@FactChecking always liked my posts...
The thing about shorting with puts is that you're subjecting yourself to the MMs' whims. No wonder these put walls have been dead money for weeks. I wonder who's behind them though.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
The thing about shorting with puts is that you're subjecting yourself to the MMs' whims. No wonder these put walls have been dead money for weeks. I wonder who's behind them though.
NOT-ADVICE of course.
Doubling the position count while cutting the spread size in half IS digging a bigger hole. More specifically you are doubling up on your leverage. And most of the time with shares mimicking a random walk over short periods of time it works out great.
Right up until it doesn't. Doubling up on the leverage means you're doubling up on how quickly the position recovers - you are also doubling up how fast you lose money when it goes against you. Since this isn't happening in a vaccuum, you are also managing the risk by choosing a better strike that is more likely to recover, so you're not making a 50/50 bet on double or nothing
The main thing to realize is you're doing more leverage and manage that carefully. It's another important reason for the $100 spread size for me - I've got at least 1, and maybe 2 rounds, of double contracts / half size spreads should I need them (while holding the committed margin constant).
If I decide to roll, then my first choice is to roll out 1 week while keeping the spread size the same, and getting the strike improvement plus net credit. This keeps the contract doubling available without increasing my leverage. If the position keeps going against me, then the half size spread / double contracts might not only get me a particularly big strike improvement, it might also enable me to reel the expiration date back in.
The idea is that I don't want to give up any management choices until I have to. And increasing my leverage isn't my first choice.
I concur. To me time is "free." Trying to keep the same expiry and doubling down just seems to me you are pushing yourself into a corner. Once the spread is small enough, there's just really no good way to move out in time without paying for it. Having said that, if you started with a wide spread (100/200, etc), then this might work since you'll still end up in a relatively wide spread for one management round.NOT-ADVICE of course.
Doubling the position count while cutting the spread size in half IS digging a bigger hole. More specifically you are doubling up on your leverage. And most of the time with shares mimicking a random walk over short periods of time it works out great.
Right up until it doesn't. Doubling up on the leverage means you're doubling up on how quickly the position recovers - you are also doubling up how fast you lose money when it goes against you. Since this isn't happening in a vaccuum, you are also managing the risk by choosing a better strike that is more likely to recover, so you're not making a 50/50 bet on double or nothing
The main thing to realize is you're doing more leverage and manage that carefully. It's another important reason for the $100 spread size for me - I've got at least 1, and maybe 2 rounds, of double contracts / half size spreads should I need them (while holding the committed margin constant).
If I decide to roll, then my first choice is to roll out 1 week while keeping the spread size the same, and getting the strike improvement plus net credit. This keeps the contract doubling available without increasing my leverage. If the position keeps going against me, then the half size spread / double contracts might not only get me a particularly big strike improvement, it might also enable me to reel the expiration date back in.
The idea is that I don't want to give up any management choices until I have to. And increasing my leverage isn't my first choice.
corduroy
Active Member
That is basically the realm that I play in, so I can confirm that it can consistently work very well.Hey guys, I'm new to this so don't hurt me too bad...
Maybe someone has tried this in the past and can tell me of their experience. Could someone "play safe" and make weekly bull put spread below the Boiler bands on 200 day MA and under Max pain? Walk away each week with a 3-5% gain just by letting them expire (dead investor style).
For example. lower BB today was $724, huge put wall @ $720, 200 day MA @ $702. You could buy 10/8 BPS at +620/-700. Excluding a black swan type event should be easy money each week: TSLA Put Spread calculator
Maybe that is more safe/conservative than you guys like to go though.
I would caution against ever thinking it's easy money though, because it's not. If there is one universal rule I have found in options, it is that things work until they don't. When they don't you need to have a solid backup plan, and a backup to your backup. Those strategies are well documented in this thread.
Also, I would not recommend letting your short legs just expire, but instead at least closing them out for pennies on Friday. This is cheap insurance against nasty after hours surprises.
I'm a bit new with BPS also, and my safe sells right now are below 680. I'll feel better about going higher after I've had some experience with rolling or adjusting them. I'm thinking of trying a closer to ATM BPS with something besides TSLA where the amount at stake for a single contract is much lower.Hey guys, I'm new to this so don't hurt me too bad...
Maybe someone has tried this in the past and can tell me of their experience. Could someone "play safe" and make weekly bull put spread below the Boiler bands on 200 day MA and under Max pain? Walk away each week with a 3-5% gain just by letting them expire (dead investor style).
