It's midnight for me and decided to take a peak at market. NQ futures currently at 13485, the option chain shows a wide 19 pt spread at this hour and the 13450 put is priced at bid 70/ask 89. So right now if I closed trade at offers I'd make 115 x 2 on futures trade plus 36 x 3 on options for a total profit of 338 pts. Conversely if I hold until tomorrow's close these will be the profits (if any) at the different close levels. If NQ closes at: profit points. 13787: +0 13687: +200 13600: +375 13500: +575 13450: +675 13400: +625 13300: +525 13150: +375 13000: +225 12975: +200 12775: +0 So, as of midnight if I continue to hold I'm hoping/gambling that NQ will stay between 13600 and 13150 at tomorrow's close to improve on current profits.
In my opinion... Good trading is about a repeatable process not about shiny new things. What in your process for this trade is repeatable? You had a profitable trade according to your plan, you adjusted your plan to try this new thing, now you have to be up at midnight to check if it's still profitable. To me that's madness. That being said, selling covered options in exactly the way you did it *is* a legitimate way to make money. If you want to sell options as a way to add some extra juice to swing trades that you want to hold, OK that's fine. But plan it and do it consciously. There is always another trade.
So to summarize: the trade itself isn't necessarily good or bad, the fact that you winged it in the moment is the problematic issue.
Update: close the position now at 13 737. Lost 275 points on the futures contract, hopefully we’ll still keep all the premium of 375 points on the puts sold.
Yes, I had a profitable trade with almost 200 points locked up that I thought a bit about and decided to modify. As with my luck past month or so, not totally surprised trade faltered. There will be other trades. I still do think I took a viable risk to trade in a 200 point profit and possibly extract up to 475 more points from it. Unfortunately it didn't work out. Will likely make 100 points now (if options expire worthless today) or I can undo trade and buy back options and make approx. 50 points in total trade. I did enjoy the process of thinking this out. I still believe the risk/reward here was warranted and I'd consider doing this again even on next trade. So I do feel it is repeatable. Was up at midnight, because I was up. These trades are not huge enough that I lose sleep or can't sleep while they're on. Next trade on NQ is approaching too. Another high probability trade coming if during RTH NQ futures crosses above 13785 yielding a high % trade to the upside for 50 points.
This is where people leg in and out. You believe in the short, so you sell short. You get to some target where you feel there will be a reversal which doesn't change the trend, so you sell puts. You get the reversal you expect and you buy them back. People do this, it's called wheeling. Just do it consciously.