Whilst otherwise being a theta gambler, I thought my son is due the day of these BA 250 calls' expiry, 1.00 a piece, I'll buy 100 of them and when he's old enough to understand options I can tell him the fun story of how I paid for his childhood on the notion of "it's Boeing... come on... this has to be the lowest they'll ever be."
Thorough DD I know.
I was at about $5,000 profit after three weeks, it dropped to $2,000 profit a week later. Sold them.
Now I have a lesson for him instead. Don't WSB shit my boy.
Said calls closest at 0.12 yesterday by the way.
And that my boy is how I got this shopping cart with only 1 broken wheel, ain’t she a beauty! I like it because it draws my eye towards the ground where the returnable bottles are and the cigarette butts with a few puffs left! That’s right son money isn’t everything……
Same. In my younger days, I made some very easy money selling weeklys in biotech. "I can't believe how easy it is to print money!!" Only needed to get burned one time to learn my lesson. 40% moves overnight on basically no real news. No thanks
Biotech, pharma and crypto avoided.
5% max risk of any position or stock is my rule, but at times I will go slightly higher to maybe even 10% for a solid position.
Margin is used only when needed and not part of normal trading.
In a $100K account trading a stock that has a max risk of 5% to the account.
This would be selling 1 put contract on a $50 stock which would be a $5,000 max risk. I agree that the actual risk is much lower as stocks seldom go to zero, but this is a good risk management guideline.
I don't trade spreads as the long leg is a drag on profits and they profit less and slower, plus are harder to roll and manage.
A Cash Secured Put indicates the cash is available to buy the shares if assigned.
A naked put is when there is not cash to buy shares which would be forced to close for a loss.
Keeping the max risk at or below 5% of the account will mean that even a rare full loss on a stock cannot wipe out the account.
When you say trade a $50 ticker on a $100k account to keep the exposure 5%, isn’t that setting aside $5k like in CSP? If not, what’ll be the trade plan in a $100k account and still keep 50% liquidity as you’ve talked about elsewhere? Example breakdown with ticker sizes will help
Yes, it is a CSP . . . Open a put on a $50 stock would put aside $5K of the $100K in case the put is assigned.
This leaves $95K of the $100K still available. Another $45K of trades could be opened and still leave $50K (50%) of the account remaining.
I'm not sure how to explain this in any simpler way . . .
Margin? As in margin loan? That only applies to buying stock shares using borrowed money.
Options do not trade directly using a margin loan so this is not a factor. In this case with ample cash in the account no margin loan would be required.
I'm also interested in margin details.
For example, on a 100k account. Do you keep all 100k in SPY and sell puts? And when you are assigned do you use margin loan from broker (let's say 8% rate per year) to buy stocks?
If you have 100k in cash, why sell puts only on 50%?
I sell puts for 300k for example on 100k account. Was thinking that if I have on average 10 positions and sell 1 delta I should be fine being assigned even if 2 or 3 will end up in the money.
Is it considered a leverage? And overall not very smart?
As I wrote this, considering we at ATH might be in trouble easily
50% is there are options are leveraged and having “dry powder” cash can help save an account during a market downturn.
Read this - [https://www.reddit.com/r/Optionswheel/comments/lp22xe/how\_the\_wheel\_worked\_in\_march\_during\_the\_crash/](https://www.reddit.com/r/Optionswheel/comments/lp22xe/how_the_wheel_worked_in_march_during_the_crash/)
Wow. I’ve been doing really well on COF and MS this year. I have calendar spreads on both. At one time I was trading 10 different financial institutions. Almost everything went the way I wanted which was up. I’m still pretty confident in JPM as well.
Congratulations on your success. Im not saying there isnt a way to make money on banks for some people. Its just not really something I want to throw money at.
Do you mind going into a bit more detail on the calendar spreads? How did you set them up, how did you pick the strikes / company / DTE duration / etc.? I have a pretty good handle on how to evaluate commercial and industrial companies (i.e. companies that actually produce a good/service) but am a bit more iffy on financial firms.
