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Selling Premium - Strategy Never Discussed
- Thread starter robertSt
- Start date
Even my super wide ratio spreads with 2 days to expiry is not working in this environment.
Can you provide a trade example?
CSIQ dropped below 20 this morning. I bought back the 21 puts for 90 cents. I sold next Friday's 20 for 1.00. I had 70 cents on the original. So now I have net 80 cents ($800 on ten contracts).
If that pans out, that's still about 4% return in two weeks. If I have to go down again, I will.
Premiums across the board are so high, I'm beginning to think I prefer selloffs to the bull.
If that pans out, that's still about 4% return in two weeks. If I have to go down again, I will.
Premiums across the board are so high, I'm beginning to think I prefer selloffs to the bull.
Just when you think it's safe in the market for your option to expire worthless, Friday comes along and the underlying declines by 7%. So with less than an hour to go, and CSIQ slightly in the money, I rolled down from 20 to 19.5. (It's rebounded somewhat out of the money with a half hour to go.)
I collected 65 cents by selling next Friday, so I now have a net of 1.45, or $1450 on 10 contracts.
I started Feb 24 with the 21, when the stock was at 21.04. So even though I've had to come down 150 points, to 19.5, I still have a net of about $1500. If it expires next week, that would be a return of over 6% of the amount invested in 3 weeks.
We'll see what happens next.
I collected 65 cents by selling next Friday, so I now have a net of 1.45, or $1450 on 10 contracts.
I started Feb 24 with the 21, when the stock was at 21.04. So even though I've had to come down 150 points, to 19.5, I still have a net of about $1500. If it expires next week, that would be a return of over 6% of the amount invested in 3 weeks.
We'll see what happens next.
This is fast becoming a weekly update of my short put CSIQ position, which I began on Feb. 24 at a strike of 21.
So after the worst week, more or less. in stock market history, and the bear officially arrived, this position might be instructive to some, especially in light of the many warnings I have received regarding this strategy in just such a market scenario as this.
I went into the week at a strike of 19.5. Tuesday, with CSIQ at 18.35, I bought the 19.5s and sold 19s with the same expiration, giving back 35 cents of my net 1.45.
With an hour to go on Friday and CSIQ at 15.96, I repurchased the 19s and sold the Mar 27 18s, giving back another 20 cents.
That leaves me with a net of 90 cents. Not ideal, I'm still 2 points in the money, but a potential $900 (on 10 contracts) in 5 weeks would still be about 3.5% on the initial $21,000 investment. The exposure now is only $18,000, which raises the percentage some. And I continue to earn interest on the "invested" money.
Not a bad place to be after such a couple of weeks. I think I'm probably feeling a lot less pain than many.
So after the worst week, more or less. in stock market history, and the bear officially arrived, this position might be instructive to some, especially in light of the many warnings I have received regarding this strategy in just such a market scenario as this.
I went into the week at a strike of 19.5. Tuesday, with CSIQ at 18.35, I bought the 19.5s and sold 19s with the same expiration, giving back 35 cents of my net 1.45.
With an hour to go on Friday and CSIQ at 15.96, I repurchased the 19s and sold the Mar 27 18s, giving back another 20 cents.
That leaves me with a net of 90 cents. Not ideal, I'm still 2 points in the money, but a potential $900 (on 10 contracts) in 5 weeks would still be about 3.5% on the initial $21,000 investment. The exposure now is only $18,000, which raises the percentage some. And I continue to earn interest on the "invested" money.
Not a bad place to be after such a couple of weeks. I think I'm probably feeling a lot less pain than many.
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CSIQ Trade Update:
CSIQ got absolutely crushed last week, along with the rest of the market. It traded as low as 12. I had already rolled down from 21 to 18, which was going to expire this Friday, March 27.
With the incredible rally today, I bought back the 18s, and sold April 9 17.5s, for a 5 cent credit. So I now have a net of 95 cents, or $950 on 10 contracts.
I'm still about 2 points above the actual stock price. I may just take the stock at some point and start selling calls.
Not too bad though, eh? I've come down 350 cents from my original and still have a net of 95 cents. And this was supposed to be the environment where I get destroyed.
CSIQ got absolutely crushed last week, along with the rest of the market. It traded as low as 12. I had already rolled down from 21 to 18, which was going to expire this Friday, March 27.
With the incredible rally today, I bought back the 18s, and sold April 9 17.5s, for a 5 cent credit. So I now have a net of 95 cents, or $950 on 10 contracts.
I'm still about 2 points above the actual stock price. I may just take the stock at some point and start selling calls.
Not too bad though, eh? I've come down 350 cents from my original and still have a net of 95 cents. And this was supposed to be the environment where I get destroyed.