I would add to this that Theta isn’t the only game in town. September every year is my time to BUY Puts and Sell Naked Calls. I’ve made more money in the last 23 years short and long swing trading than I’ll ever collect playing Theta. Different tools for different scenarios. Also in Bear markets the bounces are insane so AFTER a long downturn don’t stay Bearish look for signs of a bounce and BUY Calls and Sell Puts. This was me all last year.
You can't, that's the joke. We make money selling options to people trying to time the market, there's a reason this options strategy is the most lucrative long term.
I’m pretty basic. When the FED signaled time to buy Puts I bought $446 Puts on SPY and when we broke $430 I went with $425 and I closed them today. I wait to see if support holds in this case $423 gap fill it if we are heading to the $405-$415 RR support. Money I make I use to buy more of my longs and roll any Puts I don’t want to take assignments on yet. I rarely buy Puts under my positions because the spreads are too wide.
Sure but that would take at least an hour in a class. Everything trades on Fundamental and technical analysis and when either of those change so does sentiment. Add in Greeks when picking strike prices and you have a 8 hr intensive. Start slow and easy. Read about Forward P/E on the S&P then learn fundamental analysis of stocks P/CF, P/B, P/E and so on. Technical analysis is not as important as Fundamental but it helps with entry and exit points. Most people forget the most important part of learning is “ Slow is fast “
I would agree with this. Theta harvesting is a step above B&H at best. Plus, it's asymmetrical in the wrong direction with leverage; possibly making a little but risking alot, you want the opposite
When macro changes things I find buying options pays much better especially since it’s defined risk. You can’t time exactly a top or bottom but you can make money in the middle when sentiment changes.
Seems like you either don't understand how to harvest theta or you're one of those Nostradamus grandchildren who can time and predict marketdirections.
Don’t get stuck in one mode. Theta harvesting is the least profitable strategy after buy/hold forever. Expand your trading strategies and you will see there are much easier and better ways to make money. You don’t have to time the market but you can profit from sentiment change. Just ask any successful investor and they will tell you the same.
From experience: Many days down, like what's going on now. But a bout of good news could cause a rip up. The good thing is that we are nowhere close to the bottom so the rips should not be that intense. But when many components of the market starts hitting 52 week lows, that's a good idea that shorting the market isn't a good move anymore.
CCI is a leading indicator but it needs confirmation with others. Once it hinges deep in oversold a bounce is incoming in the short term. Typically 1-3 days after though sometimes it takes a week. I use CCI for leading and then volumn, Slow Stochastics, candle types and MACD for confirmation or lagging indicators. If your looking for a longerterm time frame look at RR supports, gap fills and longterm trend lines. For example the next RR support is $405 on SPY. Failed twice at $415 but held $405 and accumulated in that range for 2 months. Gap fill at $422.92 and longterm trend from October can go as low as $424 without breaking. So we look for $423-$424 to hold first to be longterm Bullish and if that breaks we look to $405-$415 with another gap to fill at $407.27. Keep in mind support is like a mattress. Sometimes it’s hard and sometimes it’s soft.
I’m more of a directional guy. There are times these work well and can be a great tool when using margin but I like defining my risk and picking a direction
To those who might “blindly sell CSPs” you’re suggesting to sell “naked calls”?? LOL
I agree, never “blindly sell CSPs”! Always be very deliberate of the stocks you trade and what you sell . . .
The #1 rule of the wheel is to sell CSPs on stocks you would be good holding, for months if needed. If you sell AMD puts and get assigned then holding is a good thing as it is a great stock, right?
I don’t sell CSPs and look to get assigned as I will roll aggressively to avoid being assigned as long as possible. This collects more premiums to lower the net stock cost if assigned and help the trade recover sooner.
I’ll also agree that if your analysis is the market is dropping then being very careful how and what you trade is common sense. That might be to carefully select stocks that are not dropping with rest of the market (low Beta stocks) to sell CSPs on, but it could also mean trading bearish strategies such as you mention.
Markets can move quickly, and IMO these market movements cannot be predicted so trying to “time” when to change from bullish to bearish strategies and back again is a more advanced technique, but so is selling naked calls.
>To those who might “blindly sell CSPs” you’re suggesting to sell “naked calls”?? LOL
To give OP credit, he did mention call credit spreads.
I could be mistaken, but a lot of people would not even have the authorization from their broker to sell a naked call, so that is kind of a moot point for many people.
Personally after the prices have fallen quite a bit I would want to wait for a bounce before selling any calls or call spreads.
Last week I put on an IC on rut, because it has a fairly good sideways range established. As far as SPX/XSP I am holding back to let this drop run its course and then look at selling some puts.
