Decent week, cleared my monthly salary, though I left a lot of cash on the table by rolling and closing my -p1000s and -c1020s way too early. I was able to accurately predict the right options to sell and the IV crush, but again discovered that I don’t have enough patience to properly time when to sell/roll. I sold some CCs before the earnings announcement, obviously got less premium than if I’d waited until the next morning peak, but still managed to close them out for decent profit. Same with the CSPs, closed at a local SP peak, but then didn’t wait long enough to open for next week. In reality, I should have just held everything until the $1005 close. My impatience cost 25-50% of my realized profit.
NOT-ADVICE.
I'm curious - for each of these suboptimal situations (in retrospect) was there something you knew at the time that you also knew would lead to the sub optimal result? Is there a situation you can recognize the next time it arises, but do different then?
I ask because learning from the past in order to change future behavior will pay well (or at least it can). Coulda woulda shoulda though won't change future decisions. Only the future decisions have an opportunity to be improved on.
I consider the risk and stomach acid considerations to be at least as important as entry / exit, if not more important. When you closed the 1000 puts and the 1020 calls, did you do so at a good close at that moment? Was there very much left in the position to be earned, and was sticking it out for those last few $$ worthwhile? And did closing those early for a good but not great profit enable a later sale in a better position?
1% per week with a really really high hit rate, with losses occasional and scaled to be a week or two of earnings, is a stupidly strong result. Something like 40-60% annualized. So only $500k/year on a $1M account, instead of $1M/year on $1M account. And in this view of the world what holds the line on 50% annual results are loss management; staying out of losing positions in the first place, and managing them to small losses when necessary. As you commented, many winning weeks get wiped out by a bad week - thus avoiding losers is the real focus, not whether you earned 2% or 1% in the week
My own bias is towards early closes. I mostly keep waiting <50%, but am on a hair trigger around 50% and up. A big part of that is exiting the existing position so I'm ready to enter a replacement tomorrow when the shares regress. Sometimes they do, sometimes they don't. But with intent to collect most of 1 credit per week its easy to sit out for several days to open the position for the next weekly credit.
I also continue holding the larger positions that still have a lot of value to burn off. These are the exceptions - if I've earned $5 out of a $9 credit on a move in my favor, I'm likely out and looking for the next position. But that's me.
Question on positioning for the future stock split and/or Moody’s upgrade to investment grade. We all expect the SP to rise due to increased buying and short covering. I’m only trading in my IRAs, and my brokerage doesn’t all me to take advantage of sophisticated spreads. So what’s are some ways to profit off of this? Here are a few that I’ve been reading and contemplating:
1) buy DITM LEAPS (eg, Jan2024 +c500s or similar). Lower risk, leverage, return, but still likely better than holding stock. Costs about 1/2 capital of the stock. Many people are able to sell LEAP-covered calls against them, further increasing profits.
2) buy OTM calls/LEAPS (eg, Jan22 +c1500s). Lower cost, adjustable, to less than 10% of stock capital, but risk partial or complete loss of principle if SP doesn’t rise enough.
3) sell ATM cash-secured puts, weeklies or monthlies. Higher cost, capped profit to about $10-$30/wk ($500-$1500/yr).
4) spreads like BPS or BCS
NOT-ADVICE
My intention #1 for the stock split and investment grade upgrade. I'll be buying June '24 500s, hopefully with the shares closer to $900 (or lower!) sometime in May. This will be the bulk of my positioning and these calls will be share replacement positions for selling cc, and hopefully collecting a big share price move.
I'm just looking for -some- leverage on the upside move, with the bulk of the intent being backing for call sales.
I'm thinking about #2 but no real ideas.
#3 can generate a lot of cash now for immediate use. It'll lock up more cash though for a significant period, so I'm sticking with my usual weekly put sales strategy.
No way I go out long with a put or call credit spread
. There are some interesting call debit spread ideas, but its not something I've ever done. Maybe some others will fill us in with some ideas!
Worth noting that, at least at Fidelity, I've been trading put/call spreads and leap covered calls in my retirement accounts without a problem. You'll need to have level 2 permissions, with spreads (an additional application), and IRA margin (a 3rd application). IRA margin just enables trading on unsettled positions instead of waiting for settlement.
Your broker might do things differently, but the OCC permits that sort of trading. So its a brokerage limitation if its not supported.
The put roll into next week wasn’t too bad, maybe $20-$22 net, but not the $28-$30 that I could have received by waiting (not complaining because one never really knows what will happen, but in this case I was pretty sure the push down to near $1000 was coming to scare out the weak hands). I rolled the calls up, so only $12-$14 net. One problem with strangles for me has been rolling, which is suboptimal on one side or the other by definition.
