Hi all, today I am selling some puts, even in the tricky market.
I like CLF TRADING AROUND 94.5. Selling the 75 put for .20 =2.5%
A stock that is trading up today and being natural resources i like that in this market.
I am also looking hard at MOS 79.60 Sell the march 60 for .10 1.6% Roi
With food/fuel going up farmers need to max out their productivity.
On any play this week I am not refi'ing the house, just taking some loose change off the table.
45 comments:
i think I'm gonna play it safe and just pick up some SPY weeklys at the end of the day - the 122 look to be around .18 right now - 7% cushion & .7% ROI for 8 days (annualized out to 36%). feeling under the weather so i might just stay on the sidelines instead of doing something stupid from being over tired and over medicated.
newport,
99.4% chance of success, sorry but I love numbers.
I opened a NFLX 205 spread yesterday that will expire tomorrow for $908 credit ($10K) at risk. No, not "safe", but I feel strongly the market will relax for at least the next couple of days. We'll see, I'll end the week down, it's just a matter of how much. CAT hurt me yesterday.
Dave
dave - not much safer crumb than that - thanks for the validation :)
newport,
Also, if you look at the SPY chart, it is getting close to the 50 day MA (even though the stochastics are still high). It is likely to bounce off that if not sooner. We are still in a strong bull market, the recent pullback is normal IMHO. Sorry, but I do like to study charts also.
Dave
hey dave - i agree with you that it still looks over bought (not as bad as last week obviously) and there is a supporting trend line near where the SPY is currently; even if you factor in a 10% correction in the S&P over the next weekly period; starting from the top last week of 134.70 you'd be at 121.23(pretty amazing if it does do that) so a 122 strike price puts you at basically a full 10% correction in the S&P for this trade to sour.
for myself; this is a very safe trade/low risk that allows me to sleep at night and keeps me from checking the market every second (i'm obsessive like that) at work and a 30% annualized return is nothing to poo-poo either IMHO.
Good luck all :)
Hi all, I just did some SPY 25 Strike for next weeks options. received .32 for a 1.58% roi.
Each one takes 20.18 maint.
I had some Feb4 (Weeklys) 320 AAPL that I rolled to Mar1 (Weeklys) AAPL 305. This gives me another week, plus additional cushion.
Mar1 (Weeklys) - 8 days to expiration:
305 @ .41 (1.3% ROI, 59% annualized) 35 pts cushion - ProbExp 95%
300 @ .30 (1% ROI, 45% annualized) 40 pts cushion - ProbExp 97%
I think the iPad 2 event next week (March 2) will keep this a safe play.
I've never traded SPY. It's lost $5 this week already - from $135 to $130. You guys are selling it at $125...(?) what am I missing?
i'm looking at the 122 strike (I think Jerry meant 125 (missed the 1)); I'd rather trade off return for safety - I'm waiting until day's end to see if SPY stays above 130 - I'll make my decision then depending on price and volume action in the last 15 minutes.
With drops of some plays in the 5-10% range, the premium on the puts (even with lots of cushion) looks like they doubled, if not more...Even though probabilities of expiring at 97-99% do you still place a buy stop order when the premium doubles?
@John, here's a good case to examine puts vs spreads. I just pulled up the trade and the put, at Nat, will give me 1.26% roi. A vertical spread, on the other hand, generates 2.0% roi. On $10k of maintenance this translates to $126 premium vs $200. Something to consider.
voskoboy - myself; i will put in a contingent order to close this type of position (SPY 122 strike weekly) once my strike price was reached - when i would do a 20% cushion monthly i would close the position when the opening premium doubled ----- those are my additional rules; a little tweak on Jerry's fundamentals
As I say in my book, one protective tool you can use and it works best with weeklys, is to roll down. This means selling more puts on a losing position but at a lower strike. There is a good chance that within a week or two and by adding cushion each time you will eventually hit pay dirt..lol But you also need some reserve maint. to do this defensive move. Just something for traders to keep in mind. I do not recommend this very often but it is a tool to keep in mind
I didn't add to the above note that you also buy to close the original puts... It might look like- buy to close the 10 puts and sell to open the 12 puts etc. You can do this in a spread or alone.
picked up SPY 123 weekly @ .19 right at the close --- 6% cushion, 0.72% ROI 37.4928% annualized
what a roller coaster ride
dave - SPY bounced right off my support trend line - if only a person could always rely on 'technical analysis'
newport,
Sounds like a good entry to me. I do like technical analysis. Of course, nobody really knows where the market is going. You do need a good plan to deal with uncertainties. Cushion is good way to do that. I like to supplement cushion with other tools. I don't use as much cushion, so I do have to keep a close eye on my positions. Most people would love to get 36% a year without a lot of heartache. I think most people don't sell puts because of the perceived high risk and limited reward. So what if your reward is limited to 36% if you have a very high chance of reaching that reward? Just my thoughts.
Dave
here here dave - i started "learning" technical analysis the el cheapo way by visiting various websites that do daily TA of market - have been visiting freeonlinetradingeducation.com for a while now; they do a good job but you have to out up with them pushing their mentoring program, which is fine, they need to make a living also.