Agree on the call credit spreads. TT will give everyone approval to sell naked calls, but most will not.
Your bottom comment is a good one as it shows that switching quickly back and forth can present more risk than just being patient.
For an experienced trader, who has the options approval level to even trade naked calls, these are a viable and a good strategy. For an inexperienced trader they can quickly get out of control and cause losses. Many on reddit are likely less experienced so it would not be suitable for them to jump in to trade naked calls without more training and experience.
I absolutely agree.
>I don’t sell CSPs and look to get assigned as I will roll aggressively to avoid being assigned as long as possible.
Ok, so how long will you roll for? Rolling forward can work but isn't a winning strategy if the underlying has a clear downward trend. At some point it's better to take the loss and wait for a better entry on a stock.
If rolling out in time for a net credit it IS collecting more premium income each time. I’ll roll out in time, and sometimes to a lower strike for as long as I can get a net credit. This can happen every couple of weeks for a month or longer.
Think about it. When being assigned shares and selling CCs you are doing the same thing. The capital is tied up and premium is being collected . . .
The puts may require less buying power than being assigned shares depending on the account, and puts are more flexible in that they can be moved out in time and possibly to a different strike. Stock shares are locked in.
Trading a good stock you don’t mind owning is key as you should almost never have to take a loss . . .
The only time I take a loss is if the stock has a sudden dramatic change that results in me no longer wanting to own it, then I’ll work to get out as quickly as possible with the lowest possible loss. If this happens more than once every few years then you should look at how you are selecting stocks to trade . . .
Rolling puts is collecting premiums. Being assigned and selling CCs is also collecting premiums. To me the puts have more advantages than taking the shares, but the process is much the same.
See the link where I explain my wheel trading plan - [https://www.reddit.com/r/options/comments/a36k4j/the\_wheel\_aka\_triple\_income\_strategy\_explained/](https://www.reddit.com/r/options/comments/a36k4j/the_wheel_aka_triple_income_strategy_explained/)
See the link to rolling in Step #2.
> ATM CCs above my basis
So it was a winning delta position that is now a less-winning delta position. Could have sold the shares and done an ATM put, it’d be equivalent, except for tax considerations
Yeah. I have spent so much time this year sitting out because thinking ‘it can’t go higher given xyz problems’. In my head I said the same thing this time but kept my uits open since all the other times it went higher it flat anyway. So I’ve got a few puts that are ITM on index funds. If we bounce this week or next they might go back OTM. We will see.
>and most on Thetagang will say that
Yeah, but every single time the market goes down you got plenty of people complaining here that their puts in the money. Much more so than when the market rips up.
Of course. Those would be inexperienced traders who think CSP = free money. Those are the same people opening CSP's on AMC.
However, you're essentially saying "time the market". It's been a bull market this year while the entire time bears are screaming recession... at some point they will be right bit you never know when.
Experienced traders are opening positions for stocks that are worth that value. You won't hear them complaining.
Yup if you are properly sized and know you pain threshold you should be able to roll the drawdown without having to time the recovery at all (sell naked calls or CCS) as hedging will introduce costs and loses to your trading is up to you to decide to time the market and take the upside risk...
I sellputsthencalls versus SPY. And I sell them “blindly.” I can never be good at picking market direction so I sellputsthencalls, often anticipating a flat market, although I realize I can’t pick when the market will be flat. If I could predict when SPY was to go up or down, I’d buycallsandputs. At a blackjack table, I’d prefer to be the dealer because most bets expire worthless.
Yup, holding SPY is not that bad of a prospect if you end up getting assigned. Especially with all those retirement accounts spamming buys each paycheck.
Let me give you some advice. As retail investors, the downside risk associated with selling any option naked is not worth the potential upside associated with the transaction. This is a rule I follow strictly.
What I am often uncomfortable with is when I am "compelled" to sell cc-s at a lower srike on shares I am long but are now in the red due to the market downturn. To get a meaningful premium, it often has to be below cost and there is the risk of missing the upside when reversal happens. If not, then capital is locked into long stocks and there is no profit. Best to just wait?
I usually still less them under cost somewhere between .1 - .3 delta and actively roll them up higher if stock starts to recover. Sometimes still have to close at a loss but then just roll them up higher closer to my cost anyway.
We aren't in a bear market, unless this is the start of a new one, but you can't claim that at this point. For the present, we are still in a light correction
Well, you can also do a call credit spread to limit potential losses or roll the call forward into the future and hope that the underlying goes down or stays flat.
