selling 120+ day ATM stangles on ES SPX or SPY is good ...there is a research paper that says OTM puts and ATM stranges are the best strategy but don't use more than 3-2 leverage
There are many different strategies depending on many factors. What works for one may not work for another.
thanks for the insights. I definitely only do this on brand-name stocks. However, IMO, these are the 2 worst ultimate scenarios: 1. The brand-name company goes bankrupt. In this case I have 0 recovery and all is lost. 2. I get assigned, the stock drops off a cliff and I just keep selling calls which amounts to peanuts and wait for the dividends. This is the "likely" worst scenario and I don't really have an answer (so I asked about any bear strategies that are similar). But suppose the market trend is "normal" that companies dip and recover, is it so bad? Well, the consensus seem to say its foolish. I guess answering to an idiot manager and working with assholes is just part of life that we all live..
Are you selling put spreads? Perhaps protect your downside with cheap long term puts? Essentially calendar spreading instead of pure put selling? Either way, you do have to consider volatility in your strategy. Sell long term when volatility spikes, etc.
You're on the right track. Blue chip dividend aristocrats do not drop to zero. The nay sayers are trading their strategy with their variables. Been there done that, they have many opposing factors also, especially the one you mentioned. As long as you're collecting option premium and dividends, you're generating income. Blue chip div aristocrats are stable and retrace quicker. During a bear market, rather than selling put options. Sell otm credit vertical call spreads after ex-div date, take profits when they appear. Do not hold to expiry.
Nope. First af all they don't go bankrupt in 2 days. (well, at least not usually) Somebody mentioned Enron, it took a full year for the stock to drop to zero, that is 12 monthly premiums collected on a falling stock, so you would have gains too. Second, if you diversify, most likely you only get unlucky with 1-2 stocks and you don't even lose all on that, so your overall losses should be limited. You could also abandon the falling stock at a predetermined price... Now it is possible that for a year or two you won't have any income or even a loss, so you should plan accordingly, to survive the lean years...
Would enron pass blue chip dividend aristocrat test? I thought their PE ratio was really high at the time, more of a momentum play. I never got involved, didn't meet my selection criteria .
For 1, try ETF rather than individual stocks. Less risk and more consistent devidend payout. Can't do much for 2. Covered call is bullish pos and you for sure will lose in bear market. Covered call is easy to understand but hard to practice in real world. You will run into dilemma let say if you long a stock at 100, short 110 call for 1, if the stock drop to 70 at expired and 100 call for next expired worth almost nothing. The question is do you want to short 90 call for 1? If you do this, and if the stock rally back to 91 during expired and you will lock in loss for sure.
I can see your scenario play out for momentum stocks. But you will need to provide a example that is a blue chip dividend aristocrat.