Good strategy, one big advantage I see is that you don’t have to wait for the stock to hit support levels or an oversold RSI, with that, you may execute right away.
Great video, It got me thinking about the “wheel strategy” and how they compare. Both strategies start off with selling puts but this one involves using the premium received to finance a put debit spread, so less premium received, but more downside risk protection. So i guess it depends on an individuals view of the market, if bullish - just sell the put, collect max premium. If bullish but afraid of drawdown run with the put ratio spreads. Either way you will need to have the cash on hand ready to buy the $100 so using this for blue chips is good.
I like to churn my puts but as the market continues to climb (and with what "feels" like uncertainty) I get more conservative and like to use these types of trades.
@@wealthadventures I definitely see where you’re coming from with that. Also great content dude, been a sub for a short while and picked up a few things from here!
Love debit spreads for speculative replacements for shorting stock. Also love to enter debit bear put spreads on SPY and sometimes QQQ as a hedge when everything is flying high. However I’ve had some bad luck on ratio spreads with the stocks just continuing to drop. In one case, I closed out one of the shorts for a “profit.” But as the stock falls, I no longer have two shorts to decay to offset the decay in my long option.
Good one Dave. Thank you. How about selling covered calls and then buying puts on the shares owned to protect against sudden stock prixe declines? Would you consider doing an example trade in the above-mentioned scenario?
I’m curious to see how that works, cause selling a covered call already gives you downside hedge. You own 100, then sell a call (i.e covered call) and collect premium. Now, there is nothing stopping you from buying extra protection, and you can use the premium received to buy the put, but this is where my curiosity comes in, and tbh just selling the covered call should be sufficient but maybe someone else has better insight.
That is called an option collar. I have not done a video on it directly but I did talk about it in this video: th-cam.com/video/870tezZND0U/w-d-xo.html It is also what many hedged equity ETFs do like this one: th-cam.com/video/2w4k1ghVY6k/w-d-xo.html I will look at doing a video in the future!
@wealthadventures that's what I am doing with a couple of stocks that are close to earnings reports. Write covered calls and buy puts far out of money for downside protection in case stock falls on earnings. Of course, I do this on those stocks that are expected to trade sideways or down over the next few months. Would love a video on the same.
Good question... I use both when I'm being more conservative versus just selling puts. I tend to put on credit spreads that are out 60-90 days and when I have most capital tied up. These I typically sell out 30-60 days and have capital to activate. If you really want to kick in technical analysis, it can help you target support levels as someone else mentioned.
Nice video. I use this strategy quite a bit as well. Do you consider trading costs which can use up a few percent of gains? Also, what are thoughts on broken wing butterfly which is a put debit spread but then buy a far OTM put to define the risk?
Yes - Trading costs can be substantial and I would like to see Fidelity get them lowered. I like the broken wing butterfly, like this trade, if I can get a nice credit initially.
You will need enough to cover the purchase of 100 shares of the underlying at the strike of the put you sold. So if you sold the put at $80, you will need $80*100 shares = 8000.
Creative Dave. I trade the "frill necked lizard". It is a position I trade that I invented and named after an Australian lizard that isn't famous yet. Alas, those of us at the ASX have to just endure.
Long is similar to "owning" or buying where short is similar to selling. So if someone is long a put, they own a PUT option. If they are short a put option they SOLD a put and are short a contract. Likewise, a long call would mean you own a call option. Make sense?
Although investing in stocks appears straightforward, choosing the right ones without a well-defined plan can be challenging. My $350K portfolio, $10K in an HSA, and a property that could yield an additional $200K have stagnated primarily due to lack of clarity in my strategies. I’d welcome any advice you can provide.
Just noticed at 12:52 I say "you can close out the debit spread and have a long put left"... that would be a short put. Hope I didn't confuse anyone!
I'm going to bookmark this video because I'll be learning about options next year when I'm retired. Gives me something to do.
Head on over to Tasty Trade and Tasty Live. Great way to learn options for free.
Sounds good! Let me know if I can help.
I like using this trading strategy, thanks for the video!
My pleasure! Thanks for watching.
Thanks as usual Dave!!
Thanks Mr Groovy!
Great example. Thanks for sharing. I use fidelity as well
Thanks!
Love the movie clips in your examples! 😂
Ha! Thanks. It makes it more fun to make these videos.
Good strategy, one big advantage I see is that you don’t have to wait for the stock to hit support levels or an oversold RSI, with that, you may execute right away.
Yea. I like that point.
Great video, It got me thinking about the “wheel strategy” and how they compare. Both strategies start off with selling puts but this one involves using the premium received to finance a put debit spread, so less premium received, but more downside risk protection. So i guess it depends on an individuals view of the market, if bullish - just sell the put, collect max premium. If bullish but afraid of drawdown run with the put ratio spreads. Either way you will need to have the cash on hand ready to buy the $100 so using this for blue chips is good.