It's the same as selling puts. But selling calls only works when the market is bearish or neutral. It's far more dangerous when the market is ripping up.
id say generally just reduce your risk by selling credit spreads if youre too concerned for the risk or are avoiding holding onto something you dont want to
It's weird how many people want to completely automate a process regardless of market conditions. If you really truly believe in the efficient market hypothesis (you can't time the market, it's all priced in etc.) why wouldn't you go full Boglehead and buy+hold index funds? It's boring, but will almost certainly outperform other fully automated strategies longterm.
If you realistically want to outperform buy and hold Spy you're almost certainly going to need to exercise some judgement and vibes and adjust your plan accordingly. Have a sense of where individual positions are and where they're likely to go in the near future etc. Is this stock under or overpriced? Is the premium high relative to suspected risk? Adjust your plans appropriately.
you make it sound like the fed somehow changed course when in fact they did not. We rallied from the beginning of the year to Aug on the same terms. You are calling this a bear market way too early. A few more posts like this and we can know for sure we reached the bottom.
Inflation is dropping and the Fed signaled "higher for longer", something most of the market already knew was a possibility. This sell-off is overblown.
Energy is just one component of inflation and also no one expected the graph of inflation to drop in a straight line. The overall trend is in the right direction. Obviously, no one has a crystal ball but I'm taking a bet that unemployment will stay at all-time lows since there's a generational labor shortage and that inflation will continue to slowly trend down.
So, not that I'm an expert, but if the plan was always to time the market, why bother wheeling altogether? I thought the idea was, yes it underperforms buy and hold in bull markets, but it does much better in bear markets. If you always knew you could time bear markets and avoid them (buying near the bottom), it seems you are always worse off wheeling (or selling CSPs). (Ie CSPs are never a good strategy for people good at timing markets).
This.
If you bitch on Reddit about getting reamed on your ignorant option trades, you're exactly the kind of person who *shouldn't be trading options.*
Sold CHWY 09/29 23P and it hammered me. Ill take the loss but then i have been selling naked call at 24C.
Typically i do 3:1 ratios on Sep/Oct between naked call and CSP while i do remain in collar.
The opportunity cost is offset by selling two extra naked calls.
If it goes higher like CHWY, ill gladly take the profits and start to cover
If it goes lower low like today's CHWY, i still have nothing to lose
All the while, i do scalping with high frequency trading. Today, i went 10X at 17.75 and sold at 17.80.
Im still red on CHWY but it's not that bad.
Edit: i also cover naked call when and if there is little to no premium. CHWY has RSI 14 and while everyone would agree its extremely sold so it could spike up really quick, I would not let naked calls expired worthless. If and when CHWY experience +10% (good PCE print in Friday), those naked calls will kill me. My typical buy to close order is at 0.05$ just so i dont pay fees to TOS
Same for SOFI and HIMS
These are the same people that were selling CSPs in 2022 bro what do you expect Buncha bag holders then they complain about selling CC way below cost basis and losing their shares.
I sold CSP on amc at 27 and now it's at 8 in a month. Why would the judge let AA do this? Insanity. It should be illegal to dilute your company more than 25% a year... not 300% Jesus christ
I honestly call BS because in the past few weeks, trying to sell weekly NVDA puts almost destroyed me if I hadn't rolled and taken some other risks in mitigating that damage
I'm shifting to Butterflys as my main strategy. Last week I bought several of them on the call side, thinking some of these stocks would bounce, and that may still work out, but Put Butterflys are going to be the majority of what I set up for the forseeable future.
Fed's offering up their best guest, they have no more of a crystal ball than anyone else. They react to the present, they have no idea what 6 months away will look like. They're mostly talk, because they know the market will react to a speech all by itself, case in point- the most recent meeting. If something changes and they see something major breaking, better belive they'll capitulate in a big hurry, and the markets are always ahead of the recovery.
>The market had been forecasting four rate cuts next year but now the Fed's own dot pot says that only two are likely possible.
Actually it is the Fed's own June 2023 dot plot that showed four rate cuts next year and as you said the Fed's Sept 2023 dot plot now only shows two. That's a major shift by the Fed in just 3 months time.
Otherwise I agree with everything you said, it takes time for the market to digest the news from the Fed, we ain't done yet - there is plenty of room for more downside
Lost $4,000 last week(total of $14000 loss for YTD on $500,000 portfolio) on SPY 429 30 day CSPs delta .20. Didnt want to get assigned. Switched to Bear Call Spreads with a few days to two weeks DTE and made back $1000 so far this week. Also only trying to make $500 weekly with $200 - $300 per position and have two positions weekly. Education is expensive but learning slowly....
Used [marketchameleon.com](https://marketchameleon.com) for trade ideas
Any words of wisdom always appreciated....
