Get started

Shortput

OPENING (IRA): QQQ NOVEMBER 20TH 239 SHORT PUT... for a 3.90/contract credit. Notes: My weekly 2 x expected move/16 delta short put in the broad market exchange-traded fund with the highest 30-day, which is QQQ here at 33.6%. There isn't a weekly expiry available right around 45 days, so going with the monthly. 235.10 break even with a 1.66% ROC at max. Will run to approaching worthless and/or roll out "as is" for a credit or proceed to cover/sell call against if assigned.
NASDAQ:QQQ
by NaughtyPines
2
EDUCATION: SHORT PUT "WINDOW DRESSING" ROLLSPictured here is a QQQ November 239 short put I filled for a 3.90 credit. (See Post Below). It's got 33 days to go, and was valued at 1.32 as of Friday close (i.e., it's in profit by 2.58 ($258)). I would like to lock in that profit here, but stay in the play a little longer to bleed the last bit of extrinsic (1.32) out of it. Rolling out in time is one way to do that. Looking at the November 27th expiry in table view (that's extending duration just one week), I'm basically looking for a strike that is paying greater than 1.32 in credit. The November 27th 230 is paying 1.07 (too little to roll for a credit), while the 240 is paying 1.71 (which is greater than 1.32). There are only five-wides available in the November 27th expiry, so I would roll the November 20th 239 to the November 27th 240 for a credit that is equal to 1.71 (what the November 27th 240 is paying) minus the price of the November 20th 239 (1.32) or .39. This way, (a) I book a profit on the November 20th 239 of $258/contract; (b) increase my total credits received on the play by .39 (for a total of the 3.90 originally received plus .39 or 4.29); and (c) give myself a little more time to squeeze out what extrinsic remains in the short put, all while increasing net delta only slightly (from 7 delta for the November 20th 239 to 9 for the November 27th 240).
NASDAQ:QQQ
by NaughtyPines
OPENING (IRA): HYG NOVEMBER 20TH 77 SHORT PUT... for a .66/contract credit. Notes: A starter position in "junk" at the 17 delta in the November cycle. The implied volatility here is quite low -- 15.7% for the 30-day, but I'm looking to eventually swap out my TLT position for something that pays more on a percentage basis. HYG's yield is currently 5.02% with a monthly dividend payment of .341, with the short put premium nearly twice that amount, so I'm fine with just keeping the premium versus actually being in the stock. TLT's yield is currently a paltry 1.62% with a monthly dividend of .18292 as of the last distribution.
AMEX:HYG
by NaughtyPines
OPENING (IRA): SLV JANUARY 15TH 18.5 SHORT PUT... for .48/contract. Notes: Selling some more SLV (30-day at 47.7%), as well as collating my "ladder" into a single post. Will add in a December monthly "rung" once that becomes available, assuming the volatility hangs in there. Collected 1.74/contract in total. Here's the way I look at this trade relative to one put on in GLD: Currently, GLD is trading at 178.16, SLV at 22.65, so GLD is about 8 times the notional value of SLV here. The November 20th GLD 15 delta 184 strike is paying 1.14; the November 20th SLV 14 delta strike at 19. .31 and 8 x .31 = 2.48. Consequently, you're getting more than 2 x "bang for your buck" in risk premium as a function of stock price in SLV than GLD here, primarily due to the differential between SLV 30-day IV at 47.7% versus GLD's 20.4%.