I like to churn my puts but as the market continues to climb (and with what "feels" like uncertainty) I get more conservative and like to use these types of trades.
@@wealthadventures I definitely see where you’re coming from with that. Also great content dude, been a sub for a short while and picked up a few things from here!
Love debit spreads for speculative replacements for shorting stock. Also love to enter debit bear put spreads on SPY and sometimes QQQ as a hedge when everything is flying high.
However I’ve had some bad luck on ratio spreads with the stocks just continuing to drop. In one case, I closed out one of the shorts for a “profit.” But as the stock falls, I no longer have two shorts to decay to offset the decay in my long option.
Maybe stick to what sounds like is working for you - SPY/QQQ!
Have you ever thought about day trading or swing trading? You can produce a higher return with the money you're using to sell puts.
new to channel love the content, wondering why do u use fidelity, im with scwab and curious if i should switch
I'm sure Schwab is fine. I've always used Fidelity so I know it pretty well. I also use Etrade and M1.
Good one Dave. Thank you. How about selling covered calls and then buying puts on the shares owned to protect against sudden stock prixe declines? Would you consider doing an example trade in the above-mentioned scenario?
I’m curious to see how that works, cause selling a covered call already gives you downside hedge. You own 100, then sell a call (i.e covered call) and collect premium. Now, there is nothing stopping you from buying extra protection, and you can use the premium received to buy the put, but this is where my curiosity comes in, and tbh just selling the covered call should be sufficient but maybe someone else has better insight.
That is called an option collar. I have not done a video on it directly but I did talk about it in this video:
th-cam.com/video/870tezZND0U/w-d-xo.html
It is also what many hedged equity ETFs do like this one:
th-cam.com/video/2w4k1ghVY6k/w-d-xo.html
I will look at doing a video in the future!
@wealthadventures that's what I am doing with a couple of stocks that are close to earnings reports. Write covered calls and buy puts far out of money for downside protection in case stock falls on earnings. Of course, I do this on those stocks that are expected to trade sideways or down over the next few months. Would love a video on the same.
When would you use this put ratio spread vs a put credit spread?
Good question... I use both when I'm being more conservative versus just selling puts. I tend to put on credit spreads that are out 60-90 days and when I have most capital tied up. These I typically sell out 30-60 days and have capital to activate. If you really want to kick in technical analysis, it can help you target support levels as someone else mentioned.
Nice video. I use this strategy quite a bit as well. Do you consider trading costs which can use up a few percent of gains? Also, what are thoughts on broken wing butterfly which is a put debit spread but then buy a far OTM put to define the risk?
Yes - Trading costs can be substantial and I would like to see Fidelity get them lowered. I like the broken wing butterfly, like this trade, if I can get a nice credit initially.
what are the capital requirements for this type of trade for the NVDA example?
You will need enough to cover the purchase of 100 shares of the underlying at the strike of the put you sold. So if you sold the put at $80, you will need $80*100 shares = 8000.
You should have the put covered.
Is it worth it to wait and do each leg at different dates rather tha both legs on same date?
I initiate the trade with both legs but often close or roll one leg.
Creative Dave. I trade the "frill necked lizard". It is a position I trade that I invented and named after an Australian lizard that isn't famous yet. Alas, those of us at the ASX have to just endure.
Must be hot down there. Maybe too hot. Lol.
@@wealthadventures Not really. It's like California here in Victoria. (I got sunburned in Arizona so I know how hot it gets over there).
Thanks Dave! Learning a lot from ya. What Options level with Fidelity allows you to do this? Guessing level 2 or 3?
Level 3, as you will need spreads. But maybe things have changed since I got approved.
Thanks! Looks like level 2. You can find info here:
www.fidelity.com/options-trading/faqs
So on November 15th will you follow up with what you did?
Sure! If I don't, remind me! I did not do the NVDA trade so I assume you mean the TLT trade?
Why is it called a “long put” if it has the same expiration date? What is the “long” referring to?
Long is similar to "owning" or buying where short is similar to selling. So if someone is long a put, they own a PUT option. If they are short a put option they SOLD a put and are short a contract. Likewise, a long call would mean you own a call option. Make sense?
Although investing in stocks appears straightforward, choosing the right ones without a well-defined plan can be challenging. My $350K portfolio, $10K in an HSA, and a property that could yield an additional $200K have stagnated primarily due to lack of clarity in my strategies. I’d welcome any advice you can provide.
Low cost index ETFs. Dollar cost average. Keep it simple.
Wait no spam financial advisor recommendations in the comments section? Why not?
I try to keep it cleaned up... but the spam keeps coming!
You were rambling a bit more in this video. But content is good as usual.
I'm a professional rambler! Lol.