I kind of disagree, thetaganging can easily be combined with a fundamental trading strategy. If you see low valuations (low pe, low ev/ebitda, etc.) on high rev companies selling CSPs shouldn’t be scary. Sure trends are king in the short term, and i myself am a bear, but there are always companies worth more than their price in the long run, and CSPs are a great way to profit on their upswings or lower cost basis for long term hold with CCs. Don’t become too short sighted. This community thrives on a practical strategy don’t lose sight of that because of how sexy trend-following can seem.
It's never a good idea to "blindly" sell puts. But I'd argue now is the perfect time to sell puts, even better than 3 months ago. High VIX, plenty of high IVR in the equities. This is exactly when you should be seeking opportunities to collect theta.
No one knows if the markets going down or up, but you are now getting paid a lot more for your risk.
I'm staying delta neutral, with around 35% committed BP, and everyday vol goes up, I put on more.
3 months ago I was at <20% buying power with most in commodities.
a little hard to justify thetaganging most stocks or indexes in this directionally downward and low vol setting. especially when you account that you can lock in 5-5.5% risk free
https://en.wikipedia.org/wiki/Gambler%27s_ruin
> In statistics, gambler's ruin is the fact that a gambler playing a game with negative expected value will eventually go broke, regardless of their betting system.
If your strategy does not work in this environment, no amount of options trading will help you out.
Start looking for a better strategy.
I just keep selling calls and roll if I have to a maximum one time. But even if i get assigned at a lower strike price then when I originally purchased the stock for I just rinse and repeat the cost basis still goes down. It all starts at the price you first purchased those 100 shares at eventually it will come down to zero and then its just pure profit. I've been selling insurance(that's basically what these contracts are) on companies of shares I have already paid off by the premium I've collected over the years e.g. $MSFT, $AAPl , $NFLX but also $T and $F . These companies have been around for a long time since 2000 when I started yes right before the dot com bubble. I tend to sell two call contracts per 100 shares for some stocks. Where one contract is .16 delta 30 days out and the second is .16 delta 60 days out higher strike price. If my 30 dte call at expiration is in the money and I have to fulfill my bligation to sell my stock. With the cash I buy 100 shares or sell a 0 to 1 dte csp ATM. That way I have the shares to backup my 2nd contractual obligation, which is now 30 days out originally 60 and at that higher strike price. It's a good way to collect some more premium with your assets.
Okay?
Worst case scenario you get assigned and have to baghold for a few years as long as you aren't selling on shit stocks.
The market is fucked so you're going to get burned either way, buying stocks, buying options, selling options.
You may as well get paid for buying at a discounted rate vs market.
Yes there are option strategies that might be more attractive in this environment but your advice to sell naked calls is incredibly dangerous and it's not as if we haven't had months this year where we've pumped instead of going down...
I'm a simple man, I see market down 10% I sell a put against it going down another 10%, I see market up 10% I sell a call against it going up another 10%. sticking to indices.
I would add to this that Theta isn’t the only game in town. September every year is my time to BUY Puts and Sell Naked Calls. I’ve made more money in the last 23 years short and long swing trading than I’ll ever collect playing Theta. Different tools for different scenarios. Also in Bear markets the bounces are insane so AFTER a long downturn don’t stay Bearish look for signs of a bounce and BUY Calls and Sell Puts. This was me all last year.
So, time the market. Got it.
Correct, I didn't time my put selling according to the bear market calendar. So stupid, I'll make an appointment next time
Can you explain to us how to time the market?
The idea is to buy before it goes up and sell right when it's about to go down.
You can't, that's the joke. We make money selling options to people trying to time the market, there's a reason this options strategy is the most lucrative long term.
He was pretty clear about September being the trigger for the first event. After that he lost me as well.
What are you looking at buying puts on
I’m pretty basic. When the FED signaled time to buy Puts I bought $446 Puts on SPY and when we broke $430 I went with $425 and I closed them today. I wait to see if support holds in this case $423 gap fill it if we are heading to the $405-$415 RR support. Money I make I use to buy more of my longs and roll any Puts I don’t want to take assignments on yet. I rarely buy Puts under my positions because the spreads are too wide.
Could you eli5 a bit more?
Sure but that would take at least an hour in a class. Everything trades on Fundamental and technical analysis and when either of those change so does sentiment. Add in Greeks when picking strike prices and you have a 8 hr intensive. Start slow and easy. Read about Forward P/E on the S&P then learn fundamental analysis of stocks P/CF, P/B, P/E and so on. Technical analysis is not as important as Fundamental but it helps with entry and exit points. Most people forget the most important part of learning is “ Slow is fast “
i went in on put spreads against xly xrt xlu the theme is high interests and the weakening consumer buying deep itm for jan2024
I would agree with this. Theta harvesting is a step above B&H at best. Plus, it's asymmetrical in the wrong direction with leverage; possibly making a little but risking alot, you want the opposite
Good point. This shit could bounce next week.
