Wheel strategy un hedged

[taowave]

Depends how you define mechanically ...

Depending on ones model/forecasts,there is certainly "theoretical edge"..

That doesnt imply one should abandon prudent money management

What do MM's have to do with anything??

There is no theoretical edge mechanically selling calls or puts. MM are not charitable.

 

[taowave]

so you sell a 1 DTE put and lose 9 minus the premium you took in.Keep in mind thats a 5% drop,not 20%..Stock is now at 190.. It appears that you are selling 1 day call for .65..Stock at 190,what strike are those calls you are selling?

Let's say 20% over a week? Ok so if I'm doing it daily 1 otm put, I sell a 199, and price drops to 190. Ok I take a ($10*100) $-1000 paper loss on the assignment.

Day 2: Sell an 1 otm call and collect $65
Day 3: Sell an 1 otm call and collect $65
Day 4: Sell an 1 otm call and collect $65
Day 5: Sell an 1 otm call and collect $65
Day 6: Sell an 1 otm call and collect $65
Day 7: Sell an 1 otm call and collect $65
Day 8: Sell an 1 otm call and collect $65
Day8: get called away at a $100 (1otm) profit.
Day9: Day 7: Sell an 1 otm put and collect $90
Day10: Day 7: Sell an 1 otm put and collect $90
Day11: Day 7: Sell an 1 otm put and collect $90
Day12: Day 7: Sell an 1 otm put and collect $90
Day12: get assigned at a $-100 (1otm) loss

Total paper losses: $-1100
Total collected: $915
Total realized losses: $-85

So even in your worst case scenario I am pulling out of it np. It's basically just a manual version of a dividend position EXCEPT I am gaining the p/l from getting called away at a profit to offset the paper loss when I got assigned. With a dividend you just wait it out, so the recovery would take longer.

 

[tsfx]

so you sell a 1 DTE put and lose 9 minus the premium you took in.Keep in mind thats a 5% drop,not 20%..Stock is now at 190.. It appears that you are selling 1 day call for .65..Stock at 190,what strike are those calls you are selling?

Dont even bother...

 

[wxytrader]

so you sell a 1 DTE put and lose 9 minus the premium you took in.Keep in mind thats a 5% drop,not 20%..Stock is now at 190.. It appears that you are selling 1 day call for .65..Stock at 190,what strike are those calls you are selling?

I am selling 1 contract $1 OTM strike every day. I am taking all assignments. I am realizing all losses. I am collecting all premium. Had I launched this strategy starting Dec.22 2022 I would had the following results on Dec22 2023 (incl all fees, spread loss, realized losses, realized gains):

Annual Income: $24,025.00
Monthly income: $1,974.66

What you are seeing is the benefit of taking shares and making premium off them constantly, versus taking permanent losses when you close the contract. You guys over complicate things with all your arbs and vol etc..because you are trying to avoid losses...losses are a part of the game. The more you hedge the more profits you are just giving back for no reason. Would you freak out and sell your rental property if it drops 100K? No you keep turning over rent.

Sometimes I think you guys are too clever to ever make money in stocks.

Bottom line without risk there is no reward...this is a universal truth of the market. The trick is to find a way to take on "unlimited risk" short term for zero risk long term. I said once that I wish all options were cash settled, I take that back. The reason they aren't is ultimately one would prefer take the assignment over closing for a loss if they can cover. The closing of contracts for losses is typically a retail phenomenon.

 

[taowave]

If the stock drops from 199 to 190,are you selling the 1 DTE 191 call for .65???

 

[wxytrader]

If the stock drops from 199 to 190,are you selling the 1 DTE 191 call for .65???

Whatever the ATM or $1 OTM price is...flexible. The point is, in this framework, selling a put isn't a bullish strategy, or a bearish one...same with selling the calls. I could tweak for directional probability if I want to but typically I don't care if assigned or not...it is inconsequential because eventually the assignment losses + the called out gains will mean revert to zero over time. I think over the year 2022 in my example I was $-1200 at the end.

This doesn't work if you can't take the shares...PMCC will not perform the same. This will perform more like a dividend position but more dynamic, less static.

 

[ironchef]

There is no theoretical edge mechanically selling calls or puts. MM are not charitable.

I found hunting black swans more profitable because they are difficult to price.

 

[taowave]

You are missing the point...What percent of spot call do you sell to get .65 on a 1 day option?

 

[taowave]

Are you more capable because your "model" is better or are you a better "fundamental" analyst?

I found hunting black swans more profitable because they are difficult to price.

 

[ironchef]

What do MM's have to do with anything??

Most of the time they are my counter parties.