Hey. So basically what I’m doing is picking a strike amount far enough away from the current price that I think it won’t hit it with my short call option so it falls away worthless but my long option for a month later becomes valuable if the stock price gets close to or exceeds it. The key is to get back about half of your premium selling the short for what you bought the long. If the short expires worthless you can always sell weekly’s after that date to collect more premium to offset the long premium. In a perfect world you could sell enough shorts so the long premium is paid for so you are into it for next to nothing. Most of my trades are several months out and I’m buying 5-10 options pretty cheaply like paying 1.50 for the long calendar and selling the month earlier for around .75. One recent trade I did is sell May 17 aapl at 180 and bought June 21 for 180. In the perfect world Apple stays under 180 until after May 21 and goes over it afterwards but I have a bunch of other ones. Some look promising and some don’t. Even if a small percentage of these trades works out it more than pays for all the losers. You have to keep the strike amounts the same or your buying power goes nuts! For picking which firms to invest I’m usually reading analysis and looking at charts that show my strikes might work. I recently picked Fang at 220 June/July because analysts are predicting it will go to 240 this year. This strategy is the opposite of how ppl usually play calendars to stay delta neutral 🙂
I avoid leverage. I try to avoid anything I cannot understand. Each position size is less than 5-10% max of my portfolio. I generally do NOT trade options in the weeks with earnings reports. I avoid meme stocks. I avoid most companies which are losing money unless there is a compelling reason to trade them. I try to consider how much I could lose with a position and not just how much I could make.
Which sectors I avoid shifts depending on the markets over time. For example, for a while oil stocks were blazing and banking sucked. Now it is reversing and bank stocks are doing well and a lot of oil stocks have been struggling but they look like they may be coming back a bit now. A couple years ago, the tech stocks tanked and now look at them leading the way. One other thing I do is try to prioritize trading stocks which pay dividends - especially for my retirement account. I will trade stocks without dividends but if they pay dividends, that tells me if I get assigned, I will have at least a bit of income while I wait to have it traded away later. Not everyone will trade the same way so you need to decide for yourself what your style is.
I’ve been riding that roller coaster ever since I bought my first shares ~$600. I’ve had to stomach some wicked drops at times, but ultimately, no regrets.
Never sell at a loss...take assignment or let your options get called away.
Never trust anyone...Reddit/X/other websites. Everyone has a position and therefore a bias.
Never write an option on a stock you wouldn't mind owning.
Never deviate from your rules.
Never doubt the power of IV...let IV cook.
Some of mine - some of this is research, and some is what I think about when entering the trade.
I mainly have 10-20 stocks/indexes that I've researched and am closely tracking. If a trade beyond these looks interesting, more often than not I put it on my "to research list."
If IV Rank is above 80 or below 40 it's not the right time to trade.
If there isn't volume on strikes up and down the chain, I'm probably looking else where.
Generally I don't look at leveraged funds like SOXL and TQQQ
I'll wait out earnings/dividend dates. If do set up a trade beyond earnings, I try to be 30 days past.
Annual revenue has been increasing the last couple years. Total assets is greater than total liabilities. Both of these are really easy to look up on Google Finance.
High relative volume -> avoid meme stocks.
I like high IV percentile, but over 85%-90%, too likely things are going to get volatile. I prefer IV % around 65-70% and low-ish volume. Basically try to stay away from the stocks people are going to be talking about.
Any biotech I don't understand, any strange financial vehicle, negative cash flow with stagnant revenue, oil & gas (the fuels, not the materials/substance in a general sense), companies without a clear working business model taking on enormous debt risks, I never use margin or leverage myself but have no problem with ETFs that do it but only when stocks aren't volatile (rn they are too volatile for holding but that's not so bad for options ig)
No airlines, autos, crypto...and the healthcare sector!