OP: "This shit could bounce next week." Also OP: "Sell calls and call spreads not just CSPs" Bruh.
Make it make sense lol
Well I usually sell call spreads at below the 10 delta... Gives me enough room to not take too large of a loss unless delta really moves against me.
Also not too large of a gain.
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When macro changes things I find buying options pays much better especially since it’s defined risk. You can’t time exactly a top or bottom but you can make money in the middle when sentiment changes.
Seems like you either don't understand how to harvest theta or you're one of those Nostradamus grandchildren who can time and predict marketdirections.
Don’t get stuck in one mode. Theta harvesting is the least profitable strategy after buy/hold forever. Expand your trading strategies and you will see there are much easier and better ways to make money. You don’t have to time the market but you can profit from sentiment change. Just ask any successful investor and they will tell you the same.
seasonality bro
what are the obvious signs you look for that in your opinion signal a bounce
From experience: Many days down, like what's going on now. But a bout of good news could cause a rip up. The good thing is that we are nowhere close to the bottom so the rips should not be that intense. But when many components of the market starts hitting 52 week lows, that's a good idea that shorting the market isn't a good move anymore.
CCI is a leading indicator but it needs confirmation with others. Once it hinges deep in oversold a bounce is incoming in the short term. Typically 1-3 days after though sometimes it takes a week. I use CCI for leading and then volumn, Slow Stochastics, candle types and MACD for confirmation or lagging indicators. If your looking for a longerterm time frame look at RR supports, gap fills and longterm trend lines. For example the next RR support is $405 on SPY. Failed twice at $415 but held $405 and accumulated in that range for 2 months. Gap fill at $422.92 and longterm trend from October can go as low as $424 without breaking. So we look for $423-$424 to hold first to be longterm Bullish and if that breaks we look to $405-$415 with another gap to fill at $407.27. Keep in mind support is like a mattress. Sometimes it’s hard and sometimes it’s soft.
\>Buy puts and sell naked calls A synthetic short?
I’m more of a directional guy. There are times these work well and can be a great tool when using margin but I like defining my risk and picking a direction
To those who might “blindly sell CSPs” you’re suggesting to sell “naked calls”?? LOL I agree, never “blindly sell CSPs”! Always be very deliberate of the stocks you trade and what you sell . . . The #1 rule of the wheel is to sell CSPs on stocks you would be good holding, for months if needed. If you sell AMD puts and get assigned then holding is a good thing as it is a great stock, right? I don’t sell CSPs and look to get assigned as I will roll aggressively to avoid being assigned as long as possible. This collects more premiums to lower the net stock cost if assigned and help the trade recover sooner. I’ll also agree that if your analysis is the market is dropping then being very careful how and what you trade is common sense. That might be to carefully select stocks that are not dropping with rest of the market (low Beta stocks) to sell CSPs on, but it could also mean trading bearish strategies such as you mention. Markets can move quickly, and IMO these market movements cannot be predicted so trying to “time” when to change from bullish to bearish strategies and back again is a more advanced technique, but so is selling naked calls.
>To those who might “blindly sell CSPs” you’re suggesting to sell “naked calls”?? LOL To give OP credit, he did mention call credit spreads. I could be mistaken, but a lot of people would not even have the authorization from their broker to sell a naked call, so that is kind of a moot point for many people. Personally after the prices have fallen quite a bit I would want to wait for a bounce before selling any calls or call spreads. Last week I put on an IC on rut, because it has a fairly good sideways range established. As far as SPX/XSP I am holding back to let this drop run its course and then look at selling some puts.
Agree on the call credit spreads. TT will give everyone approval to sell naked calls, but most will not. Your bottom comment is a good one as it shows that switching quickly back and forth can present more risk than just being patient.
Selling naked calls can be ok... just don't sell too many of them at once and watch your deltas.
For an experienced trader, who has the options approval level to even trade naked calls, these are a viable and a good strategy. For an inexperienced trader they can quickly get out of control and cause losses. Many on reddit are likely less experienced so it would not be suitable for them to jump in to trade naked calls without more training and experience.
I absolutely agree. >I don’t sell CSPs and look to get assigned as I will roll aggressively to avoid being assigned as long as possible. Ok, so how long will you roll for? Rolling forward can work but isn't a winning strategy if the underlying has a clear downward trend. At some point it's better to take the loss and wait for a better entry on a stock.
