Should it be settled daily and opened again to reset the hedge? Apparently there is risk of inverse and leveraged ETFs underperforming their daily return targets when held longer.
Geez did Santa leave you coal in your stocking or something? Options aren't cost effective as a hedge for the wheel strategy because of the delta...I want 1:1. I don't think they would even work for the wheel strategy because you are realizing losses daily or weekly, so would have to keep closing the option to realize the hedge...and the costs would quickly negate the protection
Well basically you can't hedge a wheel strategy whether with an inverse etf or a protective put, the numbers just don't work...at least according to my spreadsheet. The problem is with either strategy, you are realizing losses when you have your shares called away. You just can't over come this with premium, AND the losses you suffer on the hedge as you keep rolling out. The same goes for a deep ITM leap...if you just hold till the end of the year, you could give back all the premium you collected depending on the stock price. The best method for collecting premium would be to sell credit spreads and take assignment, but diversify with stocks in different sectors...so if one of them gets trapped, you just park it and continue with the others. You could also double dip to improve your B/E.
Thx, just as was suspected by me... But: did you try it also by shortselling options of tickers with high ATM IVs? Like ATMIV > 200 ? But such high ATM IV usually lasts not longer than 3 months. Ie. use DTE < 3 months.
When I look at IV on tos it only ever gets as high as 30%? Yes I would basically just sell ATM spreads with the idea that they will finish otm, but will take assignment versus closing for a loss. How about selling puts on IWM and RWM and just collect both premium, then turn around and sell calls. Wouldn't that be a built in hedge with no fees, and you collect premium? Ah they aren't daily expirations so you run into the original problem of the inverse not performing 1:1 over time. Wheres the free lunch??? lol
When I say High ATM IV, then it not necessarily means to sell the ATM strike. It rather means for filtering/finding tickers with high IVs: if it has a high ATM IV, then its other strikes surely will have even higher IVs.... I already had told you about this site in the pvt thread: https://marketchameleon.com/volReports/VolatilityRankings Click 2x on the column heading "Current IV30" to sort the list for the highest ATM IVs. Of course throw away the penny stocks. Try your strategy for example with the ticker SAVE and its options. BUT ATTN: it's a takeover target --> see this news. Forget your IWM and RWM They are useless toy tickers, like all ETFs, IMO
Can you pls clarify what you mean by the above. Why do you think is such an Assignment good? IMO, to get assigned is never good. But then you maybe do understand something different when saying "assignment", since you say "to take assignment", as nobody would say it so; one rather "gets assigned", forcefully initiated by the counterparty. Such an assignment is usually very undesireable/unwanted by the shortseller, since it means your shortposition will be forcefully closed by the other side... Ie. remote-controlled... of course happens only when the other party makes a substantial profit, which of course means a big loss for you... Ie. happens when your position is (temporarily) in the reds, without ever getting a chance to recover... as the position got closed... Of course the counterparty does it by clicking "Exercise" in his/her trade program.