Welcome to the page that discusses Put Options

I want to start this blog by telling you that I have no 1-800 number, I am not trying to sell you any newsletter with the next great stock idea. I am not inviting you to come to my house and view a cleaning agent. I will not try to sell you plastic bowls or any other ‘can’t miss’ ideas. I do not have any life changing secrets and I cannot promise you a flat stomach.



I am going to share with you my daily option moves and the reasons behind them. My way of trading options are of course not the only way to utilize Put Options. This is a way that I have found to be simple and easy and not as complicated as some make this business. My hope is that you can develop a steady stream of income and continue to enjoy your life.











Monday, May 30, 2011

Next week plays

Hi all, in the final comment of the last post I wrote my ideas on when to close. If you have not read it, it has some answers to previous questions of when to close and how.
For next week. it is a short week of 4 days...
I am looking at the following. I will judge if I will use any or all depending on the mkt and what is happening.
These are not in any order!
NFLX @ 264 240/235---290/295
GOOG @ 521 490/485--545/550
AAPL @ 337 310/305--355/360
PCLN @ 501 470/465--535/540
AMZN @194 175/170--215/220
BIDU @134 120/115
SPX @1331 1250/1245--1380/1385
OEX @ 590 560/555
I might still use these same stocks but adjust the strikes if the mkt is up or down etc. These of course are not the only good plays out there but what I am looking at. If the mkt is really weird tomorrow, I will let it rest until Wednesday etc.
Good trading all
Jerry

140 comments:

GP said...

Jerry,

Thanks for the comments and advice. FYI...I read earlier today that there is going to be an "up or down" vote on tuesday regarding raising the national debt level. It appears, they will take the vote at 6:30 pm in order to specifically avoid wrangling tuesdays markets. At this point, nobody expects them to raise the limit. However, how the market is going to react is anybody's guess.

Nicky said...

Itching to trade, I want to write calls on the 1000 shares of MSFT that were assigned to me but now this guy David Einhorn comes out and says he "loves" MSFT and his fund owns 9.1 million shares, this guy knows what he's talking about, he predicted the fall of Lehman Brothers, made a killing shorting the stock, just paid 200 million for 33% of The NY Mets, has the option to own 60% in three years unless the current owner objects, if he does he has to return the $200 million to Einhorn but Einhorn still keeps 33% of the Mets!! What a deal! Guy is a genius.

On the put side I'm looking to sell FAS weekly probably the $26s.

Nic said...

GP, great catch. I usually look at Yahoo for financial events that can prove disruptive, but this isn't mentioned.

http://biz.yahoo.com/c/e.html

Bald Harley said...

Regarding busted spreads... I concur with Jerry, there is no correct way. Perhaps the best correction is derived from the education/pain experienced. More Cush!!!

I've tried the roll-outs. For me, it has only delayed the pain, and prevented me from EARNING on those $$$ you have locked away...

More Cushion!!
rick

Fulgore said...

@All, looks like an up market today. But by noon we will know which way it will really go. I have not made any trades yet but and getting ready if i see some good returns.

Henry said...

It's funny how we have bad economic data and the market rallies on rumors, not facts. Good trade to all!

Fulgore said...

Ok so I put in an order for SPX put spread - 1270 / 1265. Since there are only 4 days left this gives me a cushion of 60 points with a market that is currently going UP (for now lol).

Trade - SPX - 1339
Put Spread - 1270 / 1265
Premium - .10
Contracts - 12
ROI Before Comm - 2%
ROI After Comm - 1.2%

Usually I go about 75 points or so for 5 days but with 4 days left 60 points should be ok.

Fulgore said...

I can't remember who commented that they use ToS and they have alarms set. I was wondering if whoever that is might be able to educate me on some alarms / stops?

Anonymous said...

Does the IRS allow option trading in an individual IRA account? Seems like the perfect way to take full advantage of "compounding" without immediate tax ramifications.

Hannah said...

Just discovered that TDA's 0.75/contract charge includes 0.45 extra for index contract. Can you imagine charging 0.75+0.40? LOL
Hmm indexes -should be looking harder in that direction.

Hannah said...

@safensimple
Yes it does. All trades are cash-secured meaning there is no margin. There are many of us here trading IRA account.
If you want to trade options beyond just buying calls and puts, or sell covered calls, you have to apply for higher level of option tradings with your broker; namely spreads and cash-backed puts.
Hope it helps.

Fulgore said...

is it just me or does yahoo finance along with a few other sites try and move the market the way they want with the information they post on theirs sites.
Yahoo currently has all bad stuff posted on the home site. It looks like they want the market to go down, but it isn't lol

Anonymous said...

Thanks Hannah

Nic said...

Jerry, careful with the AAPL condor, next week is their developer conference and Jobs will present. Could be a runup all the way to 360.

DR3Z said...

Omg! This morning I purchased the PCLN 480/475 put spread for .09 I was glad I got it at such a good premium. What I didn't think to look at was how many of my contracts sold!! I just looked at the "executed at .09".

It was ONE!!!! One contract!! With commissions was down a buck! WOW!!

The WORST part is the stock took off and there was no way I could get that great price with that much of a cushion! Has that ever happened to anyone? And what is one to do??? I use tradeking fyi......

Nicky said...

