Short put is deep ITM. Advice!

[BlueWaterSailor]

I get terrified just thinking about a spread going into the money or needing adjusting or losing money.

But a short put/covered call going DITM doesn't bother you? Wow. That... takes a complicated set of rationalizations.

If you're terrified, don't trade. I'm 1000% serious: if your trading is driven by emotions, then all you're doing is flushing your money down the crapper while entertaining yourself. Just like standing in front of a machine in Vegas and tossing coins in the slot with essentially zero chance of return - but without the pretty girls and bright lights. If you can't stay away, buy a $0.01 DTE SPY fly an hour before expiration and watch the pretty numbers... you might even "win" once in a while, and you're only risking $1 plus fees.

The market is absolutely the most efficient system ever for taking money from those who operate emotionally... no one designed it that way, it just naturally aligns with that facet of the human psyche.

(Perhaps I should stop warning people about this... without FOMO-driven traders hitting the bid or lifting the offer, I'd have a tougher time filling at good prices. But I could never get much pleasure from playing against weak opponents.)

 

[lightninboy]

But a short put/covered call going DITM doesn't bother you? Wow. That... takes a complicated set of rationalizations.

Two legs? Three? Four? Five? How much for each leg? Volatility? Bullish or bearish outlook? Spreads are good if they go my way, but if not I feel stuck and screwed. Talk about complicated.

 

[BlueWaterSailor]

Two legs? Three? Four? Five? How much for each leg? Volatility? Bullish or bearish outlook?

A spread, without anything to qualify it further, refers to a vertical (that's, um, two legs.) But you can keep piling on these red herrings to scare yourself into fits; no one will stop you.

For everyone else, though, spreads are much simpler in a number of ways. Since they're risk-defined, there's no need to plan for "rolling" or any sort of complex management. Since they're mostly flat the greeks (certainly by comparison to single options), the effects of volatility, time, and delta change are minimized. It's all about where the price goes - or doesn't go.

The practical aspects of trading short puts are significantly more complex than that.

Spreads are good if they go my way, but if not I feel stuck and screwed.

And a short put or a CC is different... how? Feel all unstuck and unscrewed after a 25% drop in the underlying, do you?

To misquote a popular saying, options don't care about your feelings. If you're feeling "stuck and screwed", that's what you brought to the game; options don't have anything to do with it. Learning more and getting unterrified - instead of trying to pile all those feelings of terror into a single basket and shaking it up till it's all snarled and incomprehensible - is the right answer.

 

[lightninboy]

Since they're risk-defined, there's no need to plan for "rolling" or any sort of complex management. Since they're mostly flat the greeks (certainly by comparison to single options), the effects of volatility, time, and delta change are minimized. It's all about where the price goes - or doesn't go.

What about the danger of ITM getting exercised and messing up the spread? Aren't traders like on tastytrade always adjusting spreads when needed? Yeah, it's all about where the price goes and sometimes it goes against you.

And a short put or a CC is different... how? Feel all unstuck and unscrewed after a 25% drop in the underlying, do you?

I try to be bulletproof against a 50% drop.

 

[BlueWaterSailor]

What about the danger of ITM getting exercised and messing up the spread?

"Messing up the spread" how? If someone exercises early, you get the remaining extrinsic for free. Where's the problem?

Aren't traders like on tastytrade always adjusting spreads when needed?

Spreads are a rare exception in TT; they preach selling premium. Back when I was listening to them, I wanted to learn about spreads - and as I recall, I found exactly one video of Soss talking about entering them. The only advice about managing spreads that I recall from them is "you can roll spreads, but only before they've gone ITM." Like, duh...

Not that TT is any sort of a major authority, but if you have examples of them "always adjusting spreads", please feel free to point to it. As I recall, they adjust short puts and straddles, but not much else. In fact, they very rarely go into detail on losing trades (Jim Schultz is the only one I remember doing so to any meaningful degree, and even that wasn't very often.)

Yeah, it's all about where the price goes and sometimes it goes against you.

That's the nature of all trading; it's what you pay to play. The trick - and it's THE tough bit - is having an expectancy of greater than zero.

I try to be bulletproof against a 50% drop.

If you can manage that as well as a return that's anywhere near that of the market, please let everyone know. You'll have millions of people lining up to invest with you.

 

[lightninboy]

I don't know. Why risk it?

Google spreads vs. wheel and some Reddit traders tend to echo what I say about the wheel being superior to spreads.

tastytrade: ROLLING....ROLLING....ROLLING

I'm up 18% YTD with no terror or hassles.

 

[BlueWaterSailor]

I don't know. Why risk it?

You keep saying things like this, but you never actually explain what the risk is. Nor do you seem to understand that the wheel is far more risky with regard to exposure than any normal spread could be; after all, a short put (and the CC) is also a "spread" - just one with a no-cost long at the zero strike. You max loss on it equals your strike * 100 less the premium - say, ~10k on a $100 stock, and you'll have a hard time matching that with any spread in that same underlying.

Google spreads vs. wheel and some Reddit traders tend to echo what I say about the wheel being superior to spreads.

"I've looked for other people who say the same thing I do to comfort me regardless of the facts" is not a good rationale for trading.

I'm up 18% YTD with no terror or hassles.

[shrug] Again, your emotions are up to you. They don't represent anything meaningful, and this case, they're steering you in the wrong direction.

All I can say is, good luck with your trading. I'm done here.

 

[lightninboy]

Hey, I'm up 18.3% YTD right now. I looked at the markets for YTD for comparison and anything that beats that is as rare as hen's teeth.

But, hey, money talks, I'm open to trading spreads, condors, etc., if the money is there consistently. You tell me, what should a good spread/condor trader have for a YTD right now and how much adjusting and losses should he have had to put up with?

 

[JackMorgan]

99% of retail trading options
shouldn't

cudda told you that long ago

 

[BlueWaterSailor]

Hey, I'm up 18.3% YTD right now.

This year. If it's actually true, then congrats, and stick with it; the market has some lessons to teach you.

You tell me, what should a good spread/condor trader have for a YTD right now and how much adjusting and losses should he have had to put up with?

Oh, say 500% YTD - assuming he picked the right underlyings and direction. Zero adjusting - if you tried to actually read what I wrote, I've mentioned that a number of times - and losses proportional to all the relevant factors.

Was your "question" actually supposed to mean anything, or were you just trying to boast about your 18.3%? "OMG, I got lucky at the poker table! I must be the most brilliant player in the world!" Uh... no. You're not. For every put seller who made money this year - and I'm sure there are a few here and there - there are a hundred and more who lost everything they had. People like AllDayFaders and other successful put buyers have made fortunes this year - and since every trade has to have a counterparty, they've made them off people exactly like you. Ones who thought they were The Hot Thing - until suddenly, they discovered that they weren't.

But hey, keep going to that well. That first hard lesson is going to sting... hopefully, it won't kill.