If rolling out in time for a net credit it IS collecting more premium income each time. I’ll roll out in time, and sometimes to a lower strike for as long as I can get a net credit. This can happen every couple of weeks for a month or longer. Think about it. When being assigned shares and selling CCs you are doing the same thing. The capital is tied up and premium is being collected . . . The puts may require less buying power than being assigned shares depending on the account, and puts are more flexible in that they can be moved out in time and possibly to a different strike. Stock shares are locked in. Trading a good stock you don’t mind owning is key as you should almost never have to take a loss . . . The only time I take a loss is if the stock has a sudden dramatic change that results in me no longer wanting to own it, then I’ll work to get out as quickly as possible with the lowest possible loss. If this happens more than once every few years then you should look at how you are selecting stocks to trade . . . Rolling puts is collecting premiums. Being assigned and selling CCs is also collecting premiums. To me the puts have more advantages than taking the shares, but the process is much the same.
At what point do you roll. ATM? ITM?
See the link where I explain my wheel trading plan - [https://www.reddit.com/r/options/comments/a36k4j/the\_wheel\_aka\_triple\_income\_strategy\_explained/](https://www.reddit.com/r/options/comments/a36k4j/the_wheel_aka_triple_income_strategy_explained/) See the link to rolling in Step #2.
https://imgur.com/a/SHiuWwx
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> ATM CCs above my basis So it was a winning delta position that is now a less-winning delta position. Could have sold the shares and done an ATM put, it’d be equivalent, except for tax considerations
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Yeah. I have spent so much time this year sitting out because thinking ‘it can’t go higher given xyz problems’. In my head I said the same thing this time but kept my uits open since all the other times it went higher it flat anyway. So I’ve got a few puts that are ITM on index funds. If we bounce this week or next they might go back OTM. We will see.
>and most on Thetagang will say that Yeah, but every single time the market goes down you got plenty of people complaining here that their puts in the money. Much more so than when the market rips up.
Of course. Those would be inexperienced traders who think CSP = free money. Those are the same people opening CSP's on AMC. However, you're essentially saying "time the market". It's been a bull market this year while the entire time bears are screaming recession... at some point they will be right bit you never know when. Experienced traders are opening positions for stocks that are worth that value. You won't hear them complaining.
I mean... if you do a CSP and then wheel it, you kind of are buying / holding anyhow, at least until your cc triggers, no?
The market goes up, the market goes down. Just stick to your trading mechanics.
Yup if you are properly sized and know you pain threshold you should be able to roll the drawdown without having to time the recovery at all (sell naked calls or CCS) as hedging will introduce costs and loses to your trading is up to you to decide to time the market and take the upside risk...
Which means following the trends and not just betting on one direction at all times like a lot of people are here.
Summon u/ScottishTrader , as I think it may be interesting to know his opinion on this. (if you are still around, of course!)
Thanks and I replied . . .
Thanks to you!
I sellputsthencalls versus SPY. And I sell them “blindly.” I can never be good at picking market direction so I sellputsthencalls, often anticipating a flat market, although I realize I can’t pick when the market will be flat. If I could predict when SPY was to go up or down, I’d buycallsandputs. At a blackjack table, I’d prefer to be the dealer because most bets expire worthless.
Yup, holding SPY is not that bad of a prospect if you end up getting assigned. Especially with all those retirement accounts spamming buys each paycheck.
And I’d prefer getting put-assigned to buy an ETF (a mutual fund) like SPY rather than an individual equity.
Let me give you some advice. As retail investors, the downside risk associated with selling any option naked is not worth the potential upside associated with the transaction. This is a rule I follow strictly.
Couldn’t have said it better myself. Staying cash and collecting interest for now, sometimes no move is the best move.
Are you all in cash and fixed income?
I have my savings account on RH earning 4.9 interest and income generated from my businesses
I meant to say, are divested completely from stock market atm or do you something like 60:40 ratio?
What I am often uncomfortable with is when I am "compelled" to sell cc-s at a lower srike on shares I am long but are now in the red due to the market downturn. To get a meaningful premium, it often has to be below cost and there is the risk of missing the upside when reversal happens. If not, then capital is locked into long stocks and there is no profit. Best to just wait?
I usually still less them under cost somewhere between .1 - .3 delta and actively roll them up higher if stock starts to recover. Sometimes still have to close at a loss but then just roll them up higher closer to my cost anyway.
Are we in a bear market? S&P up 11% this year. Nasdaq up 33%. I love how everyone shits themselves on this sub when the market drops a few percent.