I've had the one contract thing happen before, but never for that low a price, as my trading style is close to the money trades, it's happened with both TK and OH, then I started using AON, but with that selected trades never went thorough, so I had to go back to no restrictions and be at the mercy of the market maker.

DR3Z said...

Tell me about it. I was thinking I made a good trade all morning! haha! Then for some reason I decided to check on the stock and noticed it only said "1". By that time the stock had run up another 5 points. Tradeking does not have an all or none for spreads either. I'm surprised it does not happen more often. I guess there is nothing one can do to prevent this...

Selling Put Options said...

Hi all, Nic, I did cancel the aapl order. Tomorrow I will do a put spread with them if I can get it to go through. If the mkt is up I will leave 20 or 25 point cush if I can get .04+
Regarding partial fills, it happens often. I had one in today for 40 pcln spreads and only got 31 filled.
-----------
Today 100 pcln 475/480 @ .05
50 spx 1300/1295 @ .05
31 pcln 470/465 @ .05
Tomorrow we can see more on the mkt direction. Don't rush or push your orders. There will be safe plays even on Thursday and some even Friday.
Jerry

Kenny said...

Here's my position today.
Put side looks ok but Call looks ugly after afternoon market's up

50 SPX Put 1275/1285 for 0.15
50 SPX Call 1370/1380 for 0.10

Unknown said...

Hey all is there a best time to get the best premium. I looked early today and nothing looked good after noon. Do the best prices, premium, seem to be around 10:30 just as the days direction is still in flux? Just wondering Jerry if experience has taught you to wait at least an hour and then see how the overall market is going?

Nic said...

Good question, I couldn't find anything close to the 1275/1280 Kenny nailed at .15. Would have loved that one.

Fulgore said...

@Nic, you might now because the SPX is down 15 points today. I don't see the market dropping much lower today. The SPX might hit 25 points today but not much more. But hey what do i know haha. I have the SPX 1280 / 1275 right now and i am not worried.
Nic i have Think or Swim. What I do is i set up a vertical put spread. Then it gives me 0.05. What I do is a change it to 0.10 or higher (depending on time / market / day / how long left in the week) and i wait for it to go through. I am assuming that is what Kenny did with this.

hope this helps

Fulgore said...

@All, 11:05am today and the market is just starting to come back up. I love crumbs. I don't worry when it drops 10 points on the SPX and I don't mind when it goes up 10 haha

I'll have to send Jerry some Canadian beer to thank him.

Nic said...

Looks like I was too late, can't even get filled on 1300/1295 now.

Anonymous said...

Got the spx 1300/1295 on TK at about 8:30 MDT. Went right past me tho and coulda done better with more aggressive bid. Coming back now a little and don't believe index will drop to 1300 this week (obviously). Still real green with this approach but love the idea and the crumbs...

Hannah said...
This comment has been removed by the author.
Nicky said...

Sold 17 contracts FAS $26 weekly for .41, hopefully all goes according to plan, it would be nice to repeat this trade week after week and pick up $700 each time for a 3 day trade.
The only down side is 3X ETFs require 100% cash, so cash is on hold for 3 days.

Nic said...

Well, needless to say I also got filled on my 1300/1295. Now it is suddenly more a question of whether I need to close it or not. :-)

Anonymous said...

How close do you let it get before you back out? Just askin'

Nic said...

Well, I'm getting there, the ask right now is .90 and I got .15 so I've long passed Jerry's rule on doubling the premium.

Since it's been a firm relatively fast gradual decline I may not dare to keep over night to see if it recovers in the morning.

Fulgore said...

Wow Dow down 282 today. SPX down 30.63 wow. CUSHION!!! WE NEED MORE CUSHION LOL

avid_kris said...
This comment has been removed by the author.
avid_kris said...

Sold about 20 puts for .05 at 1250/1245 today. Hope market goes up tomorrow :) Cushion seems to be critical in any situation!

newportnewsva said...

Today's activity:
STO FCX 42 6/17 15% cushion 1.48% ROI
STO LULU 70 6/17 20% cushion 2.66% ROI
Still open SOHU 6/17 24% cushion 3.1% ROI

I was going to stay out of the hard commodity sector but my IRA wanted FCX. The downgrade in LULU was stupid (not very technical but true); great opportunity is here.

jamesaliano said...

I closed out of my SPX 1295/1290 put spread at a loss of 173.00 for one day . I couldn't stand holding overnight, of course I screwed up when I put the trade with not enough cush.

avid_kris said...

I am thinking at the most it will test support level 1300 tomorrow but it may not go down further than that. But it is good to sleep peacefully than keeping it open. You did right!.

Bald Harley said...

Jerry/Nic/Safe and etc...

I'm right there with ya'll on the SPX 1300/1295. Sonofagun that looked good yesterday afternoon.

I cannot decide if I wanna roll to JUL, or buy 1/2 of the 1300's back...or buy some OTM puts.

Actually, I think we might be ok. S&P may crack 1295 tomorrow, but small recovery on Friday will save our butts with a 1302 close :-o

rick

Kenny said...

At this point, I would roll over to JUL. I don't think it's good idea to buy puts at this point to partially hedge the position since long puts are already too expensive now. Let's wait till tomorrow morning, we may have a good chance to roll over before the market sink again. Futures are flat as of 8 pm now.

Nic said...

