Get started

Premiumselling

The Day Ahead: IWM, QQQ, TQQQ, GDXJ, FXI, EWZIt's Friday and a Triple Witching to boot! Well, IV isn't great here pretty much across the board for us premium sellers. Nevertheless, if you must play (and some of us gotta), here's what's shakin' ... . Broad Market QQQ, .8 IVR, 17.8% 30-day IV, with the shortest duration in which the <16 delta is paying greater than 1% of the strike price: December 29th. IWM, .7 IVR, 16.8% 30-day, with the shortest duration in which the <16 delta is paying greater than 1% of the strike price: December 29th. SPY, .9 IVR, 12.9% 30-day, with the shortest duration in which the <16 delta is paying greater than 1%: (Ugh), March (there is no February monthly yet). Exchange-Traded Funds Ideally, you want to hit these when IVR >50 and IV is >35%, but IVR is at rock bottom, with most skimming the very low end of their 52-week ranges. Sometimes, you just have to settle for what the market gives you. TQQQ, 8.5 IVR; 52.6% 30-day. GDXJ, .6 IVR; 31.6% 30-day. FXI, 7.9 IVR; 29.4% 30-day. EWZ, 2.8 IVR; 26.7% 30-day. Fortunately, all of these are <$45/share, so you will be small in terms of buying power effect with the natural exception of the leveraged TQQQ, which your broker may require be cash secured on margin (which naturally makes it less sexy in that environment from an ROC %-age perspective). Stay small and don't get all of your powder wet.
AMEX:IWMLong
by NaughtyPines
Opening (IRA): SPY January 19th 375 Short Put... for a 3.76 credit. Comments: Targeting the <16 delta strike paying around 1% of the strike price in credit to emulate dollar cost averaging into the broad market. Going out to January here, because I already have quite a few rungs on in the Nov and Dec monthlies, as well as the Dec 29th. I may still try to squeeze some rungs in November and December if that turns out to be productive and/or at better strikes than I currently have on.
AMEX:SPYLong
by NaughtyPines
Opening (IRA): IWM December 29th 155 Short Put... for a 1.56 credit. Comments: Rounding out rungs in the last of the available expiries in the 4th quarter, targeting the <16 delta strike paying around 1% of the strike price in credit to emulate dollar cost averaging into the broad market using short puts. If I had nothing on in IWM, I'd probably go shorter duration (e.g., November 17th) where the 165 is paying 1.75 at the moment; I already have a rung at that strike, so am going out farther in duration to keep theta on and burning. The same would probably go for my Friday stuff in the Q's and in SPY.
AMEX:IWM
by NaughtyPines
Opening (IRA): TLT October 27th 91 Short Put... for a .96 credit. Comments: Adding on weakness, targeting the strike paying around 1% of the strike price in credit in the contract nearest 45 days duration. This is more aggressive than I usually do, since it's at the 30 delta, but I'm looking to pick up shares at or around these lows if at all possible. Because of this, I'll look to run these right up until expiry and/or take them off for "approaching worthless"; I immediately stuck an order in to close it if it gets to .05. If I get assigned, I'll look to cover with short call.