For example. lower BB today was $724, huge put wall @ $720, 200 day MA @ $702. You could buy 10/8 BPS at +620/-700. Excluding a black swan type event should be easy money each week: TSLA Put Spread calculator
Maybe that is more safe/conservative than you guys like to go though.
Curious about a strategy a few of you mentioned earlier today and yesterday - rolling up the short side (I think that is what it is called) of the BPS when the SP is spiking up.
So for e.g. I currently have 40X BPS at strikes of 650/750 which is nicely in the profit range. The Premium on the 650 is about 1.5 now, was probably lower earlier in the morning when the SP was up. How would rolling it up help?
Rolling up the 650 would be for some debit - correct? So, say I roll it up to 685 paying $0.75 per contract, so about $3000 net debit. Is the reason to do this to be able to now sell more BPS?
So for e.g. I currently have 40X BPS at strikes of 650/750 which is nicely in the profit range. The Premium on the 650 is about 1.5 now, was probably lower earlier in the morning when the SP was up. How would rolling it up help?
Rolling up the 650 would be for some debit - correct? So, say I roll it up to 685 paying $0.75 per contract, so about $3000 net debit. Is the reason to do this to be able to now sell more BPS?
There is a working assumption in the thread that you've already got at least as much options education and background as that found in the Options Alpha education link you'll find back on page 1 of the thread. If you don't at least have that, its a good place to start.Hey guys, I'm new to this so don't hurt me too bad...
Maybe someone has tried this in the past and can tell me of their experience. Could someone "play safe" and make weekly bull put spread below the Boiler bands on 200 day MA and under Max pain? Walk away each week with a 3-5% gain just by letting them expire (dead investor style).
For example. lower BB today was $724, huge put wall @ $720, 200 day MA @ $702. You could buy 10/8 BPS at +620/-700. Excluding a black swan type event should be easy money each week: TSLA Put Spread calculator
Maybe that is more safe/conservative than you guys like to go though.
Your post suggests to me that you do have that background, but as you also mention being new, then I figure its a good thing to mention.
As was also mentioned later, there isn't a one-size-fits-all approach. Some of us are really aggressive, some of us really conservative, some of us in between. And with some frequency we get overlapped - somebody aggressive most of the time, finds themselves being conservative relative to others at times. Which is completely fine (better than fine - desirable).
The way I see it - you'll need to know for yourself, what you're trying to accomplish. I'm retired now and using option selling results for living expenses. I'm willing to give up some of my potential exposure to a big upwards move in the share price, in exchange for a much more dividend like income today and month to month. In fact I got started with this as I wanted my TSLA investment to generate a dividend.
There are other objectives though - maximizing returns, practicing up on an income stream for a future retirement; as many as there are people. Your objective is important for you, so that you can right size your risk / reward calculation. And maybe even act like reins on a desire to create more and more income, which comes from taking on more and more risk (ask me how I know
).An important benefit to the range of objectives and approaches, is that we learn from each other. And at least in my experience we're all getting smarter and more profitable together, than we ever could individually.
Also as mentioned by @corduroy - if you ever think a strategy is free money, or a trade is free / risk-free money, then you haven't looked closely enough. It means there's a risk you haven't seen. It might be really small, and it might not be a real risk -- for you --. An example that is sometimes true for me, but not always, is the risk of a covered call going ITM far enough that I take assignment. It is in fact a risk that is part of my strategy, as occasional sales as part of a larger income strategy is part of the deal (for me).
That willingness to take assignment on those covered calls, when the strike is right, lowers the 'risk' to me by a lot. It also means that I am trading away my exposure on a really big move up (opportunity cost), which is also a good tradeoff for me.
I have been playing with a BPS (just 1 contract) w/ my broker to get a feel for how it works. With eTrade its a bit of a pain in the ass to be honest since I cannot close or roll the entire spread in one trade. It looks like I either need to upgrade to Power Etrade (whatever that is) or close/roll each individually?
I will likely let the long put expire worthless Friday and BTC the short put before then. If I wanted to take profits, is there a preference for which leg gets closed first? I assume the short.
I will likely let the long put expire worthless Friday and BTC the short put before then. If I wanted to take profits, is there a preference for which leg gets closed first? I assume the short.
I did this last week for the first, and only, time and it worked really well for me.