Hi Jerry and all,
I always was the buyer of the puts you are selling. This concept of selling is totally new for me and...really...I have done a lot of all kind of courses and experiences. And they always win such a lot..or are they acting a lot?
I really do like the low profile here, with both feet on the ground
Wim
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Wim, welcome to the dark side..lol. I think you will enjoy the rewards of put 'SELLING' instead of the buying side. Selling puts works best if you treat it like a business and keep on top of your positions. Buying, you can 'buy-and- forget'. Not so with put selling. A lot of great ideas float around here so stick with us and learn and share.
I closed my SPY 125 at .15 so made just half of what I opened for. Free money
Today's market is made for put selling.
Jerry
What's up with POT? Did it split? I am OTM, but TradeKing says I'm in the money. Does anyone know?
I plan to let my positions expire today and wait for Monday.
Dave
Dave, it had a split of 3 for 1 and it is up a lot..2.60 or so
So it should be a lot more OTM, if you sold a put
Wim
Hey Dave - yeah 3 for 1 split - good luck with TK tracking it correctly to expiration and beyond - I was holding FCX when it 2 for 1 split last month and none of the screens but the 'activity' showed anything correctly - also after expiration the monies do not show up in your 'realized gains' - i am working with TK customer service now to get that rectified.
wim and newport,
Thanks for the info. The split triggered my stop loss, but fortunately the trade was rejected.
Dave
My recent trades:
Stock$ Strike Cush Yield
Yesterday MOS 82.25 62.50 24% 2.34%
Today AMZN 180 150 16.7% 2.40%
CLF 94.8 75 20.9% 2.08%
OPEN 89.5 70 21.8% 2.74%
HI Jerry,
I have been looking for you since I read your BOOK. I am 66 and currently working 2 jobs and looking to get off the merry go round. I am still Paper Trading the PUTS. The last 2-3 days have hurt.
Is this the only format when you can be reached?
Is anybody besides me trading an account with Portfolio Margin, it affects the calculated returns.
Hi Nelson this is the only blog type place that I use. I can be reached at putman3232@yahoo.com if needed. Late last week I advised traders to avoid the mkt until this Libya and mid-east in general settles down. These world events effect the stocks even when they are not involved.
Newport, those SPY's should be about worthless now..good trade
Hello, quick question. What is the benefit in doing naked put versus put credit spread?
Jerry,
What I meant with buying options..that I was the buyer of your options...was that I write a lot of options, but always much nearer ATM and when thay are worth 0.20 or 0.30 I buy them back.
My first experience with "Selling Put options"was with Veco. I wrote 5 put40 options at 0.30 when the stock was 51.00, so a cushion of 22%. Placed an open buyorder at 0.60 and then the stock went to 45.40 and I was stopped out for 0.75. So my "real cushion is not 22% but 11%...the price at which I was stopped out.
So there are 2 cushions...?
Wim
Hey Jerry - yep today's is done and next week's SPY 123 is already 50% decayed - even a broke clock is right twice a day :) - I will again thank you Jerry for showing me the light - the 'crumb' technique is awesome - wish I would have found out about it at the beginning of 2008 when I started trading stocks versus having my monies in mutual funds. Would have prevented a lot of stress.
AAPL Weeklys still looking good:
Mar(1) 310 @ .40
7 days til expiration
1.3% ROI (66% annualized)
37 pts cushion (11%) for 7 days.
Probability of Expiration is 95% (per thinkorswim stats).
With iPhone 4 event next Tuesday, cushion should be good.
Henry, I am not a fan of put credit spreads for a couple of reasons. It does offer the safety of some protection if the stock plummets overnight etc.
Your profits are reduced some by having to buy the protective put. What I find happens is when doing a spread traders tend to move their strike closer with the thinking that they have some protection.. If I am doing 50 of XXX stock, the extra protection of 5 point spread is still 25K loss. I would rather move down several strikes and use cushion as protection. CaCa can still happen but the chance is minimized by following the other guidelines I use.
When I have done put credit spreads, I tend to juggle them by closing the long put when the stock goes up and then i comes down and then i have to buy it again etc etc. To much thought going on for me. lol. I tend to 'leg-in and leg-out' at the wrong times.
But many traders do them and love them.
Wim. Aha, got it. But even though I recommend that you should close if the as doubles, that does not mean that you have to wait that long. If a stock especially only 11 points as in your example, starts moving down I usually close it period. the double factor is the last gasp stock!! You could look at it either was I guess regarding 11 or 22 % etc But the 20+% is a starting place to open a position. Often the stock will move slowly down and even with it moving down the time decay eats up the premium. In your example the stock could move down so slow that with one day left the stock could be trading at 41 and the premium might be .05?
The questions I get regarding all the greeks - black-sholes model and the Vega- the delta the gamma - theta etc confuse me...lol Several traders on this board like to do all the charts etc. I appreciate that and it certainly doesn't hurt but it again, confuses me. I believe in the KISS method.
Someone in an above mentioned that you get a better return with a vert. spread? I am not sure i get that? You sell the higher put and buy the lower one so you have the cost of buying subtracted from your income of the sold one?
