:
What is really sad here is you are doing all this "analysis" 10 ways from Sunday forward and backward and yet you still are afraid to just buy the shares of companies that you swear are great. What's worse is all this analysis to make a bullish call and collect pennies on your "prediction". Just buy the shares already and if you tell me it's too risky I'm going to hit the roof.
And the $0.30 in prem is like a half daily sigma in the shares. It's akin to buying AAPL solely for the 2% div.
Quote from Maverick74:
What is really sad here is you are doing all this "analysis" 10 ways from Sunday forward and backward and yet you still are afraid to just buy the shares of companies that you swear are great. What's worse is all this analysis to make a bullish call and collect pennies on your "prediction". Just buy the shares already and if you tell me it's too risky I'm going to hit the roof.
I buy stocks all the time.
But only when they hit my desired price.
If they are not trading at my desired strike, I select the appropriate % otm and place my order.
Hence the reason some of my trades are 5% otm and others 25%.
As I stated previously, I really don't care where a stock is currently trading.
I decide the price I will buy at. Not the market.
And I don't collect pennies. I collect % returns.
A $0.20 credit may be puny for a 2 month $40 strike trade, but it's very reasonable for a $10 strike, 1 month trade.
That's 24% annualized.
Quote from Put_Master:
I buy stocks all the time.
But only when they hit my desired price.
If they are not trading at my desired strike, I select the appropriate % otm and place my order.
Hence the reason some of my trades are 5% otm and others 25%.
As I stated previously, I really don't care where a stock is currently trading.
I decide the price I will buy at. Not the market.
And I don't collect pennies. I collect % returns.
A $0.20 credit may be puny for a 2 month $40 strike trade, but it's very reasonable for a $10 strike, 1 month trade.
That's 24% annualized.
.20? Just buy the shares and scalp the .20 before noon and call it a month. Come on man, give me a break. You claimed in a previous posts something about strong support levels. Well? I mean think about this for a second. The premium you are taking for holding a stock for a month or longer is probably 1/3 of the daily range of the actual stock. LOL. And please give me an example of some puts you sold that were 25% otm. This I gotta see.
Quote from atticus:
And...? I risked 3% to produce 30% in the first quarter. I don't see the relevance of the 24% fiction in light of the fact that if may trade $3 ITM before you're assigned and writing calls. How do you spend that 400% annualized loss?
I suggest you didn't "risk" 3% of your money to earn 30%.
I suggest you "used" 3%.
How much notional leverage did you actually "risk"?
Quote from Maverick74:
.20? Just buy the shares and scalp the .20 before noon and call it a month. Come on man, give me a break. You claimed in a previous posts something about strong support levels. Well? I mean think about this for a second. The premium you are taking for holding a stock for a month or longer is probably 1/3 of the daily range of the actual stock. LOL. And please give me an example of some puts you sold that were 25% otm. This I gotta see.
A $10 stock can just as easily drop $0.20 as rise, before noon.
But remember, the stock is not actually trading at $10.
Probably trading in the $11.5 - $12 area.
What's the hurry?
It would be one thing if the market had just gone through a sig correction.
But with the market at current levels.... what's the hurry to rush into any stock?
Relax. Pick your price. Give yourself a safety cushion. Collect income. Life is good.