Selling Puts with distant expiration dates

M

Marty L

While I've traded stocks for 25+ years, I'm relatively new to options but I've been trying this with success. I use a strategy that some call the "wheel" meaning I sell a put and if it's assigned, I turn around and sell a call option marked up.

Recently, I started selling puts with 6 to 8 months expiration dates and then buy them back once they reach a 50% profit or more. I heard a long time ago that pigs eat while hogs get slaughtered and it makes sense to me.

Any more experienced option traders see any problems with my strategy?
 
Marty L said:
While I've traded stocks for 25+ years, I'm relatively new to options but I've been trying this with success. I use a strategy that some call the "wheel" meaning I sell a put and if it's assigned, I turn around and sell a call option marked up.

Recently, I started selling puts with 6 to 8 months expiration dates and then buy them back once they reach a 50% profit or more. I heard a long time ago that pigs eat while hogs get slaughtered and it makes sense to me.

Any more experienced option traders see any problems with my strategy?
More...

How did it go in March?
 
Best bet is to check out a good option backtester like Orats and run simulations..The proof will be in the pudding.
 
Every strategy published under the sun works under certain conditions and assumptions. So, instead of asking if it works, try to find conditions when it works and conditions when it doesn't.

Don't ask me under what circumstances it works, you should be able to figure it out yourself by creating scenarios when it fails. Most of the time the devil is in the details.

And one more thing, there is no free lunch on any strategy published.

Good luck.
 
Cash secured puts then covered calls... not a bad place to start if the underlyings are sound but during covid when we see blue chips swinging 50% the timing might be tough. I don't know what you are trading.
 
Marty L said:
While I've traded stocks for 25+ years, I'm relatively new to options but I've been trying this with success. I use a strategy that some call the "wheel" meaning I sell a put and if it's assigned, I turn around and sell a call option marked up.

Recently, I started selling puts with 6 to 8 months expiration dates and then buy them back once they reach a 50% profit or more. I heard a long time ago that pigs eat while hogs get slaughtered and it makes sense to me.

Any more experienced option traders see any problems with my strategy?
More...


Now is good as you're still shorting top three decile vols. I don't like the idea of CCs as you're only doing it for the premium and most ignore the risk in the shares. Writing a $6 premium doesn't make sense to me if you're risking $30.

That out of the way... I've shorted synthetic straddles for 20Y, in and out of an IRA.
 
destriero said:
Now is good as you're still shorting top three decile vols. I don't like the idea of CCs as you're only doing it for the premium and most ignore the risk in the shares. Writing a $6 premium doesn't make sense to me if you're risking $30.

That out of the way... I've shorted synthetic straddles for 20Y, in and out of an IRA.
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If you could advise a rookie starting over, what strategies would you tell him to concentrate on, and what risk reward numbers to stay within?
 
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