Selling Premium from a Macro Trader's Perspective

[tnatrader]

@tnatrader Oh, busy times then! Nice that you're doing well!

Do you think some variation of your strategy could be made with only options and not getting "involved" with the underlying?

Yes, one option is to just trade the options on the futures which are cash settled, but if you're doing this on etfs, first see if/when liquidity dries up as they go ITM/OTM, that's where you need to roll your positions.

If you never want to get assigned, just make sure it isn't because you don't have the margin for it. That typically means you are trading too large.

Actual results will differ slightly from what I'm doing since I just let them get assigned/expire, but in the long run it should be similar.

 

[dsch11]

Yes, one option is to just trade the options on the futures which are cash settled, but if you're doing this on etfs, first see if/when liquidity dries up as they go ITM/OTM, that's where you need to roll your positions.

If you never want to get assigned, just make sure it isn't because you don't have the margin for it. That typically means you are trading too large.

Actual results will differ slightly from what I'm doing since I just let them get assigned/expire, but in the long run it should be similar.

Thanks for the response!

 

[tnatrader]

Another day another dollar. My profits for June should be at least triple this if I thought things through a little more clearer. My thesis was more or less correct, but the trades I decided to put on to carry my thesis out could've been much better in retrospect. Chalk it up to a learning experience, I suppose.

This is my portfolio after this week's expiration. I think further quick gains in the indexes will be limited here, but worst-case our downside is capped at about 20%. The Fed is doing its best Greenspan 1998 impression. It will not allow a bear market, at least not without a bubble first.

 

[tnatrader]

Trading is truly one of the most rewarding ventures left on this Earth. If you want to discover a new periodic element or cure cancer, you got to go to school for twenty years and work your way up on the totem pole for another 20. But even the smartest people on this planet can't figure out what the market's going to do on any given day. Yet any Joe Schmoe with $25k can be a trader and have the chance to prove he's smarter than everybody else. That, my friend, is a true meritocracy.

I think this broad range continues. Let's see if I can ride this range without fucking it up this time. So far, so good.

 

[vanv0029]

Great system. I am also now using it with UCO (long 3x crude oil) that has a lot more weekly option volume than AMRN. I seem to run into a pattern where stocks either fall 20% with no bounces or rise 20% also with no bounces. I wonder if there is a better way to trade that? I also ran into an accidental positive for using system in an IRA. I was forced to buy some options back under 10 cents because my broker said I couldn't sell any more calls even though the June 28 calls are more than 10% out of the money. Rolling down the covered calls wasn't something I was thinking of.

 

[tnatrader]

Great system. I am also now using it with UCO (long 3x crude oil) that has a lot more weekly option volume than AMRN. I seem to run into a pattern where stocks either fall 20% with no bounces or rise 20% also with no bounces. I wonder if there is a better way to trade that? I also ran into an accidental positive for using system in an IRA. I was forced to buy some options back under 10 cents because my broker said I couldn't sell any more calls even though the June 28 calls are more than 10% out of the money. Rolling down the covered calls wasn't something I was thinking of.

Yeah your broker won't really care about the delta of the options you are selling in an IRA. If you have 500 shares, they will let you sell 5 calls that's it, regardless of strike. In those situations, you need to roll them when they get too I/OTM.

My 51.5 puts went OTM right near the close, but I will have about 900 shares to play with for next week. Overall, a very good week and well-positioned. I can comfortably sell about 2 strangles/day starting next week.

 

[destriero]

There is a lot you can do in a margin IRA. You can short synthetic straddles with garbage wings (wide synthetic iron flies), etc.

 

[tnatrader]

Anybody else use Tradingview.com? They completely bugged out after the markets closed early on July 3rd and didn't even show live data today until about 10 AM. I should've asked for compensation LOL.

Anyways, a relatively good week, but market gains should be limited for next week. I am almost flat, but will slowly sell about 4 ATM puts/day starting on Monday.

 

[tnatrader]

OK I've been lazy and not updating the journal and the thought even crossed my mind to abandon this, but then people will think I somehow blew up since my strategy is selling premium. So this motivated me to come back and prove that I'm still alive and kicking, and didn't get Niederhoffered.

Long run, my thesis remains that we are in a cyclical bull market, but for the next month or so, we should remain rangebound. So while I continue to sell puts, I will be much more aggressive in reducing exposure during rallies. For the very short term, I have a slight bearish bias, which in a bull market just means to have less exposure and more cash. This means during rallies, if I am holding shares, I will sell the shares outright and if I only have puts, sell some slight ITM calls. I won't mind being short until I get a bit more bullish in the short term.

Closed pnl here

 

[tnatrader]

Still alive folks, but I've been too busy to keep updating this for a while, but with things slightly calmer, let's give an update. First, I truly marvel at our President. Tariff Man, unlike any other politician before him, continues to delight me with his simplicity. There's no grand strategy, no horse trading in cigar smoke-filled rooms, no clandestine meetings with heads of other states to concoct fanciful distractions. He thinks it, he tweets it, he moves on. We are so used to banal non-threatening rhetoric from empty suits that we have no idea what to do when a politician says in public what he thinks in private. The paradox is that in private, almost all people, politicians especially, have their Trump moments: petty, thin-skinned, insecure, etc. Just like how greed and inequality isn't privy to capitalism, these peccadilloes are part of human nature.

With that said, i don't really see a happy ending to this whole China-USA beef. Much like Pac and Biggie, the two beefers have a lot of pride, a lot of money, and a lot of weapons. In public, you got to act tough, even after you forget what exactly is being fought over. Is it really even about the tariffs anymore or is it about settling an unsure pecking order like a cat colony?

A longer term macro trader like me sees this as paradoxically both bullish and bearish. Truly brutal bear markets only occur when risks are masked or ignored. But thanks to Trump's tweets shitting on everybody, there's now a microscope on risk everywhere, so much so that bond yields are negative everywhere you look. Yes, nobody wants to invest or deploy capital when there's so much uncertainty, but at the same time, everybody is already invested like there is so much uncertainty. Outside of the typical European bank yahoos who still got their fingers dipped in the wrong pies, most of America, banks and consumers, are not that leveraged and thus there is a natural cushion against any 50% ballbusting bear markets.

And thus, for now at least, I believe we are mostly in a rangebound market with a tilt to the downside, but not much. My baseline calls for no recession and thus no nasty bear market. A 15% correction is on the table, but that's just a dip to be bought in the grand scheme of things.