Never been in this situation before and can't say I particularly like it, but what happens if it closes at 1298? Would that be $2 down per option, i.e. $200 per contract?

Bald Harley said...

S&P futures are up 3pts at 2am CDT. I think I'll stay awake a little longer!!!

Rick

Bald Harley said...

Early morning Futures: DJI ^5. S&P ^2.25

Asian markets are off ~1.7% compared to our 2.7% loss yesterday. Should bode well for us.

Hasta manana mi amigos!!
rick

Kenny said...

I may choose to ride out if the market is not tanking anymore in the morning session.

avid_kris said...

Looks like market will go up today. Futures are up at this time. May be during the afternoon it might just even out and S&P wil stay around narrow range of 1315.

Fulgore said...

@Bald, Avid, Since I am still new can you please explain how I can check futures and how they tie into say .... the SPX and how i can see if the market MAY go up or down the next day?

DR3Z said...

Looking at the SPX chart, March 16 it did a similar sell of only to trigger a 2 week long bull run. I'm not too big on charting, but its something to look at history wise.

Selling Put Options said...

I am also holding till I see a definate trend downward. Hmmm, interesting mkt

avid_kris said...

Hi Fulgore - I usually check futures in finance dot yahoo dot com. On the left side it shows futures value listed in the morning on most of the days.

I have seen futures on the earlier nights in the past on some websites but I haven't made a note of them. Though futures may indicate market direction, it may not be accurate all the time.

As far as I understand futures are values calculated for indexes based on a complex set of calculations involving pending options and other trend data.

Bald Harley said...

Fulgore - Google "SPX Futures". There are several sites that show the futures after market hours, as well as the Asian and Euro markets.

Cheers!!
rick

Hannah said...

Fulgore,

All major business TV channels show futures and commodities; Bloomberg, CNBC, Fox Business...You have Canada Bloomberg channel?

I also got spx 1280/1275 - a bit nervous. Base on the job data,I am guessing tomorrow won't be too pretty. 1245/50, 1255/65 didn't get filled.

Fulgore said...

@All, thanks for the futures information I will do some research into it. Basically from what i gather it is mostly commodities with a calculation of options etc.. mixed in and it CAN at times show a trend for the coming day. Let me know if im wrong.
Market is flat right now we will see how it goes.

Hannah said...

At the top or bottom of the TV screen show the futures for dow, nasdaq, s&p, crude oil, sweet oil....The futures numbers aren't good indicators of the market next day though they show somewhat a bit of sentiment...

@newport - lulu ER on June9, I was so tempted to jump in but no-rule...

Nic said...

What a horror show. The problem is that even if it may keep its nose over 1300 today, it will take a dive for sure if the employment numbers tomorrow are bad. The only hope is that expectations are very low from Wednesday, but I'm not sure I have the stomach for it.

Anonymous said...

Bailed yesterday afternoon on the SPX 1300/1295 for my first loss. Slept well tho. Now I'm trying to avoid the impulse to jump in too aggressively today to get whole.

Nicky said...

Looks like I'll have to purchase 1700 shares of FAS @ $26 tomorrow, I should have stuck to what I know, market tanked yesterday and TTWO only went down 0.07, market down today and TTWO up .11, should have stuck with my go to stock.

Fulgore said...

@All, Right now I am sitting at the SPX 1280 / 1275. I think this should be ok and I am not worried. If the SPX does hit 1300 and stays or is above I still have 20 points of cush for 1 day. If the numbers look bad for unemployment results then yes it could take a dive. But by how much we will not know. The best thing to do is keep an eye on it. If anything this week will show us that we are not bullet proof and bring us back to reality a bit, which is good.

Fulgore said...

@Jerry, It seems your PCLN should be ok, but did you do anything with your SPX yet?

avid_kris said...

I guess SPX will not see 1300 today by the ways it looks now. It should finish above 1310. Good luck to everyone!

Chelski said...

Hey Jerry et al! Newbie on here and just finished reading every single blog from when this blog started and learnt a lot from you guys!

If you have a weekly SPX put at 1295, you should be fine. I slept well last night...maybe it's because I'm still paper trading! lol.

2 questions:

1) Why doesn't anyone use Interactive Brokers that don't charge a base commission rate and only cents per contract?

2) Nobody trades futures, same or more cushion for a higher return?

Cheers!

Fulgore said...

@Louis, Welcome to the blog. For me right now I use Think or Swim. Currently I don't think IB is available in Canada. Also there are alot of broker that require a minimum amount in your account. For newer investors they may not meet the requirements

Chelski said...

Hey Fulgore, I believe IB is available in Canada, but you're right, they require $10K minimum. I think once you have $10K, it is worth moving to IB as you do save a lot of money not paying a base fee of $9-$12 for every option trade.

Fulgore said...

@Chelski, yes I think you are correct thanks for the info, I will have to wait until I get to that amount. What is the amount per trade with IB do you remember?
Also do they do rolling?

Chelski said...

@Fulgore, they only charge 0.15 to 0.75 per contract. If you go on their website and look up the rates for Canada, it is $1.50 per contract with no base fee. Yes, they do rolling; I'm in the process of opening an account with them.

Fulgore said...

@Chelski, thanks for the information, I will look at their site and do some calculations.

Hannah said...