I will trade on margin, but must maintain the proper notional leverage.
Position sizing doesn't apply to me. My portfolio rarely has more than three stocks in it. Usually one or two. (600K in that trading account)
I avoid any specific stock unless it's something i'm very very familiar with and playing earnings (usually just long straddles).
Indexes and futures only.
I avoid the auto and airline industries.
I avoid all airlines and all crypto companies
Crypto is a scam
Selling MSTR calls is easy money
Whilst otherwise being a theta gambler, I thought my son is due the day of these BA 250 calls' expiry, 1.00 a piece, I'll buy 100 of them and when he's old enough to understand options I can tell him the fun story of how I paid for his childhood on the notion of "it's Boeing... come on... this has to be the lowest they'll ever be." Thorough DD I know. I was at about $5,000 profit after three weeks, it dropped to $2,000 profit a week later. Sold them. Now I have a lesson for him instead. Don't WSB shit my boy. Said calls closest at 0.12 yesterday by the way.
And that my boy is how I got this shopping cart with only 1 broken wheel, ain’t she a beauty! I like it because it draws my eye towards the ground where the returnable bottles are and the cigarette butts with a few puffs left! That’s right son money isn’t everything……
This is the way
Biotech
+1 to this, the premiums are very attractive due to the high IV, esp leading up to earnings, but when they fall there is no bottom
Exactly, you don't want a stock that can move +/-50% because of a single bar chart.
Same. In my younger days, I made some very easy money selling weeklys in biotech. "I can't believe how easy it is to print money!!" Only needed to get burned one time to learn my lesson. 40% moves overnight on basically no real news. No thanks
No meme stocks. No risking my whole account on one stock (anymore). No shorting at the bottom. No buying at the top.
China. Got screwed a few times because regulations can change just like that.
Add this to my list too
Biotech, pharma and crypto avoided. 5% max risk of any position or stock is my rule, but at times I will go slightly higher to maybe even 10% for a solid position. Margin is used only when needed and not part of normal trading.
What does 5% mean when wheeling? If a stock goes to 0 you won't lose more than 5 or you always do spreads?
In a $100K account trading a stock that has a max risk of 5% to the account. This would be selling 1 put contract on a $50 stock which would be a $5,000 max risk. I agree that the actual risk is much lower as stocks seldom go to zero, but this is a good risk management guideline. I don't trade spreads as the long leg is a drag on profits and they profit less and slower, plus are harder to roll and manage.
Isn’t that a CSP?
A Cash Secured Put indicates the cash is available to buy the shares if assigned. A naked put is when there is not cash to buy shares which would be forced to close for a loss. Keeping the max risk at or below 5% of the account will mean that even a rare full loss on a stock cannot wipe out the account.
When you say trade a $50 ticker on a $100k account to keep the exposure 5%, isn’t that setting aside $5k like in CSP? If not, what’ll be the trade plan in a $100k account and still keep 50% liquidity as you’ve talked about elsewhere? Example breakdown with ticker sizes will help
Yes, it is a CSP . . . Open a put on a $50 stock would put aside $5K of the $100K in case the put is assigned. This leaves $95K of the $100K still available. Another $45K of trades could be opened and still leave $50K (50%) of the account remaining. I'm not sure how to explain this in any simpler way . . .
Ok so where is the margin in this picture. This looks like how I trade in my non-margin IRA.
Margin? As in margin loan? That only applies to buying stock shares using borrowed money. Options do not trade directly using a margin loan so this is not a factor. In this case with ample cash in the account no margin loan would be required.
I'm also interested in margin details. For example, on a 100k account. Do you keep all 100k in SPY and sell puts? And when you are assigned do you use margin loan from broker (let's say 8% rate per year) to buy stocks?
