NOT-ADVICE.
More like random musings that are likely to keep me up all night
The question about position size or backing to achieve $100k/week has gotten me thinking about an entirely different trading style than what I've been doing the last month or two. It would use the same trading strategies I've already come to know and love, but if one has access to and can make use of large amounts of cash / margin to back their trades, then going much further OTM can create positions that are a lot more autopilot.
And if the larger strategy becomes something closer to riding positions out to expiration, rather than trading in and out at desirable opportunities along the way, then actual daily and weekly effort can be significantly diminished. That latter part isn't important to everybody, but I know it is to me. I enjoy the process and learning that comes along with it a lot, but one of the vectors I think about is whether I'm doing something that I believe will be sustainable - something I'll be doing 15 years from now and have been doing weekly over those 15 years.
As backing increases, position sizes (cash / margin backing) can be used for the purpose of lowering position risk rather than increasing profit. At the example we've just been using, $2M can back 200x $100 wide spreads, and next week put spreads can yield a $5 credit using the 580/680 (680 is awfully far OTM). Management of a position is much wider - effectively down to 630ish, with more management options from there, such as the 2x contract for 1/2 spread size that probably can get you rolled down to 550-580. That'll take a REALLY steep and fast fall to make that position unmanageable. Even the Feb-April fall in the share price would have been readily handled, maybe with 3-5 weeks of no income.
But if you're collecting $100k/week the rest of the time, does 45 weeks otu of the year instead of 50 really make a difference? Really?
Which has me thinking - maybe I'm at a point in my life where I've got too many TSLA shares. I'm already overly concentrated based on standard financial advice - I own cash and TSLA shares/derivatives (really seriously NOT-ADVICE). But if I could be pretty reliably be getting $70-$120k/week with an hour or two of actual trading effort each week, along with the routine and ongoing education about Tesla that I would be doing anyway, then would I care if I'd be missing out on more than that? I really, really hope the answer to that question is "no".
The tougher question to be thinking about - would I really care if I missed a $1000 move in the share price? Like - really? It's not like I'd get rid of all the shares, but clearly cash and put spreads would be earning a lot more slowly during that $1000 share price move than owning shares or LEAPs, but again - does it matter if I'm earning that income level? Again - I really hope the answer to that question is "no".
(In both cases - my answer to that question for me; we all have different needs and wants in life, so the answer is personal. It ties into an important idea, of having some idea of what "enough" is).
This idea is somewhat resistant to changing premium and IV levels. If the premium balance shifts to be in favor of calls, then call spreads can be used instead of put spreads, and the resource (cash/margin) is unchanged in type and quantity. Or these can be combined into distant ICs where we add on some call spreads to go with the put spreads.
Heh - maybe I have "discovered" what
@Chenkers has been talking about and doing all along
Critical and previously unstated assumption is that these weekly positions are effectively 100% winners. Considering the distance OTM I don't have a hard time believing in that idea. But I also have my own personal experience where 99 of my first 100 trades (according to my trade log), when I was still buying a clue, were winners. (I got paid a lot, buying that clue!). The winning rate has fallen off since then, but managing to avoid max or even big winners isn't that hard to do - especially when you start so far OTM.
Also unstated before now - $100k/week is sort of a ridiculous income or standard to be using (at least for virtually ever person on the planet). I only picked it up from the previous question.