Ever did check up IB and read all the reviews available on IB.

It has other fees like cancellation/modification fee etc etc... In another word, please check out all hidden fees and routing first.

IB is pretty popular among currency traders, they are market makers and have dealing desks (bad since they can influence rates so that they can make money out of their clients....) I ended up trading currencies with MBTrading. Perhaps it has improved much....At a glance, their current site is not very clear on commissions and fees.
Just my 2 cents.

Chelski said...

Hi Hannah, for a broker to charge no base fee, they have to make money some other way, but yes read the small print to see what other charges one may incur.

Does anybody trade option in futures? I believe you can get better returns for the same 20% or even more cushion? Your thoughts Jerry?

ongba said...

Hey Louis,

Can you elaborate on futures trading with bigger cushion for the same return?

many thanks

Ongba

Anonymous said...

Closed 1300/1295 spread around noon when volatility spiked for an incredible loss...couldn't handle it anymore. I wonder what Jerry did.

Hannah said...

@Dukes, so sorry about the loss. Had been there many times and bled. Pick up and get smarter each time.

@chelski What if you trade 50 contracts per trade? $75 dollar commission will reap all of your profit. On the IB website: Industry average cost per option trade is $0.66, IB is 0.87, it's 0.21 disadvantage not advantage as it claims.

We had a lot of discussion on previous threads about brokers.

@Louis I am looking into OptionXpress for commodity future option. Too much distraction (currency, stock, options, com options, future...)is bad for my business lol. Isn't that true.

But would love to hear about your future trade.

Nic said...

@Dukes, sorry to hear that. I also took quite a beating. Thought I was clever and bought back my sold puts at 1306 thinking a further fall would increase the value of my 1295's. Of course, right at that point it turned and I lost a little more on those before selling them. What a day, and tomorrow could be worse if the unemployment is bad. Expensive, but hopefully good lesson. Will take a while to get back the money.

@Hannah, I pay .15 per option at Optionshouse, makes quite a difference on 50 contracts.

Chelski said...

@Nic, I think you meant .15 per contract and not per option, but you have to add the 8.50 fixed fee.

@Hannah, yeah, it probably does add up to a lot if one is trading over 50 contracts on one trade.

@ongba, I'm not a pro in commodity futures, I just wanted to know other traders' opinions and experience in futures. I know the objective for us here is to leave as less time to expiration as possible, but even a with a few days of expiration can even increase our risk in putting a trade on in trying to make a 1% profit in a week. Don't get me wrong, I do agree with the crumb method. Given the imminent rise in inflation and world wide increase in demand for commodities, it's very unlikely commodities, except for silver, will ever fall over 20%in any period unlike stocks regardless how good a stock is, because if the market wants to fall, it will bring everything down with it, except for commodities. I know this goes against our time frame, but one could sell a 3 month put for 20% cushion on oil or natural gas for 24% profit or 8% profit a month, if you put this trade on every month....just my thoughts :)

Selling Put Options said...

HI all, my positions are in great shape except...SPX. I will wait until the SPX gets to 1300. I will then roll down to next week and maybe get down to 1250 or so? Not liking doing it but with one day left... and a lot resting on the opening tomorrow. The good regarding rolling down, is that it does not matter what the premium is as the next week 1250 will go up a corresponding amount. I am not locked on the 1250 next week, just where I can roll down to and make a small profit.

Nic said...

Ok, I have to ask. Can someone expplain how does this rolling down work. I know it is mentioned a lot in the book but how does it exactly work in practice? Do you mean closing your spread and opening a similar next week, or is it a function of the broker?

Raging Bull Winkle said...

Dukes, curious why did you close out the spread? You had defined risk, I could understand a naked short but a spread at least wait till Friday and see if it's in the money roll to the next week or in this case June even. Take it from some one that has followed Preston down the selling in the money puts it takes a set to ride it till the end. Huge money when you right and a pain in the rear end when your rolling for weeks on end.

newportnewsva said...

@ Hannah - yeah, pulled the trigger on LULU without looking as closely as I usually do - planning on closing out at break even before earnings if I can; if not I'm playing as "cash secured" so the worse that could happen is I own LULU at 59.80.

Anonymous said...

The risk was defined but with the way things were tanking, I could not take the bleeding anymore. Granted I should have closed out on Wednesday. What do you mean by Preston?

Raging Bull Winkle said...
This comment has been removed by the author.
Raging Bull Winkle said...

Dukes, sorry about that Preston is someone a few on this board knew thought you were one. He likes to sell at or in the money puts. Or what I like to call the polar opposite of Jerry...LOL

Raging Bull Winkle said...

Jerry why do you not like cushion plus time? You held out on the SPX till this week and sold 1300/1295 spread for .05? On 5-26 I sold naked 20 SPX 1200 .55 and 10 1225 .35 I'm thinking your giving up 5 days of extrinsic value forced you to the 1300
Not here to toot my own horn just pointing out it’s better to be a time merchant than a short term market picker?

Nic said...

Gary, I did the same thing this Tuesday at .20 and SPX was at 1345 with three days to go. But that was before the biggest drop in SPX since last August.

Raging Bull Winkle said...
This comment has been removed by the author.
Raging Bull Winkle said...

