Selling Premium from a Macro Trader's Perspective
- Thread starter tnatrader
- Start date
It's more of a psychological issue as I just can't stand it when the stock isn't moving. Selling options fits my psychological profile, if you will. That's why I'm not a "great" trader, there are plenty of times where my rational analysis is bullish enough to warrant buying some calls, but my emotional makeup forces me to be short premo.
Still bullish. Markets are complacent, but not dangerously so. Sold some more puts expiring tomorrow. It's hilarious if you annualize some of these premiums when exp is 1 day away, you get like 100%. My baghold capacity is 3500 shares so I'll sell around 3 more puts tomorrow. For now, as long as prices stay around 52.5, I'll sell a few calls a day just to keep monetizing the upside, one in the hand, two in the bush etc etc.
Interesting moment at the close on Thursday when prices last traded at 53. Guess where most of my strikes were...On Friday morning, all of my calls were exercised, but all my puts expired so here's me hoping we gap down on Monday LOL.
Plan for next week: buy ~500 shares on Monday then sell ~5 puts per day. Prices need to stay around or above 53 for me to sell calls. If we dip, I'm in full baghold mode. This bull market still got legs.
Plan for next week: buy ~500 shares on Monday then sell ~5 puts per day. Prices need to stay around or above 53 for me to sell calls. If we dip, I'm in full baghold mode. This bull market still got legs.
Great journal. Details are complete and regular which is not always true of other posted journals. I tried something like your wheel method with oil and NG company Pioneer Natural Resources (PXD) back in 2014 during the oil price decline. It did not work because PXD stock went down faster than the premium from weekly calls and puts. I am thinking of trying it from the short side with LYFT. I have two questions. First, do you have a plan to get out or stop trading if SP 500 enters a bear market? Second, do you automatically connect your spread sheet to IB? If so how. Thanks for the effort.
Bought 600 shares near the open as planned and sold 1 call. Tomorrow, most likely sell 5 puts near the open. I see some threads looking for tops, but we are not near a cyclical top. Garden variety 10% corrections can happen at any time, but for a longer term macro trader, they are gifts to be bought. The ingredients are just not there yet for a prolonged or painful 20%+ correction/bear market.
Current fears over the very low volatility and crappy quality IPOs (Lyft lol) are understandable, but they aren't catalysts for a bear market. They are signs of complacency, like umbrellas being really cheap, but it doesn't mean it's about to rain.
I have never done the wheel from the short side, but I can't imagine it to be too different, as long as you understand the innate risks of shorting. At least with selling calls, I imagine vol to mostly decrease as prices rise, but these IPOs are so volatile, that probably doesn't hold.
I never predict a bear market per se, just like a poker player doesn't predict what card will come up next. It's all a game of probabilities. If I see risks rising, I respect that by lowering my position sizing. Taking the 2018 Q4 mini bear market as an example, my thesis was that we may have entered a bear market and my model told me to drastically cut back on position sizing by early October (1/3-1/2 the position size). However, I saw a few things that got me bullish on a short term basis so I was holding onto shares, waiting for a pop to sell into that never materialized. By January rolled around, I was so shell-shocked that I sold too many shares near the bottom.
When the smoke cleared, I was down 3% for 2018 and am up only 9% for 2019. A huge part of me wanted me to trade bigger once I got bullish in Feb/Mar to "get back" what I lost in 2018, but I know that's the wrong road to take, even though with hindsight, that was the correct call. This was the reason for the journal: to force me to stay disciplined.
My spreadsheet is manually updated. I only trade a few times per day at most so it's easily done.
Current fears over the very low volatility and crappy quality IPOs (Lyft lol) are understandable, but they aren't catalysts for a bear market. They are signs of complacency, like umbrellas being really cheap, but it doesn't mean it's about to rain.
I have never done the wheel from the short side, but I can't imagine it to be too different, as long as you understand the innate risks of shorting. At least with selling calls, I imagine vol to mostly decrease as prices rise, but these IPOs are so volatile, that probably doesn't hold.
I never predict a bear market per se, just like a poker player doesn't predict what card will come up next. It's all a game of probabilities. If I see risks rising, I respect that by lowering my position sizing. Taking the 2018 Q4 mini bear market as an example, my thesis was that we may have entered a bear market and my model told me to drastically cut back on position sizing by early October (1/3-1/2 the position size). However, I saw a few things that got me bullish on a short term basis so I was holding onto shares, waiting for a pop to sell into that never materialized. By January rolled around, I was so shell-shocked that I sold too many shares near the bottom.
When the smoke cleared, I was down 3% for 2018 and am up only 9% for 2019. A huge part of me wanted me to trade bigger once I got bullish in Feb/Mar to "get back" what I lost in 2018, but I know that's the wrong road to take, even though with hindsight, that was the correct call. This was the reason for the journal: to force me to stay disciplined.
My spreadsheet is manually updated. I only trade a few times per day at most so it's easily done.
As expected, sold 4 puts at the open and a few more calls. This is the weakness of selling cash secured puts vs long stock, shown in real time: when vol is down in the dumps, but we keep rallying. To maintain delta, we need to continuously lock in more short puts at these low low prices. At least with down moves, you know vol will spike, giving the next option you sell more juice.
The upside is that my retirement accounts, which are just long etf's, are having a great time and enjoying my bullish analysis being correct.
For tomorrow: sell 4 puts, but that may turn out to be buy 400 shares if we gap up. Gotta maintain the delta and take whatever IV the market gives you. All I can control is position size.
The upside is that my retirement accounts, which are just long etf's, are having a great time and enjoying my bullish analysis being correct.
For tomorrow: sell 4 puts, but that may turn out to be buy 400 shares if we gap up. Gotta maintain the delta and take whatever IV the market gives you. All I can control is position size.
Yes, but it doesn't solve the underlying issue of the low vol. Once you go more ITM, it becomes more of a delta bet and less theta, which is what I'm really going after (my biggest reason for selling puts instead of buying shares is hating to wait for prices to move).
In the past, I have experimented with selling OTM calls/ITM puts when I'm more bullish, but I feel more comfortable tweaking position sizing instead to express bull/bear tilt. Also, with weeklies, once you go away from ATM, extrinsic value very quickly approaches 0. I can fix that by going further out, but the nature of theta decay is that it's always faster the closer you get to exp for ATM options. It's always a trade-off and it boils down to which scenario do you want to avoid the most.
Thanks for your comments and enjoy your stay!
We are having the typical gyrations when revisiting pivot points. I do think we go higher and any dips here should be bought for longer term macro traders. Old rule applies: prices are never too high to start buy and never too low to start selling.
Sold 4 puts and 2 calls expiring in 1 day, all for .30 each. I wonder if the MM thinks about my trades like who the fuck is selling these small lot contracts with 1 day till exp for $30 each minus commissions?!? Or I guess they think nothing since it's all automated now. Regardless, let's keep plowing along.
Sold 4 puts and 2 calls expiring in 1 day, all for .30 each. I wonder if the MM thinks about my trades like who the fuck is selling these small lot contracts with 1 day till exp for $30 each minus commissions?!? Or I guess they think nothing since it's all automated now. Regardless, let's keep plowing along.