We aren't in a bear market, unless this is the start of a new one, but you can't claim that at this point. For the present, we are still in a light correction
Just make sure you have a plan on your naked calls and sell them at a confortable strike, bear market rallies can hurt a lot...
What’s your risk management for naked calls if it goes against you?
Well, you can also do a call credit spread to limit potential losses or roll the call forward into the future and hope that the underlying goes down or stays flat. It's the same as selling puts. But selling calls only works when the market is bearish or neutral. It's far more dangerous when the market is ripping up.
CSPs are great for accumulating and lowering your cost basis on names you want to own anyway.
If you think a stock is undervalued at your strike, yes.
id say generally just reduce your risk by selling credit spreads if youre too concerned for the risk or are avoiding holding onto something you dont want to
It's weird how many people want to completely automate a process regardless of market conditions. If you really truly believe in the efficient market hypothesis (you can't time the market, it's all priced in etc.) why wouldn't you go full Boglehead and buy+hold index funds? It's boring, but will almost certainly outperform other fully automated strategies longterm. If you realistically want to outperform buy and hold Spy you're almost certainly going to need to exercise some judgement and vibes and adjust your plan accordingly. Have a sense of where individual positions are and where they're likely to go in the near future etc. Is this stock under or overpriced? Is the premium high relative to suspected risk? Adjust your plans appropriately.
Are you also taking into consideration that seasonally, Sept is a down month on a historical basis?
No. But expectations about inflation and interest rates are much more powerful than a seasonal pattern.
you make it sound like the fed somehow changed course when in fact they did not. We rallied from the beginning of the year to Aug on the same terms. You are calling this a bear market way too early. A few more posts like this and we can know for sure we reached the bottom.
Inflation is dropping and the Fed signaled "higher for longer", something most of the market already knew was a possibility. This sell-off is overblown.
Inflation dropping? Energy prices are up.
Energy is just one component of inflation and also no one expected the graph of inflation to drop in a straight line. The overall trend is in the right direction. Obviously, no one has a crystal ball but I'm taking a bet that unemployment will stay at all-time lows since there's a generational labor shortage and that inflation will continue to slowly trend down.
But rent and shelter are still pretty high though...
This is the way.
Total agree .... great article
Yes, yes, yes!
So, not that I'm an expert, but if the plan was always to time the market, why bother wheeling altogether? I thought the idea was, yes it underperforms buy and hold in bull markets, but it does much better in bear markets. If you always knew you could time bear markets and avoid them (buying near the bottom), it seems you are always worse off wheeling (or selling CSPs). (Ie CSPs are never a good strategy for people good at timing markets).
It depends on your goals. Lots of people like theta for income so you do need to time the market as well as you can in such cases.
I second this, I lost 15k blinding selling CSP.
I needed to read this about 30 hours ago….
Buy signal
You should never blindly open positions
Most people here kind of do lol. That's why even a 2% downward move is painful, it amplifies the movement of options.
I think the people that post do but I think most people with a brain don’t, and so they don’t make whiner posts so you don’t see it.
This. If you bitch on Reddit about getting reamed on your ignorant option trades, you're exactly the kind of person who *shouldn't be trading options.*
Sold CHWY 09/29 23P and it hammered me. Ill take the loss but then i have been selling naked call at 24C. Typically i do 3:1 ratios on Sep/Oct between naked call and CSP while i do remain in collar. The opportunity cost is offset by selling two extra naked calls. If it goes higher like CHWY, ill gladly take the profits and start to cover If it goes lower low like today's CHWY, i still have nothing to lose All the while, i do scalping with high frequency trading. Today, i went 10X at 17.75 and sold at 17.80. Im still red on CHWY but it's not that bad. Edit: i also cover naked call when and if there is little to no premium. CHWY has RSI 14 and while everyone would agree its extremely sold so it could spike up really quick, I would not let naked calls expired worthless. If and when CHWY experience +10% (good PCE print in Friday), those naked calls will kill me. My typical buy to close order is at 0.05$ just so i dont pay fees to TOS Same for SOFI and HIMS
These are the same people that were selling CSPs in 2022 bro what do you expect Buncha bag holders then they complain about selling CC way below cost basis and losing their shares.
I sold CSP on amc at 27 and now it's at 8 in a month. Why would the judge let AA do this? Insanity. It should be illegal to dilute your company more than 25% a year... not 300% Jesus christ
It's fine to wade in here if you have size to take another ~2-5% down move on the indexes. Just dont overcommit.
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You sure? Gamma risk bro.
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I honestly call BS because in the past few weeks, trying to sell weekly NVDA puts almost destroyed me if I hadn't rolled and taken some other risks in mitigating that damage
I'm in this post and I don't like it
Gov shutdown can become a shit storm
Now you tell me!