Jerry I should have added I'm shooting for 1K a week on the SPX the 1200 and 1225 were both June week 1. Also if you can swing it naked is the way to go easier to hit you goal and easier to roll if necessary. And should the 250 point gap down come I can roll out as far as a leap. Again that friend time. Just a thought, I'm sure next week the short term play will be king. Thats the thing about the market just when you think you have it figured out it has a way of slapping you back in your proper place. :+)

Nic said...

So I've read up on rolling a bit, and from I understand the strategy is that in for instance our case with the 1300/1295 that if you end up in the money with an hour or so to go on the expiry Friday, you close the spread and open one strike lower (or higher if doing bear call spreads) with the assumption that the premium will be the same or higher, right?

I need to paper trade to test, but it sounds like the theory is that you can roll down week after week until you get out. You lock your funds without income during this period, but otherwise it sounds to good to be true. Have I got it wrong?

Kenny said...

Here are two places that you can see tomorrow's futures. Looks like they are flat as of 9:40 pm (E.T)

http://money.cnn.com/data/premarket/?iid=H_MKT_QL

http://www.bloomberg.com/markets/stocks/futures/

Bald Harley said...

Hi all,

I think the weekly SPX's close at the open tomorrow MORNING. I know we just covered this, but I may be confused with mth end... In any regard, I feel good about my 1300/1295's. It was looking ugly around noon today .... just as Dukes closed his out. Ouch!! Sorry Dukes!!

Re IB and flat rates - Many brokers will negotiate better rates for 'active traders' I was able to get TOS to come WAY WAY down and drop the base fee, and give me a very low flat rate per contract. Still, TradeKing is cheaper with $8 + 0.15/c. I usually do my spreads with 25-100 contracts per side. The break even with TOS was about 15-18 contracts per side. If you only did 5-15 contracts per side TOS would be cheaper, but you likely would not qualify for the super cheap flat rate. Give n Take.

I do most of my trading with Options House. I like their platform better than TK. OH gave me 200 free trades. When that is gone, I'll likely move more action to TK. Their lack of streaming quotes, streaming positions, etc.. is pitiful however. btw - TradeMonster has a great platform for option traders. They gave me a good discount, but TK is still cheapest. TM does have free streaming quotes, and great scanners. I'm using those too. Just open a free acct.

Cheers all,
rick

Kenny said...

FYI,
Recently I asked Tradeking for discount fee,but they turned down my request. I usually spend more than $400 for the commission and fee per month(mostly options).

Raging Bull Winkle said...

"I think the weekly SPX's close at the open"
NO SPX WEEKLYS CLOSE ON THE FRIDAY CLOSE.
JUNE 17 the June options close on the Friday open print.

Kenny said...

yeah, Gary is right. SPX weekly is PM settlement, and SPX monthly is AM settlement.

Bald Harley said...

Gary / Kenny

Thanks for clearing that up. So I have an extra 7hrs to sweat it out.

Fortunately my other sptreads (AAPL, GOOG, and PCLN) are all doing fine.

Kenny - I do not believe TK would adjust their rate if your commissions were $1000/wk. They offer 1990's tech in exchange lowest possible cost. IMHO.

rick

Raging Bull Winkle said...
This comment has been removed by the author.
DR3Z said...

@Nic,

I may be wrong but the options for the next week open on Thursday. So if you are going to roll to the next week it would have to be on Thursday or Friday.

For example, if you sell an option on Monday and it goes south by Wed. you would not be able to roll to the following week because the follwing weeks chains would not be out until thursday. So if you were in a jam, you would have to roll to the monthly (call or put). Hope this makes sense and if im wrong someone let me know....lol!

- DR3Z

Dave G said...

Gary, thank you for that piece of information on the weekend time decay.

DR3Z, you are correct and good point!

Hannah said...

But for today one can roll to next week or the following week (monthly -AM settlement)

Raging Bull Winkle said...

SPX got .40 on 20 1175's and .20 on 20 1150's did a buy on 15 1100@
.15 to free up some margin to try for 1125's is we trade down another 15 points.

Raging Bull Winkle said...

Dave,I have not picked it up yet but that bit of info comes from
Jeff Augen
Author of "Trading Options at Expiration"

tk said...

Gary, can you give me some idea of how much maintenance is required to sell naked put on SPX? You mentioned earlier that you have sold naked put "20 SPX 1200 .55 and 10 1225 .35 ". That is 30 contracts of spx. Wouldn't most broker would require you to have over $400,000 for margin? I am with TradeKing,and it would require over $600,000 of margin for the profit of $1430 profit. The ROI seems to be very low. Am I missing something?
Thanks,TK

Dave G said...

Got filled on the SPX 1100's @ .15 and am trying to get filled on the 1075's @ .15. Am looking to get a .20 or even a .25 fill on the 1100's if they go up in price. I'm sticking with the 1075's and 1100's for now - I want lots of cushion at this time as these markets are treading on shaky ground at this time...IMHO. Also, looking to sell the AAPL 310 weekly puts if I can get my fill price. All my SPX naked short puts from last week closed out profitable thanks to lots of cushion. I was naked short the 1150, 1175, 1200, 1225, and 1240 puts. Closed out the 1240’s this morning and now on to next week’s trades.

