Over the years I've developed a pretty simple way to jack up my returns from two basic systems I trade: (1) monthly momentum and (2) undervalued stocks long term. I know and have read lots of threads here with some pretty sophisticated posters but generally all I do is employ LEAPs when volatility and the premium is cheap. The distribution of my trades makes this work as a good chunk of my winners are big gainers. The potential for a further decline from here is very juicy for me. I would love to own some 1-2 year calls on positions if we in fact enter a bear market to the likes of 2000 and 2008. Only issue is the volatility at the price extremes is too high and calls are expensive. I could sell the puts, but if I want to hold stocks on a minimum yearly basis and I do sell the puts, I have not generally had my puts assigned so I likely won't be long the stock even if it hits my price and the premium I collect won't really be a consolation for me. I have considered butterflies on a 1-3 month basis and then as volatility drops buying the LEAP calls. I do not have a lot of experience with multileg positions but am willing to read up on this. Ideally, I am looking for a position I could hold for a year but I have never heard of butterflies utilizes for this duration. Any help or insight would be appreciated (including links on what to read!) Thanks.
What would you recommend specifically? I'm thinking OTM fly call and purchasing an extra call at some point when vola drops if it goes my way.
LUV is one of the stocks I'm targetting. I'll be operating with limit orders or limit order options on a lot of other names too. I have a limit order on it at $10. I realize this is quite deep and may never get filled. If it does get filled I would expect a pop within a year to $20-25. I don't see options this far down yet. How would you approach this? Thanks! I also think that $15.5-$20 is significant support so it could reverse from there (and likely will), but anytime I catch knives I like to wait for full out exhaustion and have zones setup based on stuff I stole a long time ago from a poster by the name of APEX82. I have scaled into these plays before using a 1x and 2-3x position sizing, but in the prior bear market I had luck catching a few of these plays really really deep and did well on them.
That is correct. Any recommendations for when the options do become available at that price (if they do)? I can give you other examples as well right now on other tickers but most of the stocks are still a ways away from my limit orders. Push comes to shove and I will just buy on limit orders and set cancellations as others get filled. I just feel there is a way to get paid while I have my limit orders pending and while volatility is so high. Again, I know what to do with the next part of my position... when the volatility drops I'll start buying leaps on the same names. I'm just missing the options play for the falling knife...
have you looked at selling long DOTM puts, play the time decay, buy to close early, rinse & repeat? https://www.barchart.com/stocks/quotes/LUV/options?moneyness=allRows&expiration=2021-01-15
That's the other solution I was thinking. So that I am not taking on assignment risk (even though I've never had this issue before), I would look to close out. Any other ideas?
2-3 mth out naked puts on high IV stocks/ETF from barchart look for highest IV stocks or ETF's https://www.barchart.com/options/highest-implied-volatility/stocks from the list see MYOK last at $59 Trade full cost money on the line, no margin. sell June expiry $30 put, get $8.28 last - 340%IV downside to $21.72 https://www.barchart.com/stocks/quotes/MYOK/options?expiration=2020-06-19 or what about the June $22.50 put, get $5.10, downside to $17.40 **hint: just need to find your trade & strategy that works for you Good luck