Selling naked puts option strategy

Discussion in 'Options' started by Twinsen, May 8, 2015.


  1. [​IMG]

    I have never said a word about my returns. And it's not like you are beating the S&P.....based on your own statements you are currently tied in risk-adjusted terms....

    Now go take some ulcer meds, strap yourself in and enjoy selling those juicy WMT straddles.....HACK!
     
    #71     May 21, 2015
  2. Dude, you should have ignored me and stopped talking 5 pages ago. The more you guys speak, the worse it gets for you. I'm flattered that you took the time to read my other posts on this forum, but I don't give a shit about yours so I haven't done the same. All I know is in this thread, you're a complete beginner trader and everything you've defended about chasing your 4% annualized before fees and drawdowns proves that.

    You ventured into a thread talking about a strategy you have no experience trading, because that's what people with 3700 posts do. Regardless of the topic, they NEED to comment. Sadly for you, your comments revealed how completely out to lunch you are. You actually didn't know how pathetic the premiums are 2+ SD's from the money because you've never actually checked, until after I laughed at you for it. Me showing you real examples of the highest IV times of the year has taught you a lot, you just won't admit it. After speaking with me in this thread, NOW you know that a way OTM naked put selling strategy is a non starter. You didn't have any idea before, but you do now. Why not just thank me for teaching you something and leave it at that?

    After I've taught you, now you know the real way to make it work is to stay close to the money, shorter term, smaller trade allocations on a larger number of non correlated tickers each cycle. It becomes a conservative 10-15% a year winning strategy with very consistent monthly variance. That one's free, go run with it. I guarantee it beats anything you've got going in your trade account. :)



    And FYI to your sidekick Longthewings who thinks the SPY is somehow a benchmark for low variance, in the last 48 months the monthly variance on the SPY is 11.81%. If you can't beat that on a conservative strategy, you're the worst trader on this forum. From this point forth, Longthewings will be the guy who self proclaimed he can't beat the SPY on a risk adjusted basis. Nobody made you say it, you represented it all on your own. Can't beat buy and hold on the SPY, ouch !


    You guys should really stop talking now...
     
    #72     May 23, 2015
  3. The conversation has veered away from this original question but YES, this is a viable strategy for playing a stock that you are comfortable holding. When you sell a "cash secured put" below the market you are getting paid to buy a stock you like at a lower price. What is not to like about that. You keep selling the puts until you own the stock. Then you sell covered calls against the stock until your stock is called. Then you repeat the process, sell another put and get paid to buy the stock once again.

    Of course this does not protect you in a broad stock decline but you have your weekly covered calls to offset your value losses. No strategy is fool proof as you can still get called at a lower price than you bought it at but in a sideways to grinding higher stock, this works great.
     
    #73     May 23, 2015
  4. rmorse

    rmorse Sponsor

    What I don't like about the strategy is the risk/return. You are selling a put at a very low cash value, requiring a lot of margin, for the expected return. I think the math is better in a portfolio margin account and with shorter dated options than a reg-t account. If I do a lot of research and really like a stock, I want to participate more on the upside.

    Just my opinion.
     
    #74     May 23, 2015
  5. I hear what you are saying but by doing this on weekly options the returns add up quickly. I did try this several years ago on MSFT as an experiment. I just did 100 shares and was in and out just like the plan for a couple of months and the return was surprisingly good. I had forgotten about it until this thread caught my interest again. I may have to give it another try.... PS: You do need VERY low commissions for this to be effective. I was with IB at the time so it worked.

    As long as you are using a stable mature stock, it might even enhance your long term profits verses a buy and hold. You can't dream of doing this on a CUDA or CYBR but MSFT maybe so.

    The theory does fascinate me. Get paid to buy the stock below market value. Then sell a call against it. Sell the next week as well if you don't get sold out. And if you do get sold out you got the higher price and the call premium. Then repeat the process by selling another put.
     
    #75     May 24, 2015



  6. Best case scenario about $10.00 per week - and that's selling 1 strike OTM or about $0.50 from the stock price.


    :)
     
    #76     May 24, 2015
  7. Right now at 9:48 Central time MSFT is 46.54 and the 46.50 put is $.34 bid and the 47 Call is $.18 bid so best case scenario is much better than the $10.00. At a $.33 net, you earn 0.7% to buy the stock cheaper than buying it on the open market.
     
    #77     May 26, 2015

  8. You did mention: "I did try this several years ago on MSFT as an experiment. I just did 100 shares and was in and out just like the plan for a couple of months and the return was surprisingly good".

    Several years ago MSFT was stuck in a very tight trading range of about $25.00 to $30.00 for a long time. Options were dirt cheap because of the low volatility, plus factor in the lower stock price. There is no way you could squeeze out more than $10.00 a week.





    :)
     
    #78     May 26, 2015
  9. newwurldmn

    newwurldmn

    It's more appropriate to look at it as "if you get the opportunity to buy the stock it will be below todays market price and above the market price at that time; however, you may never get to buy the stock because it may rally and you may miss the move."

     
    Last edited: May 26, 2015
    #79     May 26, 2015
    samuel11 likes this.
  10. xandman

    xandman

    I took another look at the article. The graph shows zero convexity to the downside in 2008.

    Is constant delta hedging assumed? There was no mention in the article. Additionally, bear markets usually exhibit jumps to the downside during next day openings. A bit suspect.

    upload_2015-6-2_7-0-33.png
     
    Last edited: Jun 2, 2015
    #80     Jun 2, 2015