AAPL dropped from 720 to around 425. HPQ dropped from 30 to 12 in less than a year. BP dropped from 48 to 37. JCP 40 to 18. Shit happens to companies in every industry. I've been in the business since 1980. I'm telling you this happens to companies when you least expect it. You can't assume any company is safe. The point is, if it were the same company, it would not drop that much. If it were because the market crashed, the valuation of that company is not the same. This is not rare. It happens almost every week. I still like selling options, I just prefer to stick to SPX or RUT. No company specific risk. It helps you sleep at night as some said. 1245
I am thinking of trying to make 10 percent or so on 25k Sell put spreads OTM with maybe a 75-100 spread in strikes, do this quarterly, maybe 2 contracts. stop assuming no flash crash would be 1.5 times credit, so it really would take 3 complete losing trades/quarters in a row to begin to ding account by as much as 25 percent ? look at 1200 1100 put spread in June SP mini for example.... its not that rich but...
I can't help it. AAPL, tech (ever changing). HPQ, tech (ever changing). BP, environmental tail risk (ever present). JCP, WMT/TGT/AMZN makes them obsolete (prices too high; better operators exist). I get what you are saying and you are correct about single company risk. The only reason i sell puts on individual names vs spy for example is the implied volatility is sometimes double that of spy. if WMT volatility was currently double spy i'm selling WMT premium (remember mexico scandal; ah sh*t so WMT's now going to 25? congress shuts down WMT?) come on mr market. All i'm saying is that if you combine fundamental analysis with good stock selection I think you would come ahead of index premium sellers. So WMT valuation goes from 14 p/e to 7 p/e in market crash? ok, i'll sit while they retire 20% of the float.
I don't disagree with your strategy, just the idea that if I sell a naked put, I'd be happy to buy the stock if it drops. Only a Warren Buffet can say that and mean it.
I just think call spreads with that account size would work best. Try call spreads with 10% of your account and give them time to mature. Maybe sell a few puts. Just start small until you understand the mechanics of everything you are doing. I don't know just my two cents.