Runarbt
Active Member
Your right. Hrm.
Keep the premium as cash then, until puts expire - will be better than putting it into shares - which only give 35% towards margin.
(I edited my previous post, before I noticed you replied to it)
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trading
- Thread starter Boomer19
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Your right. Hrm.
Keep the premium as cash then, until puts expire - will be better than putting it into shares - which only give 35% towards margin.
(I edited my previous post, before I noticed you replied to it)
I obviously am on here to muchYour right. Hrm.
Keep the premium as cash then, until puts expire - will be better than putting it into shares - which only give 35% towards margin.
(I edited my previous post, before I noticed you replied to it)
If you have portfolio margin you could also buy super DOTM puts to reduce your margin requirements.
Runarbt
Active Member
I havent applied for this yet. Any drawbacks, or is it just positives?I obviously am on here to much
If you have portfolio margin you could also buy super DOTM puts to reduce your margin requirements.
Other than allowing you to be more leveraged, I am not aware of any potential downsides (but that's not saying much).
I'd say the biggest downside to it is your own self. Margin requirement can appear deceptively low in the beginning but it can get out of control very quickly if you get too leveraged and things move against you rapidly. As a result, I have significantly scaled back from selling long dated options on PM. Too much time in between means a lot more things can go wrong before theta can start working in your favor.
Runarbt
Active Member
I read up on how Schwab calculate used margin on naked puts.
Greater of:
So - a $1000 put 1/22 - which pays $330 - will at a SP of $800 cost :
1000*0.2 - (-200) +330 = 200+200+330 = $730 x100 - $73,000 for each naked put.
But then - if premium is add to my cash balance, the margin spent would in effect be equal $400x100 - $40,000 for each put sold?
Greater of:
- 20% underlying value - out of the money amount + premium
- 10% contract value + premium
- $100 per contract
So - a $1000 put 1/22 - which pays $330 - will at a SP of $800 cost :
1000*0.2 - (-200) +330 = 200+200+330 = $730 x100 - $73,000 for each naked put.
But then - if premium is add to my cash balance, the margin spent would in effect be equal $400x100 - $40,000 for each put sold?
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blowing up your account on a single bad trade lol. I actually have my portfolio margin application on my desk fill out and ready to be send out but I am having second thoughts
.Although, you can also do that without using any margin at all.blowing up your account on a single bad trade lol. I actually have my portfolio margin application on my desk fill out and ready to be send out but I am having second thoughts
We have met the enemy and he is us.
-Pogo
36. “We Have Met the Enemy and He Is Us” – Tales from the Vault: 40 Years / 40 Stories
adiggs
Well-Known Member
You are a voice of reason.
I will tune back some. I can roll the current puts out to jan22, and close most..will decrease my margin usage <10%.
Will wait to see what happens next weeks.
Best of luck whatever happens. I'm starting to think I'll have ITM puts at the end of this week. Which is actually a good thing as it'll mean that my ITM call is that much closer to being ATM! So much rolling, so little time
.
TheTalkingMule
Distributed Energy Enthusiast
Selling long covered calls for massive premiums looks more and more enticing for HODL'ers semi-willing to sell and not interested in trading much.
The longest and most OTM call I see available is Mar 2023 @ $1700 at about a $21k premium per contract. As Trotter would say, "That's a lotta money."
I'm holding, but have been able to capitalize on my willingness to sell high without having to watch the stock via the selling of covered calls. Sitting on some $1200/$1300 contracts which I'll likely roll out a bit higher if/when the June 2023 calls are available and the SP spikes during this stimulus/earnings period now into Feb.
I mean, we could see $2k contracts paying $20k premiums for June 2023 if SP moves the way I think it will and volatility rises in parallel. Personally I'm not afraid to call that free money, considering we were all fantasizing of selling at $1k post-split not 18 months ago. Good times......just a month later than we thought.
The longest and most OTM call I see available is Mar 2023 @ $1700 at about a $21k premium per contract. As Trotter would say, "That's a lotta money."
I'm holding, but have been able to capitalize on my willingness to sell high without having to watch the stock via the selling of covered calls. Sitting on some $1200/$1300 contracts which I'll likely roll out a bit higher if/when the June 2023 calls are available and the SP spikes during this stimulus/earnings period now into Feb.
I mean, we could see $2k contracts paying $20k premiums for June 2023 if SP moves the way I think it will and volatility rises in parallel. Personally I'm not afraid to call that free money, considering we were all fantasizing of selling at $1k post-split not 18 months ago. Good times......just a month later than we thought.
That sounds awesome... the only thing is, this week has been pretty flat and with the earnings call next week I sort of expect volatility to go up (not quite sure whether that's sell the news or buy the news, but one way or the other). Though, I guess rising volatility in the short term has a pretty small impact on a 2023 expiration. Hmm.
corduroy
Active Member
I know there are a lot of unknown variables, but I wonder how of a difference there would be in the total premium amount selling monthlies for that same time period.
adiggs
Well-Known Member
I would expect premium per month selling monthlies, to exceed premium per month for selling a 12 or 24 month option. There will be rare setups where the long duration will match or beat the series of shorter term trades.
I haven't seriously investigated monthlies vs. yearlies, but I have investigated weeklies vs 1-2 month options for my own use. Overall I felt I could earn something like 25% more by selling weeklies at 2x the effort, over a strategy focused on the 1 month options.
Definitely agree. However, everyone should remember that selling more times, whether weekly/monthly/yearly, means more chances to lose shares. Thus, higher risk for greater returns. As always, nothing is free.
adiggs
Well-Known Member
TheTalkingMule
Distributed Energy Enthusiast
Edit: I just wish that I had left some free cash for buying during the MMD. The past few weeks I just kept loading up on calls and selling puts until there was basically nothing left. Everything is in retirement accounts, so no margin allowed.I expect this is EXACTLY what the MMs are doing. It worked on me a few weeks ago and it will probably work on others this week. However, armed with my previous experience, and knowledge from @Papafox , I fully expected the Monday morning rocket ride, followed by the MMD. I was holding some Friday 840/850c that were down about 30% since I bought them, (last week was a bit hard on my convictions). Over the weekend I guessed on an option price near $70 if the SP went to $900, set my sell orders for $69.20, $70, and $98 in the different accounts and went to sleep. Checked the SP upon waking, and ran to login, to see that I basically hit the morning peak dead on (lucky
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LOL. I bought back a put pretty near the high, like $899. Then I cleverly sold a new one on the dip... that is, when it dipped back to like $890.
Whoops!
Still pretty sure it'll expire worthless, but it's red for the moment and I definitely left some money on the table.
LN1_Casey
Draco dormiens nunquam titillandus
I was asleep during the 900 morning rise, but I put in an order to clear out my margin at 880. Missed it by thaaaat much so far.
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