This is one of the few management choices, where the purpose is to increase profit. Simplistically you might roll that 650/750 up to a 700/750 (makes the math easy). By cutting the spread size in half you can now double up the # of contracts. Of course you don't need to double up - you can do less - but we'll keep it simple.
You ALSO don't have to make the second half into 700/750s. When I did this I made the second half into a $10 closer strike. Something like 620/720s into 670/720s PLUS 680/730s.
My guess so far, based on doing this ONE time, is that most weeks will go by and I won't do anything like this. However its in my hip pockets as something to consider.
The net on it will be the net debit to cut the margin consumption in half plus the net credit from the incremental batch of put spreads sold.
You're doubling up on leverage while doing this, so if the thesis that gets you into this goes badly wrong, then you'll be losing at 2x the rate. Maybe even worse you've also already used up 1 of the first 2 desirable management choices for positions going against you. This is probably the main reason I won't be doing this often.
But hey - you might get to add a whole bunch of incremental premium to a winning position, so you can win lots more!
You'll have to BTC the short side first, regardless. That's where the margin consumption is. If you STC the long leg first then you're converting the short leg into a short put and you'll need margin for the whole thing. I.e. a 650/750 spread that needs $10k of margin, will turn into a 750 short put that needs $75k worth of margin.
NOT-ADVICE
If you're closing further out - say 60-90% profits - then closing both together is probably the best. I've tried closing the short and holding the long looking for a move that makes the long more valuable. The one time I tried it was a bunch of incremental energy for small possible rewards, with very little time to expiration, so decay was killing the position (the reason we sell BPS was working against me). My personal net from that - the cost / benefit just wasn't there and I'm doing that anymore. I treat the spread as a single position and open, close, and manage it that way.
And I have allowed 1 position go to expiration in 18 months and 00s of trades. I just don't do it - I'll pay the $0.10 or something small close to expiration if I'm letting something 'expire'; I actually close for very little. There is an incredibly small risk of a big after hours move that puts you ITM that also leads to an after hours exercise by the option owner - I see no reason to take that risk on, and the active close opens up the possibility of using those resources NOW to open a new position, rather than waiting for Monday.
I've been thinking about this - our group knowledge and profitability, and decided to post more about this.
I was doing trades of this type last year for about 8 months. That was the start of my education, and I got paid REALLY well for that education. Close to 2x my paycheck from all of last year, in 2/3rds of the time.
So far this year I'm beating last year's results handily (paycheck + trading), and am seeing that get even better over the last 3 months. I don't know that this can or will continue - I rather suspect that it can't keep going on indefinitely (30 years from now!?!). But I also believe, in retrospect, that last year was a much better year for doing this than we have right now. IV last year was more like the 80s where 80s IV today is like mythical
So significantly worse circumstances for pursuing what we're doing, while doing something like 2x or 3x the results. And I attribute this improvement to my own ongoing education and experience, of which most of it is this thread and the ongoing conversation with y'all. I want to be doing more on the technical analysis side - a lot more than simply put and call walls for example.
I post a lot and try to give back a lot, because I get a lot. If nothing else a big chunk of what I get back is me talking to myself - taking ideas that are ill formed and floating around in my head, and writing them down to force myself to make sense of them.
8 Adjustments For Credit Spread Positions Under Pressure
8 Adjustments For Credit Spread Positions Under Pressure - Download as a PDF or view online for free
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How to Adjust a Losing Credit Spread Option Strategy
Learn how to adjust a losing credit spread option strategy with a quick and easy hedging strategy.
optionalpha.com
not for newbie:
How to Adjust a Losing Credit Spread
Today, we will look at how to adjust a losing credit spread. When a credit spread goes against us, there are three primary actions we can take: hedge it, roll it, or close it. Yes, you can
optionstradingiq.com
pz1975
Active Member
I am in a similar boat as you. I started doing this on my own before this thread was created. I was selling OTM puts (no spreads) and covered calls last year and doing fine. I got better in the first year and had doubled my average weekly profits. In the last 2 months, based purely on this thread, I have started doing bull put spreads instead of just sold puts, and my average weekly profit is now 5-8x what it was last year. I am obviously more leveraged now but I feel comfortable with this as I have learned the tools (the hard way) to get out of losing positions without blowing up all my past profits. I also never use more margin than 20% of my total portfolio value at any time to keep a large buffer and avoid catastrophic losses.I've been thinking about this - our group knowledge and profitability, and decided to post more about this.