Jerry
John, In your above example of 1.3% return on the weekly AAPL trade. I have different numbers for you to consider. At 1.3% weekly, that is an annual return of 98%. A good reason for trading safe with lots of cushion.
Jerry
I actually managed to end the week up, even after getting spanked by CAT. I rolled up my NFLX spreads to 210 this morning and bought some more. Yes, very risky with NFLX at 213, but the stock cooperated, and the premium was high (6% payoff in 5 hours).
Dave
TESTIMONIAL TO CRUMBs: Some real-life actual monthly returns I've experience (comfortably and with minimal stress) since starting the Crumb method a few days after November expiration (since 11/24/2010):
@ Dec expiration: 5.4%
@ Jan expiration: 3.4%
@ Feb expiration: 2.9%
and this past 1 week: 1.5%
Note, my returns @ Feb expiration would have been a little higher except that I sold some AAPL weeklys last Thursday 2/17 right before AAPL took its big dip, which is why this past 1 week period was so good, since those Puts ended up working out great for this past week. [...actually, AAPL's action over this past week was probably the most stressed I've been with Crumbs, but it still never got within 10 pts to the 325 Feb(4) weeklys Strike I sold...thanks to the "cushion" rule...]
After compounding all of the returns since 11/24, I've experience exactly 13.9% "compounded" return over the past 91 days.
If I am able to average 13.9% every quarter, that would yield a "compounded" annual return of 68.3%
If I can do this, so can ANYONE on this board willing to put in the work, stay disciplined, and follow Jerry's proposed Crumbs system for success.
It's not complicated, but it does take steady discipline. While LOTS of "Cushion" is one of our best friends, "Greed" is our # 1 enemy!
Peace :-)
John, Did you ever get stopped out on AAPL? Tuesday and Wednesday were tough for tech stocks, I got stopped out on two plays that had 20% cushion but I roll-down to lower strikes and I've almost broke even with Thursday and todays gain. My concern is external events such as Libya. Hypothetically, what if violence breaks out one day or overnight in Saudi Arabia, the NASDAQ will tank while oil sky-rockets.
Great dialog today.
Yesterday, UYG March 52's could be sold for 3.5% roi and that was the only option I executed. A good trade, but not a great day.
Ed, you're the early bird today. I was in front of the computer a little late. Followed your lead with MOS but at slightly lower premium. Worth it nonetheless.
Jerry, when I've mention put credit spreads (verticals) I'm really talking about those instances where the spread is executed with the higher (riskier) put being identical to the naked, or ~20% OTM.. The purchased (aka further OTM) leg can be chosen for best return on maintenance but manipulating distance is usually more work than it's worth. We're already at the edge of the money. There are occasions where the vertical produces more premium with the same maintenance at risk. It's more work and the spread gives up the juice less often than the naked put. If it's $50 or more premium in the bank I may do it.
A vertical credit put spread is more work to execute for several reasons. You have to look up and compare more stuff. There isn't always enough bid size. That's a biggie. It's much, much harder to see the market makers' effects thus you're essentially bidding blind. That chafes my biscuits even more. I only do it because the comparison spreadsheet was easy to write. If I save enough 50's I'll buy you enough Titleists to fill a divot. ;)
I don't advocate for spreads. I advocate for premiums within the same margins of safety within the horizon of this particular strategy.
ShoNuff,
I came close to getting stopped out with AAPL - I had my stop a little higher than normal but was watching AAPL like a hawk. I came close to closing the position. I probably would have had it not been such a solid company.
Hi John and Hampton, do I owe you guys any money? lol
I really get a kick out of sharing my methods with all of the traders here and elsewhere.
I wrote the book several years ago and gave it away for years but many traders kept saying sell the dang things as other would love to hear of this style. The thought was, to get help most traders had to go to some all day seminar and pay hundreds.
I'm just paying it forward to those that will later share there knowledge and experience.
This blog has turned into a fun place for me to learn also. My wife says I'm a know it all, but really I learn something each day from all of you.
This page is getting long so Tomorrow I will start a new page.
Jerry
Some one should put together a Put Seller Cruise. We could all sail around the Caribean and talk about the good trades. (most traders conviently forget the bad ones)
There should be a hundred or so put sellers out there...
Vegas, baby! :)
I asked earlier about premium doubling like I read in the book. Last week, I was eyeing LO Mar 60 strike @ 0.21, which then dropped to 0.15 over the next couple days. Now, the stock price is the same, but the option TRIPLED to 0.50-0.55. Only thing I see is the stock went ex-dividend ($1.30) on 2/25. Do dividends affect the option price that much? I can't pinpoint the drastic price increase here.
voskoboy,
I looked after it...seemed attractive also for me.However there are several contradistinctions,like a lawsuit and that the CEO is buying for 1000k$. But for the options I see an Implied Volatility of more than 80% That is skyhigh, which means a lot of incertainty.
So that explains the rise in optionprices.
Hi Jerry,
As far as the cruise goes how about a get together at the Money show Las Vegas in May?
I would love to buy you a drink.
G
PS I just got home from lost wages last night, ready to go back any time :+)
http://www.moneyshow.com/lvms/
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