StockFetcher Forums · Filter Exchange · OPTIONS STRATEGY - SELLING WEEKLY PUTS<< 1 ... 2 3 4 5 6 ... 7 >>Post Follow-up
4 posts
msg #117954
Ignore MHlousek
1/30/2014 7:53:57 AM

I also can post a lilnk to a copy of my paper trade activities at Interactive brokers....:)

4 posts
msg #117957
Ignore MHlousek
1/30/2014 1:19:14 PM

Amazon is reporting today:
The 31.01.2014 options are very expensive

I paper traded this combo because I think that tommorrow therer will be an volatility implosion on the 31.01.14 options.

Amazon trade at 400 Dollar
I bought 100 470 calls (21.02.2014 expiration) paid 21.700 Dollars
100 340 puts (21.02.2014 expiration) paid 23.200 Dollars

I sold 100 470 calls (31.01.2014 expiration) received 9.200 Dollars
I sold 100 340 puts (31.01.2014 expiration) received 9.100 Dollars.

Its an calender spread....
The idea is that even if Amazon moves or gap 70 Dollars and the short term options would still expire worthless or I buy them back very cheap to avoid monday the same time the long option straddle could also profit....if the short options gap in the money I am protected with the same long opotions (february expiration)

Best scenario: Amazon gaps or jumbs before short term strikes and short term options expire worthless and straddle profits a good deal.

commission was 273 Dollars

Lets see tommorrow how much we got


3,836 posts
msg #117959
Ignore Kevin_in_GA
1/30/2014 2:32:01 PM

My play on this (which I posted earlier) was a vertical spread selling the 390 put and buying the 380 put -

SELL AMZN 390 put (10 contracts) @ 7.75
BUY AMZN 380 put (10 contracts) @ 4.75

Net credit of 3.00 per contract

146 posts
msg #117960
Ignore dashover
1/30/2014 3:42:19 PM

Sure it wasn't supposed to be reversed?


3,836 posts
msg #117968
Ignore Kevin_in_GA
1/31/2014 11:11:40 AM

This is why I paper trade any system before using it or advocating it to others!

This thread was designed to look at selling puts, but I see that as more people help frame the discussion with their experiences that the initial idea was too simplistic and risky. The flow has gone from

Sell Naked puts -> sell vertical credit spreads -> ???

I'm thinking this will quickly turn into an iron condor discussion (and will avoid trades during earnings week!)

Ultimately it may make more sense to look at weekly options on low volatility instruments such as SPY and IWM instead of indivdual stocks. These will not go through the crazy moves we just saw in AAPL and AMZN.

639 posts
msg #117975
Ignore mahkoh
1/31/2014 2:01:24 PM

You may have gotten toasted on the first try, but this doesn't change the historical 95 % success rate.

But this is a strategy where you risk giving away several months of gains when one trade goes bad.

9 posts
msg #117976
Ignore edellner
1/31/2014 2:23:28 PM

Instead of trading "low volatility" stocks, the Tastytrade forum recommends trading stocks that are relatively high (above 50%) in their annual range of IVs. For example, if an underlying has been between 20 and 40% IV over the past year, the current IV for the underlying would need to be above 30 to be considered in the top 50% of its annual range. The idea is to make sure you are getting the most credit possible for an option. ThinkorSwim displays this statistic, known as IV Rank, for all optionable stocks.It is one check mark in setting up a successful credit spread.

Today, DIA has an IV Rank of 64, meaning the current IV of 16 is in the top 64% of all IVs for DIA for the past year. SPY also has a current IV of 16, but its IV Rank is 53%. So even though both IVs are 16, DIA is the better trade oppty, since it is higher in its IV range. The DIA option premium is greater than SPY's in relative terms. Note: I consider an IV of 16 to be low in absolute terms, so neither underlying would make the cut in my trading.

3,836 posts
msg #117977
Ignore Kevin_in_GA
1/31/2014 2:25:45 PM

@mahkoh: Agreed - much like the "1% per week" system that does great until one bad trade wipes out 15 weeks of gains. The use of vertical spreads or iron condors seems to have beeter risk management, but even then it is not a "set it and forget it" trade.

I'm test driving the use of the same volatility limits on SPY and IWM, trading iron condors on the 2/7 expiries (purchased at 11 AM on 1/30):

SPY Iron condor 171/175/182/186 10 contracts @0.64 each
IWM Iron Condor 105/109/115/119 10 contracts @0.48 each

The filter I use here is as follows:

set{prev_volatility, weekly ATR(5) 1 week ago}
set{prev_base, weekly close 1 week ago}
set{prev_put, prev_base - prev_volatility}
set{prev_call, prev_base + prev_volatility}

set{volatility, weekly ATR(5)}
set{base, weekly close}
set{putstrikeprice, base - volatility}
set{callstrikeprice, base + volatility}

set{putloss, count(weekly close below prev_put,1)}
set{callloss, count(weekly close above prev_call,1)}

add column weekly close {weekly close}
add column volatility
add column putstrikeprice {strike price for selling weekly puts}
add column callstrikeprice {strike price for selling weekly calls}

chart-display is weekly
chart-time is 1 year
draw prev_put on plot price
draw prev_call on plot price
draw price line at callstrikeprice
draw price line at putstrikeprice
draw putloss
draw callloss

My strikes were based on the Wed close price. On this filter you can see histrorical performance as well as the current targets on the chart.

3,836 posts
msg #117978
Ignore Kevin_in_GA
1/31/2014 2:37:34 PM

@edellner: Good info - thanks.

SF cannot track IV, but it can at least track HV, and coding an "HV Rank" would not be hard ...



set{HVHigh, Historical Volatility(30,1) 252 day high}
set{HVLow, Historical Volatility(30,1) 252 day low}
set{HVrange, HVHigh - HVLow}
set{ HVdiff, Historical Volatility(30,1) - HVLow}
set{HVRank1, HVdiff / HVrange}
set{HVRank, HVRank1 * 100}

add column HVHigh
add column HVLow
add column Historical Volatility(30,1) {HVCurrent}
add column HVRank

346 posts
msg #117981
Ignore gmg733
1/31/2014 9:52:00 PM

While HV does provide some amount of usable data, for options trading I find it basically useless. Options trading is about trading volatility, specifically implied, as much as it is direction. In fact good options traders are delta neutral, or direction neutral.

This is a good exercise and dialog. As you have learned already covered selling is best due to margin requirements and risk control. You can do iron condors, but 4 legged trades commissions add up quick. I avoided these strategies. You can start with a spread and dovetail into an iron condor or other strategy.

My .02. I traded credit spreads exclusively for years. After having my first child, I moved to programmed trading. I like the mechanical aspect of it. Toying with sell put spreads like you are doing here or do a CC strategy or a collar.

As always, great work and collaboration.

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