Gary, I totally agree with you on cushion. I will always trade cushion for time. Cushion is my most important concern when selling premium…especially when trading cash settled instruments like the SPX. At least with a stock, like AAPL, if put to me, I can work my way back into profitability. But with SPX, you lose on the trade, the money is gone, period…on to the next trade.

Kenny said...

what's going on? Market just started to move up from early morning sell off...

Raging Bull Winkle said...

TK, I'm short 40 contracts 1150 and 1175 that along is about 90K with the long 15 1000 puts it drooped to about 70K with SPX up off the low its down to about 60K

My account is a portfolio margin acct. and plays by a different set of rules than a margin acct. I think a regular margin would be at least double that? I'm on a webanar now I will try and see what it is in a paper acct. later this AM.

Raging Bull Winkle said...

TK I forgot I have some puts from last week. Take them out keep next weeks 15 1100's and right now it's 108K I can't set up a paper trade because it's a PM account also.

So I'm .009% for this week at 110K

Nic said...

So the day of reckoning is here, tricky very tricky. We're off the lows and it seems as if 1300 could hold but just barely, so there is a risk it dips down in the hour after closing even if we survive the day.

@DR3Z, I've read up on rolling but still don't fully grasp the concept. What is the difference between rolling and closing my position and open any other at a similar premium? Is there a maintenance advantage?

Hmm, as I'm tyiping this SPX is about to go sour again.

DR3Z said...

@Nic,

When the underlying is working against you and you close your position you take a hit. Lose money.

When you roll (I've done it to the next month), if done right, you can come away with more premium (actually gain).Commisions still apply.

For example.

Lets say I had sold a spread $445/450 for xyz corp which is at $500. I recieved .10

Now lets say the stock turns on me and drops to $455 with 2 days to go.

I get worried.

I can

1) close my spread for a loss.

2) Roll to the next month (or week if availible) PUT $415/420 for a .07 premium. And make a few dollars.

For me, it all depends on the cost to close.

Plus you have to remember that rolling up to the next month ties that money up for the month too.

Hope this helps. Again if I'm wrong let me know :)

- DR3Z

Hannah said...

Observed that naked put makes a difference with weekend time decay - but rather insignificant for OTM spread. Then there is the contract fee for closing...just mho.

Hope market hangs it there.

Nic said...

@DR3Z, I'm afraid you're going to have to explain this to me like I'm a five year old. Lol.

How do you practically do the roll? You first close your position and take a loss, no? Then you open a new spread next week that has the same premium as your loss. Why does it have to be the same stock?

I bet everone is laughing at me for being thick. :)

Nic said...

Jerry and Fulgore, are you guys still holding? I'm going to give it another two hours and if it holds up I'm tempted to stay.

Max pain for SPX is 1310.

Selling Put Options said...

Hi all, as I said the only problem with my positions and I have a bunch...lol is the SPX, It certainly looked bad at the opening.
Nic to roll down / up etc
With my SPX 1300/1295
I would buy to close the 1300 and sell the 1250 next weeks. Then to roll the whole position down I would sell to close the 1295 and buy the 1245 next weeks. Which strike I would really use is determined by the premium? As Dr said, I would try to gain a little premium so that it pays to tie up the money for the coming week.

Selling Put Options said...

I will start a new post topic after the day is over as there is a common thread going.
Jerry

Nic said...

I get that part, but why does it have to be the same stock? Isn't rolling just a term for finding another trade to compensate for the loss of an existing one?

Raging Bull Winkle said...

Nic you will want to roll after your extrinsic value of your short to drops below .08-.05 most times this will be on expiration Friday. On think or swim it a right click on the position select create rolling order this will populate a window that defaults to the next MONTHLY option at the same strike as you short. If you want to roll to the next week you must change the month to a weekly. At this time you also can choose to move up or down and the platform will tell you you mid point net debit or credit.

tk said...

Thank Gary,
What broker are you with that allows you to trade naked spx with such low margin requirement? What is the different between Portfolio Margin Account vs. normal Margin Account?
Thanks for sharing. TK

Nic said...

Very cool, that functionality doesn't seem to be available at Optionshouse, but I now understand the term and where it comes from, thanks.

In your example, all about taking advantage of the weekend time decay, right? To me it sounds even more useful as a viable exit strategy.

On another note SPX is starting to look a lot better, just wish I hadn't got antzy yesterday when I closed half of my position when I could have rolled instead. Oh well, learning process.

Hannah said...

May be this can help.
Take this form Optionclub:
"..When you "roll a short put," Q:
Question::Any reasons why you wouldn't want to forward roll a short put if in a loss position? I believe there is high potential to recover some if not all loss if I roll forward for another 6 months. But, there is some added risk for holding this short put longer. What else am I missing?

Answer:
What I think you're missing is the fact that when you "roll a short put," what you're really doing is closing one trade and opening a new trade. We rationalize that it's not a new trade but just a continuation of the original trade or that its an "adjustment" and that we really will not have taken a loss if this adjustment works out as hoped. Hope is usually a poor trading plan, however.

My suggestion is that you stop thinking about this a a "roll," but as a brand new trade. Would you sell that six month put today if you did not already have the losing position in your portfolio? If not, why would you want to do it now? A lot of folks figure that once they're "in for a penny, they're in for a pound" and just compound their losses. We're not supposed to compound our losses. We're supposed to compound our gains.