NASDAQ:TLTLong
by NaughtyPines
The Day Ahead: Premium Selling in IWM, QQQ, FXI, GDXJ, SMHIt's Fryyyydayyyy ... (which is when I tend to do all my "stuff"). Well, unless you've been hiding under a rock (no judgment here), you'll know that premium-selling in broad market isn't very good here, with IWM IVR/IV at 12.3/19.7%, QQQ at 9.1/20.1%, and SPY at 6.8/14.4%. That sub-25 IVR is telling you that broad market IV is in the bottom quarter of its 52-week range which for premium-sellers is kind of drag. Your premium-selling options in this environment (at least from a premium selling perspective) are to (a) do nothing; (b) sell your go-to delta and duration for whatever the market is paying, knowing that you might get assigned at the strike or have a poo pile to manage toward expiry; or (c) go longer-dated to get paid something decent with the probability of profit (POP) and or probability of touch (POT) that you're used to. Since I'm trying to create cash flow here (at least in the retirement account), I generally opt for (c), since I'm not fond of cleaning up poo piles with a great deal of frequency and like high POP/low POT. With that goal in mind, I generally target the shortest duration <16 delta strike that is paying around 1% of the strike price in credit. Currently, the shortest duration <16 delta strike paying that in IWM is the December 15th 164 (14 delta, bid 1.65); in QQQ, the December 15th 325 (14 delta, bid 3.26); and in SPY, the Jan 19th 400 (16 delta, bid 4.24), so I'll look to add short put rungs in those durations or greater. Because broad market sucks so hard though, I'll also be venturing out into the exchange-traded fund space to see if I can scrounge up any premium there. Currently, FXI (IVR 11.3/30.8%), GDXJ (7.6/30.3%), and SMH (17.6/28.7%) are at the top of my screener when sorted for 30-day IV, but you can see that IV is also at the low end of the 52 week range in that space, too. The ideal is to sell in both high IVR/high IV with IVR >50/IV>35% for ETF's, but there is nothing currently in the space with those metrics, so -- as with broad market -- you're options are the same: (a) do nothing; (b) sell your go-to delta/duration with the chips falling where they may; or (c) sell longer duration with your go-to POP/POT. Here are the shortest duration <16 strikes paying around 1% of strike price in credit for these underlyings: FXI, Dec 15th 22.85, 13 delta, bid .29 (don't know what the odd ball strike is about). GDXJ, Nov 17th 29, 12 delta, bid .31. SMH, Nov 17th 130, 13 delta, bid 1.35. I would note that there is a highly options-liquid ETF with >50% IV, and it's TQQQ, with an IVR of 17.3 and a 30-day IV of (wait for it) ... 70.5%. It's a leveraged instrument, so I would exercise caution trading it with the expectation that, for example, the 16 delta (the 2 times expected move strike in non-leveraged stuff) is a "safe" strike to sell with limited assignment risk, a high probability of expiring worthless, and/or not being an in-the-money headache toward expiry. As long as you're familiar with all these "warts," it's probably okay to play small. That being said, it won't be particularly buying power efficient on margin; it looks like my broker's requiring that it be cash secured (most underlyings require 20% of the strike price or thereabouts in buying power), so the buying power requirement makes it "less sexy" in spite of its high IV. Lastly, I would be neglectful were I to not mention the single name space for premium-selling here, but my general order of preference in selling premium (particularly in the retirement account) is (a) broad market; (b) exchange-traded funds; and (c) single name (in that order). Here are the top 30-day IV, highly options liquid single name underlyings at the moment that are trading at >$20/share and with a 30-day>50%. There isn't a ton here and (as with everything else), IV is at the low end of its 52-week range (I mean 1.0? c'monnnn, you're killing me here, smalls): AFRM (Tech/Software)), IVR/IV 1.0/75.5% RIVN (Automaker/EV), 5.5/65.5% TSLA (Automaker/EV), 11.3/52.7%
AMEX:IWM
by NaughtyPines
Opening (IRA): IWM Jan 19th 157 Short Put... for a 1.58 credit. Comments: Targeting the <16 delta strike paying around 1% of the strike price in credit to emulate dollar cost averaging into the broad market. As I mentioned in my earlier post (See Below), shorter duration is probably paying, but I already have rungs on in the Nov 17th, Dec 15th, and Dec 29th expiries, so going out to 2024 here. Naturally, I'll sell in shorter duration if I can get in at strikes better than what I currently have on.
AMEX:IWMLong
by NaughtyPines
Opening (IRA): QQQ December 29th 297 Short Put... for a 3.00 credit. Comments: Rounding out fourth quarter rungs in the Q's here, targeting the <16 delta strike paying around 1% of the strike price in credit to emulate dollar cost averaging into the broad market. Shorter duration (i.e., November) is actually paying at or below the 16 delta strike, but already have rungs camped out there (although I still may squeeze some in there in the weeks ahead if it's productive). Will start to look to peel off shorter duration rungs as I come to them, although I only have a couple of October rungs left, with the majority being out in November and December.
NASDAQ:QQQLong
by NaughtyPines
Opening (IRA): SMH November 17th 122.5 Short Put... for a 1.34 credit. Comments: Adding a rung out in the November monthly so that my October rung doesn't look so lonely ... . It's actually because SMH 30-day IV is still fairly decent at 31.6%; the only options liquid ETF's with better IV are GDXJ (35.2%) and FXI (32.0%). Targeting the <16 delta strike paying around 1% of the strike price in credit to emulate dollar cost averaging into the semiconductor exchange-traded fund.
NASDAQ:SMHLong
by NaughtyPines