I was doing trades of this type last year for about 8 months. That was the start of my education, and I got paid REALLY well for that education. Close to 2x my paycheck from all of last year, in 2/3rds of the time.
So far this year I'm beating last year's results handily (paycheck + trading), and am seeing that get even better over the last 3 months. I don't know that this can or will continue - I rather suspect that it can't keep going on indefinitely (30 years from now!?!). But I also believe, in retrospect, that last year was a much better year for doing this than we have right now. IV last year was more like the 80s where 80s IV today is like mythical
So significantly worse circumstances for pursuing what we're doing, while doing something like 2x or 3x the results. And I attribute this improvement to my own ongoing education and experience, of which most of it is this thread and the ongoing conversation with y'all. I want to be doing more on the technical analysis side - a lot more than simply put and call walls for example.
I post a lot and try to give back a lot, because I get a lot. If nothing else a big chunk of what I get back is me talking to myself - taking ideas that are ill formed and floating around in my head, and writing them down to force myself to make sense of them.
You can close or roll the whole spread in one trade from the Web interface. Try going to the Portfolio screen, clicking one of the legs, then pick “roll”. It will bring you to a trade screen with two entries, one to buy to close and one to sell to open (or vice versa). Then click the link to “add options leg” twice, so there are four entries on the screen. You’ll need to manually set the action and price and date on the new entries, but e.g. you could get something like this in one trade:
- buy to close $740 put 10/8
- sell to close $640 put 10/8
- sell to open $740 put 10/15
- buy to open $640 put 10/15
You can do this with Fidelity as well. My assumption though is that this is what others are referring to and thinking of as a custom trade ticket.
I believe that some of the interfaces and brokers track the spread as a single 'position', and enable a "roll" transaction that populates the starting point (both positions), and then auto-fills other info in as you specify the new position (like contract count, expiration date - pretty much everything except the strikes, and maybe even the strike once you specify one of the two).
Better / more convenient trade tickets has me continuing to think about changing brokers
Awesome stuff. Thanks for the insight!NOT-ADVICE of course.
Doubling the position count while cutting the spread size in half IS digging a bigger hole. More specifically you are doubling up on your leverage. And most of the time with shares mimicking a random walk over short periods of time it works out great.
Right up until it doesn't. Doubling up on the leverage means you're doubling up on how quickly the position recovers - you are also doubling up how fast you lose money when it goes against you. Since this isn't happening in a vaccuum, you are also managing the risk by choosing a better strike that is more likely to recover, so you're not making a 50/50 bet on double or nothing
The main thing to realize is you're doing more leverage and manage that carefully. It's another important reason for the $100 spread size for me - I've got at least 1, and maybe 2 rounds, of double contracts / half size spreads should I need them (while holding the committed margin constant).
If I decide to roll, then my first choice is to roll out 1 week while keeping the spread size the same, and getting the strike improvement plus net credit. This keeps the contract doubling available without increasing my leverage. If the position keeps going against me, then the half size spread / double contracts might not only get me a particularly big strike improvement, it might also enable me to reel the expiration date back in.
The idea is that I don't want to give up any management choices until I have to. And increasing my leverage isn't my first choice.
I am currently in the process of changing over from Qtrade in Canada to IBKR. Qtrade was too restrictive and would also only let you open single trades, nothing was ever considered a spread or a condor. It will be worth it in the long run, but going through all the paperwork and waiting for my positions (All Tesla stock and lepas) to transfer has me out of trading for 1.5 weeks so far. The wait is killing me!
I don't. Then again I feel like my management bias is to 'do nothing' and I'm watching for more macro changes that would change my strategy. Going ITM isn't something I fear - it's something I plan for. And I do actively use "take the loss" as a management strategy. When that arises though, I usually am making market orders - I'm big on being done with a position, when I've mentally decided that I'm done.
What I do spend a fair bit of time doing is gaming out different possibilities and what I want to do when they happen. Most of these gaming of possibilities never get acted on of course. But if a situation arises that I've already gamed out, I find it easy to act swiftly.
And I do use particularly friendly, to me, entry and exit orders (both day and GTC). Mostly exit orders - I had an 80% gain order on for yesterday and just missed it at the peak of the day. I can readily imagine doing more entry orders this way, but haven't developed in that direction.
NOT-ADVICE of course - just how I do things.
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