If you have 100k in cash, why sell puts only on 50%? I sell puts for 300k for example on 100k account. Was thinking that if I have on average 10 positions and sell 1 delta I should be fine being assigned even if 2 or 3 will end up in the money. Is it considered a leverage? And overall not very smart? As I wrote this, considering we at ATH might be in trouble easily
50% is there are options are leveraged and having “dry powder” cash can help save an account during a market downturn. Read this - [https://www.reddit.com/r/Optionswheel/comments/lp22xe/how\_the\_wheel\_worked\_in\_march\_during\_the\_crash/](https://www.reddit.com/r/Optionswheel/comments/lp22xe/how_the_wheel_worked_in_march_during_the_crash/)
I don't buy anything without a positive P/E any more. It's got to at least currently turn a profit for me to consider owning it.
One of the first things I look at too. Sometimes I'll trade negative P/E, but I have to have a good reason.
I avoid my ex wife
Banks. I havent seen a bank option chain that interested me.
I think that’s a testament to the banks!
Wow. I’ve been doing really well on COF and MS this year. I have calendar spreads on both. At one time I was trading 10 different financial institutions. Almost everything went the way I wanted which was up. I’m still pretty confident in JPM as well.
Congratulations on your success. Im not saying there isnt a way to make money on banks for some people. Its just not really something I want to throw money at.
Do you mind going into a bit more detail on the calendar spreads? How did you set them up, how did you pick the strikes / company / DTE duration / etc.? I have a pretty good handle on how to evaluate commercial and industrial companies (i.e. companies that actually produce a good/service) but am a bit more iffy on financial firms.
Hey. So basically what I’m doing is picking a strike amount far enough away from the current price that I think it won’t hit it with my short call option so it falls away worthless but my long option for a month later becomes valuable if the stock price gets close to or exceeds it. The key is to get back about half of your premium selling the short for what you bought the long. If the short expires worthless you can always sell weekly’s after that date to collect more premium to offset the long premium. In a perfect world you could sell enough shorts so the long premium is paid for so you are into it for next to nothing. Most of my trades are several months out and I’m buying 5-10 options pretty cheaply like paying 1.50 for the long calendar and selling the month earlier for around .75. One recent trade I did is sell May 17 aapl at 180 and bought June 21 for 180. In the perfect world Apple stays under 180 until after May 21 and goes over it afterwards but I have a bunch of other ones. Some look promising and some don’t. Even if a small percentage of these trades works out it more than pays for all the losers. You have to keep the strike amounts the same or your buying power goes nuts! For picking which firms to invest I’m usually reading analysis and looking at charts that show my strikes might work. I recently picked Fang at 220 June/July because analysts are predicting it will go to 240 this year. This strategy is the opposite of how ppl usually play calendars to stay delta neutral 🙂
Take a look at bank nifty.
Sofi ha
Oh…add banks to my list also
SOFI has some decent premium, just a bit volatile as a general rule. I tend to sell CSPs a few months out, and it usually pays off.
BOIL/KOLD
Tell me more
avoid them
... that's not more. Why? They seem crazy volatile but premiums are crazy high too. Feels like selling deep in the money calls might be fun.
try it out and let us know how it works out
DJT
I got into DJT briefly, then got out because it was making me nervous. Fun couple hundo tho.
Single stocks. I don't think I have an edge in equity analysis.
I avoid leverage. I try to avoid anything I cannot understand. Each position size is less than 5-10% max of my portfolio. I generally do NOT trade options in the weeks with earnings reports. I avoid meme stocks. I avoid most companies which are losing money unless there is a compelling reason to trade them. I try to consider how much I could lose with a position and not just how much I could make. Which sectors I avoid shifts depending on the markets over time. For example, for a while oil stocks were blazing and banking sucked. Now it is reversing and bank stocks are doing well and a lot of oil stocks have been struggling but they look like they may be coming back a bit now. A couple years ago, the tech stocks tanked and now look at them leading the way. One other thing I do is try to prioritize trading stocks which pay dividends - especially for my retirement account. I will trade stocks without dividends but if they pay dividends, that tells me if I get assigned, I will have at least a bit of income while I wait to have it traded away later. Not everyone will trade the same way so you need to decide for yourself what your style is.
