HI all, my family had a great Christmas and I hope all of you enjoyed the holiday.
Regarding options, I am TRYING to follow my own advice and stick with my current positions. There is still 4 weeks left in this period so it is just to soon to roll up. All of them earned over 3% when I opened them so doing nothing for the whole month would not be all bad. However, within a week or two opportunities will show up and I will tweak 'em a little.
currently I have --
AMZN trading around 182.5 I have the 145 put
CMG 228 180
NFLX 185 135
These all seem pretty safe at this time but mutual funds and other ETFs might be adjusting their holding so there could be some shuffling.
Jerry
6 comments:
AN ANALOGY TO CONSIDER: I like to think of this as a business and therefore consider each Put Option as an employee that requires an interview each and every month prior to getting hired (i.e. prior to opening a position).
** NOTE: THESE HIRING/FIRING QUESTIONS WILL MAKE MORE SENSE WHEN YOU READ JERRY’s BOOK. **
PUT OPTION INTERVIEW QUESTIONS NECESSARY TO “HIRE” (i.e Open):
(IDEALLY, MUST ANSWER “YES” TO ALL “RESUME” QUESTIONS)
1. Is the Stock’s Price at least $50?
2. Is the Strike Price at least 20% below the Stock’s Price?
3. Is the “Probability of Expiration” above 90%?
4. Is the ROI of maintenance margin between 3% - 6% ?
5. Is the premium (ROI) at a reasonable level and not too good to be true?
6. Is the stock (and market) in an uptrend (and above 50-day MA)?
7. Do analysts recommend this stock?
8. Is the PE reasonable vs. other stocks in sector?
9. Is earnings report NOT occurring prior to the option’s expiration date?
10. Is the news on the stock good (at least NOT bad nor uncertain)?
11. Is this a good seasonal period for the stock?
12. Are there no doubts about the quality of the stock/company?
Once hired, each employee (i.e. Sold Put Option) must continue to maintain performance standards else risk being “fired” (i.e. closed).
SITUATIONS WHERE I WILL “FIRE” (i.e. Close) MY PUT OPTION POSITION:
1. If I become doubtful about the position.
2. If bad or questionable news emerges about the company.
3. If the option’s premium doubles.
4. If the stock’s price drops to the option’s strike price.
5. If I become doubtful about the position (Intentionally Repeated).
OTHER CONSIDERATIONS:
1. Do NOT get greedy
2. Do NOT use entire maintenance margin – keep a cushion.
hey thanks john for posting this. i printed it out and keep it by my desk so that i stay as close to perfect as possible..i even printed it out for a friend becuase we operate by the same standards and this is a good reminder.
i had to jump on the 150 amzn puts today for a .26 premium. not the greatest trade but a confident one.. fslr 105 puts are working out great for a .41 premium as well. jan exp.. with no volatility it seems there are no weekly trades to speak of.
Fish, that is one thing that I HOPE all traders following my methods learn,
DO A TRADE THAT YOU LIKE AND FEEL GOOD ABOUT. NOT ONE THAT YOUR THINKINGS 'IF ALL GOES RIGHT THIS WILL BE A BIG HIT...'
Those kinds of trades will break you heart! Again, this isn't all that hard if you follow some rules and use discipline.
So repeat after me..I will be careful and I will also make great profits in the coming year...
I want to thank all that have bought my book and are trying my methods. They have worked for me for many years. I enjoy sharing the ideas with you all.
To a prosperous new year.
Jerry
Jerry,
In any given month, what do you view as the optimal number of Sold Put positions? How many are too many? How many are too few? I currently have about a dozen different positions, all with Stop Orders - using approx 75% of my maint margin. But I find myself having to watch them all like a hawk -- thank God for the ToS iPhone app. I'd be curious of what your average number of monthly positions have been over the years.
Thanks,
John
Hi John, Good question. I very seldom have more than four positions, and often those might be two positions in the same stock at different strikes. No particular reason other than keeping track of them all as well as the added commission cost opening and closing all of them.
As I move my strike closer near the end of a trading month I might open some new positions because when i first open positions i might have 50-75 options at a strike. But as I move the strike closer i don't like having that many positions with not as much cushion.
The good side of having a lot of positions is that one can go south and your others will make up for it. That is the reason that I seldom have only one positions. Safety in having several, safety in cushion and safety in limiting the time factor.
Jerry
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