Is selling that six month in-the-money put a good trade? If not, why do you want to do it? Maybe you've got good answers to these questions. If you don't, then think through this before you set yourself up for additional losses.

Nic, I hope it helps.

Nicky said...

Wow the market is coming back, I can buy back my FAS $26s @ .20, sold for .41, I might just stick it out, dare them to put it on me!

Raging Bull Winkle said...

Nic. I just realized what your asking. WHY?? Every thing I roll is covered calls.

Like I'm long BIDU stock and short next weeks 140 and 150 calls. if BIDU is 145 next Friday you bet ya I'm rolling the call to the next week.


If SPX gaps down on Monday 250 points I'm going out in time just as far as needed to collect a credit wile moving my short to a safe OTM position. I'm not willing to take a loss.

The margin on SPX is 1/3 my account so I can sit on it a year if push comes to tank.

INFO on PM.. the rub is you need 100K to open I'm here to tell you you need 140K to use it.It CAN NOT drop under 100K or the pull the plug on you account.

http://www.prmia.org/Chapter_Pages/Chicago/Doug%20Engmann%20-%20Portfolio%20Margin%20Jun%2007.pdf

tk said...

Dave G or anyone else out there who are able to sell naked put on SPX without using $200,000+ per 10 contracts, please share with us how you are able to do it.
Thanks.

Nic said...

Thanks Hannah, that helps a lot.
Before I was wondering if rolling was basically an order type that perhaps had advantages in terms of less commission or maintenance, but I now realize that it really is a completely new trade, and that you indeed take a loss on your old one.

Selling Put Options said...

As Hannah said, a roll is a new position and as I mention in the book, why stick with a stock that has disappointed? One thing about SPX is that you can drop down a long ways. But remember with SPX around 1225 the strikes start moving in 25 pt increments
It has been an interesting day...

Hannah said...

@ Nic "..perhaps had advantages in terms of less commission or maintenance"
Same strike different times you can roll it with one trade (like a spread).
Same time different strikes you can roll it in one trade(like spread).

Roll forward with different strike and different time is a separate trade.

DR3Z said...

@Nic,

Using tradeking I just select spread (options view) using the check boxes by the option that I want to roll and in the drop down select "roll", it brings up a page with the closing positions and new positions already set up for you. All you have to do is select the down the road put (or call) option.
Hope this helps.

- DR3Z

Raging Bull Winkle said...

On the low margin point remember it floats or moves up and down with the market.
That said here is something a friend is doing with his PM account. Right now I can sell Jan. 2012 IWM 50 puts for .55 100 contracts 5500.00 less 85.00 comish. 5415.00
Margin today is 7800.00 69% in to the six remaining months this year is 10%+
If IWM tanks to 50 just take the stock and start selling calls.

Jerry what do you think here’s your sequel for the person with a life… LOL

Nic said...

What a day, I still have some 1300/1295 that now are under water.

Although I think there is massive support at 1300, it could quickly turn into resistance, and it will be scary to hold them another 40 min, plus another hour of trade after the bell.

The thing is though that closing now will cost me about $1, so it would be the same if it closes at 1299.

Fulgore, Jerry, did you close?

Dave G said...

Gary, using your example of selling OTM puts in IWM, my broker would require ~$60,000 in margin money to put on that trade. In your post, you quoted $7,800 as margin money in your PM account...pretty cool! I gotta get one of those someday. I like your statement "If IWM tanks to 50 just take the stock and start selling calls." - true, but as per your example, you have to have the $500,000 in your account to buy the stock with.

Nic said...

O'boy, this was more fun than I can take nowadays. Piuh.

So when am I safe? I understand settlements and things can happen for another hour?

Bald Harley said...

Did anybody watch the last 5min of the S&P in real-time?? Looks like its gonna settle ~$1,300.16.

I never had a doubt ;-)

Hannah said...

lol you guys!

Dave G said...

The official SPX settlement value has not been posted by the CBOE yet. It will be right around 1300 when they do.

Nic said...

Ok, I now need a debriefing here, obviously my exit strategy suck. :)

I'm not allowed to naked at Optionshouse yet, and I really like the controllable maintenance of spreads, but it seems to me that it is trickier to have a reasonable exit rule. With nakeds a double premium makes sense and is very easy to track, but with spreads it seems as the bought leg always trails further out even when there still is plenty of cushion. Its almost an exponential flex on top of the regular movement in the sold put.

What do the rest of you use as stop?

Raging Bull Winkle said...

Dave, Need 500K? No not really remember PM account. Lets say it's Jan 2012 expiration and that 50 is Toady's 81 the stock would be put to me and I would have bought puts before that happened. So this is just a ball park at today money.

I can buy 100 covered stock IWM that's 10K shares and 100 Sep. 79 puts 844,100.00 + 235.00 comish 844,335.00

My Net buying effect is only (I like this part) ONLY (38,425.79) The only thing I need is to come up with 2,461.67 interest to pay the nut. (I pay 3.5%) Now today 100 week2 IWM 82.00 calls would have brought in 4315.00

So say 4K a week X4 = 16,000.00 less interest net income 13,500.00 per month
on less than 40K of real out of pocket money.



Really scary stuff just be sure you did this on paper for 6 months to a year before trying one for real. If it blows up on you it could get ugly.