AMEX:SLV
by NaughtyPines
EDUCATION: SPY SHORT PUT OR SPX SPREAD? PROS AND CONSPictured here is an SPX short put vertical I recently put on as an alternative to going SPY short put in cash secured environment. (See Post Below). When do one as opposed to the other and how should I manage each? First, let's compare the metrics of the two strategies, both of which are neutral to bullish assumption: they will make money at expiry if SPX/SPY goes up, sideways, or down, as long as it doesn't go so far down as to finish below the setup's break even. Currently, a "ten percenter" in the SPX November expiry (i.e., a spread paying at least 10% of its width) would be the 3080/3130, paying 5.00 even as of Friday close on a buying power effect of 45.00 ($4500), with a 3125 break even. The buying power effect is the same regardless of whether it's on margin or in a cash secured environment. A SPY short put with a similar break even (and therefore a similar probability of profit) would be the November 20th 315, paying 3.05 as of Friday's close with a break even of 311.95. Here, the buying power effect is different on margin versus cash secured. On margin, it should be approximately 20% of the short put strike or ~63.00 ($6300); in a cash secured environment, it is the short put strike (315) minus the credit received (3.05) or 311.95 ($31195). Buying Power Effect: On Margin: $4500 for the short put vertical, $6300 for the short put. Cash Secured: $4500 for the short put vertical, $31195 for the short put. Return on Capital: On Margin: 5.00/4500 = 10% for the short put vertical; 3.05/63.00 = 4.84% for the short put Cash Secured: 10% for the short put vertical; .98% for the short put. Given the expensiveness of going short put and the lower return on capital, why would I ever opt for that strategy over the short put vertical with its lower buying power effect and higher return on capital? 1. I am looking to acquire shares in the underlying, but don't want to reduce credit received by buying a long leg. In this particular example, I will never pick up shares via an SPX spread since it is cash settled.* 2. I am looking for flexibility in managing the strike price at which I'm potentially assigned shares. The short put can be rolled for additional credit, reducing cost basis further, or the strike improved via roll to change the strike price at which I'm assigned shares. The SPX spread won't roll well for a credit if tested. Trade Management: Short Put: Generally: Assuming a 45 day cycle, take profit at 50% max, take loss at 2 x credit received, or otherwise manage at 21 days until expiry (i.e., close out or roll out for a credit), whichever comes first. In cases where I'm looking to acquire shares in the underlying, however, I'm more likely to run the short put to approaching worthless, at which point it will be fairly clear that I'm not going to be acquiring shares in that cycle. There's little point in tying up buying power further to milk what little is left out of the option, particularly if there is oodles of time left until expiry. If it's in the money toward expiry, I compare and contrast whether I should roll out the short put "as is" for additional credit, versus allowing assignment of shares and then covering the shares with a short call. I generally go for the option that yields a higher credit. Short Put Vertical: Assuming a 45 day cycle, take profit at 50% max, take loss at 2 x credit received, or otherwise manage at 21 days until expiry (i.e., close out or roll for a credit), whichever comes first. * -- I can naturally sell a SPY spread and take on shares if the short put is broken which is another option to consider if I'm comfortable with and am able to take on shares at the short option leg price.
SP:SPX
by NaughtyPines
1
OPENING (IRA): GLD OCT/NOV/DEC 164/168/172 SHORT PUT LADDER... for a 5.69 credit total. Notes: Amazingly (or not), I have no gold in my retirement account. Although I feel I'm somewhat late to the game, taking up a position here in an instrument with excellent options liquidity. For smaller accounts, consider SLV, which also has the added benefit of having higher background implied (SLV: 69.4% versus GLD: 26.4%) or one of the miners (GDX, GDXJ). As with my other acquisitional setups, run to expiry/approaching worthless and if assigned shares, proceed to sell call against.
AMEX:GLD
by NaughtyPines
OPENING (IRA) (LATE POST): IWM OCTOBER 16TH 138 SHORT PUT... for a 1.98 credit. Notes: Another late post due to the number of "Update" posts I did yesterday. Instead of putting on my weekly 16 delta short put in SPY where expiry-specific implied is above 20, went with the more "frisky" IWM with expiry-specific implied at 30.8%. This will probably be the last broad market short put I deploy before the general elections. I want to have as much dry powder as possible in the event we have a sell-off or other high volatility event before or (more likely) after those.
AMEX:IWM
by NaughtyPines
1
OPENING (IRA): SPY AUGUST 28TH 280 SHORT PUT... for a 3.55 credit. Notes: Doing something a little more "programmatic" in the IRA by selling the 1 standard deviation/16 delta short put in the expiry nearest 45 days until expiry. Will take profit on approaching worthless or take assignment and sell calls against at the strike nearest the break even. This is naturally buying power heavy, but you can look to do the same basic trade in the smaller IWM or XLK, which has a three month correlation with SPY of .86.
AMEX:SPYLong
by NaughtyPines
OPENING (IRA): SPY SEPTEMBER 4TH 295 SHORT PUT... for a 3.45 credit. Notes: Sold the strike nearest the 16 delta. Meant to do this earlier in the week, but probably got distracted by a few earnings plays. Cost basis of 291.55 if assigned. Basically, looking to do this programmatically every week in the expiry nearest 45 days 'til expiry and then run it to expiry, at which time these will either (a) expire worthless; or (b) they'll be in the money, and I'll be assigned shares, at which point I'll proceed to cover with a short call at the strike nearest my cost basis (i.e., in this case, the 292).
AMEX:SPYLong
by NaughtyPines
2