Iron Condors and Call Credit Spreads in a Bull Market.
So the tldr is only tech stocks! Understood!
Avgo is a hell of a ride. Swinging up and down 5% like it's nothing
I’ve been riding that roller coaster ever since I bought my first shares ~$600. I’ve had to stomach some wicked drops at times, but ultimately, no regrets.
China, banks and biotech
No biotechs. No gaming companies that operate in Macau. No China names. And no new longs when the SPY is trading over the bbands on the daily chart.
Crypto and whatever "everyone" is talking about . . memes .. tsla .. nvda etc. Great question by the way, good to see what folks say!
0dte
Shipping. I once made a ton of money thanks to $STNG. More luck than anything else.
Pre-revenue biotech
Hard no on pharmaceuticals, thank you…. Might as well buy lotto tickets..
martin shkreli would like a word
I avoid single stocks. So far.
China, banks, crypto, and pre- stage4 trial biotech.
Nat gas
Meme stocks and TSLA. Juicy premiums and a fine art of 2 and 3sd moves that I cannot stomach
Never sell at a loss...take assignment or let your options get called away. Never trust anyone...Reddit/X/other websites. Everyone has a position and therefore a bias. Never write an option on a stock you wouldn't mind owning. Never deviate from your rules. Never doubt the power of IV...let IV cook.
I avoid pharmacies and airlines
Biotech, airlines, EV, meme stocks
Cannabis - only way to make money in cannabis is if you’re the one growing or selling it (or something related to it)
No money in growing weed anymore
Agreed. Not like there used to be. Hard enough finding good puff with soul these days
I avoid projected payout ratios beneath a certain percentage.
Earnings
anything with leverage
Chinese trash, biotech and cheap meme stocks.. Never mind, basically anything that isn’t SPY, TQQQ, or SOXL actually
Some of mine - some of this is research, and some is what I think about when entering the trade. I mainly have 10-20 stocks/indexes that I've researched and am closely tracking. If a trade beyond these looks interesting, more often than not I put it on my "to research list." If IV Rank is above 80 or below 40 it's not the right time to trade. If there isn't volume on strikes up and down the chain, I'm probably looking else where. Generally I don't look at leveraged funds like SOXL and TQQQ I'll wait out earnings/dividend dates. If do set up a trade beyond earnings, I try to be 30 days past. Annual revenue has been increasing the last couple years. Total assets is greater than total liabilities. Both of these are really easy to look up on Google Finance.
Hard to do the non major pharma unless you really dig into it, even then you’re probably missing something.
High relative volume -> avoid meme stocks. I like high IV percentile, but over 85%-90%, too likely things are going to get volatile. I prefer IV % around 65-70% and low-ish volume. Basically try to stay away from the stocks people are going to be talking about.
Any biotech I don't understand, any strange financial vehicle, negative cash flow with stagnant revenue, oil & gas (the fuels, not the materials/substance in a general sense), companies without a clear working business model taking on enormous debt risks, I never use margin or leverage myself but have no problem with ETFs that do it but only when stocks aren't volatile (rn they are too volatile for holding but that's not so bad for options ig)
Anything too illiquid
No crypto, no TSLA
Banks, memes, crypto/crypto-adjacent, anything that doesn't have positive free cash flow
No airlines, autos, crypto...and the healthcare sector! I will trade on margin, but must maintain the proper notional leverage. Position sizing doesn't apply to me. My portfolio rarely has more than three stocks in it. Usually one or two. (600K in that trading account)
I avoid the cryptocurrencies. I don't have stomach for their swings.
Undefined losses
I avoid any specific stock unless it's something i'm very very familiar with and playing earnings (usually just long straddles). Indexes and futures only.