Think or swim will let you open one with 120K but you really need a minimum of 140-150K

newportnewsva said...

ended up BTC my SOHU and FCX for small profits on each. Just holding LULU over the weekend; if some time decays off this thing I'll get rid of it at Monday's open.

Have a great weekend everyone.

Gssound said...

What a week! Got out of this week by the skin of my teeth. The word of the week is Cushion, but even that can be taken away too!

I think I may take a week off from trading the SPX weeklies.

Chris

Dave G said...

Official SPX settlement is: 1300.16

Congrats to all in that 1300/1295 trade!!!

Gary, I have to read your reply over, but that PM stuff looks pretty cool...thanks!

Chelski said...

We all know that we shouldn't be picking these resistance level strike prices (e.g. SPX 1300) and should take the 1295 instead. Probably half of traders have an automatic sell once it reaches 1300 and the other half or so have an automatic buy once it goes below 1300 to say 1296/7 or 8. If the bears stay next week, pick your strike well below the next resistance level! Bon weekend!

Nicky said...

Assigned on FAS $26, holding a lot of assigned stock now:

1000 MSFT
1700 FAS
500 TER

Hopefully the market goes up from here, and I can make some nice income from covered calls.

Glenn said...

Hi All. I haven't offered comments here for awhile but have benefited greatly from reading yours. Many brokers offer portfolio margin which means a lot less capital tied up for any given trade. TK doesn't offer it but OptionXpress did, though it's not easy to qualify. I ended up being overleveredged resulting in a big loss and so I no longer have it...

Raging Bull Winkle said...

Glenn sorry to hear about you loss. Can you share what you positions were at the time?

Were they hedged? What could have saved it? Can you share the size? Most I know of were leveraged to the max and only need the market to correct a small amount to cause havoc. Hence me saying you need 140-150 to start. 250K plus is the sweet spot.

The riskiest thing I do is the SPX my biggest position is BIDU and my cost is 106 and I'm long Sep. 120 and 125 puts, on days like today it ticks me off but I sleep well at night.

Any insight will be greatly appreciated.

tk said...

Gary, can you go over the details from your previous post on the IWM example? I am lost after $844,335. I don't know how you come up with the 4315/wk gain on less than 40K of real out of pocket money.
I also have the same thought as Dave G that you would need 500k to pay for the assigned option in your example.
Thanks.

Raging Bull Winkle said...
This comment has been removed by the author.
Raging Bull Winkle said...

TK,
Yesterday I could have sold IWM week2 82.00 calls for .45 100 contracts is 4500.00

do this 4 time a month and after commissions and befor interest paid it works out to about 13,500.00 a month.

the out of pocket amount is the reduction of my buying power after buying 10,000 shares of stock and the puts. This amount is based on the risk of the trade. In this case I'm buying IWM at at 81.00 and I'm long 79.00 puts so the risk is two dollars. If I bought 80.00 puts the buying power reduction would drop to 32,000.00 if I bought 70.00 puts it jumps to 60.000.00 and this amount will go up sharply if IWM starts to trend down.


The goal is to get you puts ABOVE your cost base or at least very close like less than

5.00 to start and after bringing in a month or two of premium roll them up and out.


in a nut shell if you have a margin account with 200K you can buy up to 400K in stock.

With a PM account and 200K you can probably buy over 1.2 M it's all based on how it's hedged or what the risk is.


I had a hard time wrapping my head around it at first. I played on paper for over a year.

Do this open an acct. at Think or Swim It's free you don't need to fund it ever if you don't want. Next figure out how to change you starting amount. set it for 200K then E-mail customer support and ask them for PM status on that account.

Once you have it running really try and get in trouble I blew up mine so bad I had to reset it and start over 5 times in a year. Also try different amounts it's really easy to implode a 150 acct. much harder at 300K as long as at 300K you keep 200K in buying power.

Just because it's there no one says you need to use it. Don't forget the first of every month to deduct you interest. The paper platform dose not do it. TOS is 6.75% I got 3% just for asking. If your willing to put a million on margin it's 3/4 of 1% at interactive brokers 1.75 for less than a million. You really need to know what your doing over there how ever they can and wll close your acct. in the secound with out calling you first if they don't like what your doing.

Raging Bull Winkle said...

TK
Last one I need to get some work done..lol

Here is my last paper acct. Started 9-1-2010 I have not done any thing with this in months. All the puts need to be rolled up and I have not deducted any interest in that time ether. Note however the interest I pay is lass the the div. yield on VZ MO and PM. This one was started with 350K has 1.6M on margin and still has a buying power of 561K

Selling out of the money calls on these at just .10 is 5500.00 a month on 550 contracts


http://i678.photobucket.com/albums/vv145/RagingBullWinkle/PM-6_3_Statement.png

Hannah said...

Rick,
I filled in the info to open the IRA account at OH but haven't signed anything or fund it yet. Is it too late to claim the gift for referral?
At TDA, there is a choice of routing where one gets filled by different groups of MMs. I find it fast to be filled most of the times. Wonder there is any difference at all at OH or TK :)

Anonymous said...

Good blog! I've been reading for about 20 mins now, and like what I'm seeing. I use covered calls and covered puts for income for me and my wife(thabk god I can, because it's impossible to get a decent job at the moment). I'll post some of my trades, let yall tell me what I'm doing wrong, lol. Back in a while