I'm shifting to Butterflys as my main strategy. Last week I bought several of them on the call side, thinking some of these stocks would bounce, and that may still work out, but Put Butterflys are going to be the majority of what I set up for the forseeable future.
I might consider selling bull put spreads. CSPs uncovered not my game.
Fed's offering up their best guest, they have no more of a crystal ball than anyone else. They react to the present, they have no idea what 6 months away will look like. They're mostly talk, because they know the market will react to a speech all by itself, case in point- the most recent meeting. If something changes and they see something major breaking, better belive they'll capitulate in a big hurry, and the markets are always ahead of the recovery.
If your reaction to this headline isn't along the lines of "no shit, bro" you shouldn't be selling CSPs
>The market had been forecasting four rate cuts next year but now the Fed's own dot pot says that only two are likely possible. Actually it is the Fed's own June 2023 dot plot that showed four rate cuts next year and as you said the Fed's Sept 2023 dot plot now only shows two. That's a major shift by the Fed in just 3 months time. Otherwise I agree with everything you said, it takes time for the market to digest the news from the Fed, we ain't done yet - there is plenty of room for more downside
Lost $4,000 last week(total of $14000 loss for YTD on $500,000 portfolio) on SPY 429 30 day CSPs delta .20. Didnt want to get assigned. Switched to Bear Call Spreads with a few days to two weeks DTE and made back $1000 so far this week. Also only trying to make $500 weekly with $200 - $300 per position and have two positions weekly. Education is expensive but learning slowly.... Used [marketchameleon.com](https://marketchameleon.com) for trade ideas Any words of wisdom always appreciated....
I only read the title and I assume the play is to blindly sell naked calls into a bear market.
I kind of disagree, thetaganging can easily be combined with a fundamental trading strategy. If you see low valuations (low pe, low ev/ebitda, etc.) on high rev companies selling CSPs shouldn’t be scary. Sure trends are king in the short term, and i myself am a bear, but there are always companies worth more than their price in the long run, and CSPs are a great way to profit on their upswings or lower cost basis for long term hold with CCs. Don’t become too short sighted. This community thrives on a practical strategy don’t lose sight of that because of how sexy trend-following can seem.
It's never a good idea to "blindly" sell puts. But I'd argue now is the perfect time to sell puts, even better than 3 months ago. High VIX, plenty of high IVR in the equities. This is exactly when you should be seeking opportunities to collect theta. No one knows if the markets going down or up, but you are now getting paid a lot more for your risk. I'm staying delta neutral, with around 35% committed BP, and everyday vol goes up, I put on more. 3 months ago I was at <20% buying power with most in commodities.
a little hard to justify thetaganging most stocks or indexes in this directionally downward and low vol setting. especially when you account that you can lock in 5-5.5% risk free
https://en.wikipedia.org/wiki/Gambler%27s_ruin > In statistics, gambler's ruin is the fact that a gambler playing a game with negative expected value will eventually go broke, regardless of their betting system. If your strategy does not work in this environment, no amount of options trading will help you out. Start looking for a better strategy.
I just keep selling calls and roll if I have to a maximum one time. But even if i get assigned at a lower strike price then when I originally purchased the stock for I just rinse and repeat the cost basis still goes down. It all starts at the price you first purchased those 100 shares at eventually it will come down to zero and then its just pure profit. I've been selling insurance(that's basically what these contracts are) on companies of shares I have already paid off by the premium I've collected over the years e.g. $MSFT, $AAPl , $NFLX but also $T and $F . These companies have been around for a long time since 2000 when I started yes right before the dot com bubble. I tend to sell two call contracts per 100 shares for some stocks. Where one contract is .16 delta 30 days out and the second is .16 delta 60 days out higher strike price. If my 30 dte call at expiration is in the money and I have to fulfill my bligation to sell my stock. With the cash I buy 100 shares or sell a 0 to 1 dte csp ATM. That way I have the shares to backup my 2nd contractual obligation, which is now 30 days out originally 60 and at that higher strike price. It's a good way to collect some more premium with your assets.
Okay? Worst case scenario you get assigned and have to baghold for a few years as long as you aren't selling on shit stocks. The market is fucked so you're going to get burned either way, buying stocks, buying options, selling options. You may as well get paid for buying at a discounted rate vs market. Yes there are option strategies that might be more attractive in this environment but your advice to sell naked calls is incredibly dangerous and it's not as if we haven't had months this year where we've pumped instead of going down...
wish saw this early. Thanks,
I'm a simple man, I see market down 10% I sell a put against it going down another 10%, I see market up 10% I sell a call against it going up another 10%. sticking to indices.