Selling Premium - Strategy Never Discussed

[robertSt]

I mean that if I sell 10 GME 44 puts, I have $44,000 on hand to take assignment at that price.

A few reminders to those who may be new to this thread: If you want to adopt this strategy in a serious way to make a living, as I have, you need to be well-capitalized. One or two positions that go long term can paralyze the account. And if you do a few of these, they will move against you.

This isn't about showing that I can sell puts and most times watch the money roll in. Everyone already knows that, right? The value of this thread is in showing how to handle the positions that move against you. I'm willing to put myself out there in real time, knowing that I'm going to face adverse situations.

In this whole fricking, mostly useless trading forum, does anybody else do that?

 

[ironchef]

I mean that if I sell 10 GME 44 puts, I have $44,000 on hand to take assignment at that price.

A few reminders to those who may be new to this thread: If you want to adopt this strategy in a serious way to make a living, as I have, you need to be well-capitalized. One or two positions that go long term can paralyze the account. And if you do a few of these, they will move against you.

This isn't about showing that I can sell puts and most times watch the money roll in. Everyone already knows that, right? The value of this thread is in showing how to handle the positions that move against you. I'm willing to put myself out there in real time, knowing that I'm going to face adverse situations.

In this whole fricking, mostly useless trading forum, does anybody else do that?

Some of us appreciate your posts.

Your secret source is how you select and manage your trades. Anyone who does it mechanically and blindly will get hurt.

 

[newwurldmn]

I mean that if I sell 10 GME 44 puts, I have $44,000 on hand to take assignment at that price.

A few reminders to those who may be new to this thread: If you want to adopt this strategy in a serious way to make a living, as I have, you need to be well-capitalized. One or two positions that go long term can paralyze the account. And if you do a few of these, they will move against you.

This isn't about showing that I can sell puts and most times watch the money roll in. Everyone already knows that, right? The value of this thread is in showing how to handle the positions that move against you. I'm willing to put myself out there in real time, knowing that I'm going to face adverse situations.

In this whole fricking, mostly useless trading forum, does anybody else do that?

You have 44k of equity on hand? So the return would be premium/44k of equity that you have to sit idle in case of assignment?

If you can earn 35percent doing this, unlevered, you are one of the best stock pickers I have ever heard of.

 

[ironchef]

You have 44k of equity on hand? So the return would be premium/44k of equity that you have to sit idle in case of assignment?

If you can earn 35percent doing this, unlevered, you are one of the best stock pickers I have ever heard of.

GME put strike @$44 expires 3-12-21 bid/ask mid is $12.23. Returns 23.4% if expires worthless on the stock price of $52 (27.8% on the strike price of $44). Do it a couple of times you get 46.8% return for the year, you can go fishing after two month's work.

 

[robertSt]

You have 44k of equity on hand? So the return would be premium/44k of equity that you have to sit idle in case of assignment?

That is correct.

If you can earn 35percent doing this, unlevered, you are one of the best stock pickers I have ever heard of.

It has almost nothing to do with stock picking, other than picking a company I hope will still be around when the options expire. My primary criteria is always the percentage of premium, which is weighed against my assessment of the probability of a large or catastrophic drop. For that reason, I tend to avoid earnings plays (there are exceptions) and small-cap pharmaceuticals (which can gyrate wildly according to drug announcements).

I don't really care if the stock drops below the strike, so long as the drop is within limits. The only thing I care about is whether there is enough premium on future contracts to roll down profitably. I will often sell contracts at or even in the money to capture the greatest premium. If I need to adjust, fine, that's part of the plan.

But going against the conventional wisdom, I almost never want to hold the stock or take assignment. This is where I differ with the popular "wheel" strategy. I don't like being stuck in a stock that has dropped far below the assignment price. It's too hard to sell calls and then have to play defense on that side when the stock begins to rise.

 

[zdreg]

... because performance is not everything. Option strategies have very different properties in terms of risk, risk-adjusted performance, and from the tax perspective.​

"because performance is not everything." Obviously a big winning on a risk adjusted basis designates someone as having a losing performance.

Ever hear of a lottery ticket?

 

[Sig]

You have 44k of equity on hand? So the return would be premium/44k of equity that you have to sit idle in case of assignment?

If you can earn 35percent doing this, unlevered, you are one of the best stock pickers I have ever heard of.

And that's my point. If he's doing it with stocks like GME and doesn't understand or chooses to ignore the concept of risk adjusted return, then his strategy is inferior to just buying and holding an index with the leverage necessary to get the return he's getting. He might have a great strategy, but he and we will never actually know if he insists on ignoring the tools that would allow him to make that determination.

 

[destriero]

HTF do you only have $44K after doing this for six years? Doing H on the side?

 

[destriero]

And that's my point. If he's doing it with stocks like GME and doesn't understand or chooses to ignore the concept of risk adjusted return, then his strategy is inferior to just buying and holding an index with the leverage necessary to get the return he's getting. He might have a great strategy, but he and we will never actually know if he insists on ignoring the tools that would allow him to make that determination.

He throws money at naked puts on high vol/meme names. lol great strategy. It's cartoonish.

 

[ZBZB]

It is discussed on www.Reddit.com/r/thetagang ad infinitude.