►► AVAILABLE NOW! Limited to the FIRST 100 people, get my brand new online Option Trading course (Intermediate option trading) for $497. Regular price is $997. Here is the link to check it out: mylifeoflearning-randy.mykajabi.com/offers/EgeavtWJ Join my Patreon to get access to my all my Stock & Option Trades, Open Orders and Weekly Top 5 Stocks: www.patreon.com/mylifeoflearning Subscribe to this Channel: th-cam.com/channels/eUPN22CHOgoDTZ4QfOjxHw.html New Beginnings: The Option Trading Story amzn.to/2OgXx58 Limited time: Get 2 Free Stocks on Webull when you deposit $100 (Valued up to $1,850): www.webull.com/activity?inviteCode=MfCJx4xeKzuw&source=invite_gw&inviteSource=wb_oversea Facebook: facebook.com/jamiston.queens.5 Website: mylifeoflearning.com/index.html
Hey Jay if a patron is signed up for the Live Alerts Tier, then they have access to my trades which are posted as soon as I know an order gets filled on Patreon and under the Live Alerts tab on Discord. This Discord is only available to our patrons: discord.gg/aME3hMdM Some of the lower tiers, get access to those post after the market closes or at the end of the trading week. But the Live Alerts tier Patrons, gets an alert of all the details on my trades as soon as I know the trade went through. Let me know if you have any other questions.
Just wanted to let you and your other subscribers know how one of your videos helped me save a trade that had turned against me. I sold a put with an expiration date of May 14, 2021. The price of the stock dropped well below my strike price, and if I didn’t do something, the stock would be assigned to me. I’m relatively new to options trading, so I wasn’t sure what to do. I remembered that this was something that you had covered in one of your videos on how and when to close or exit a position. While watching the video, I was able to roll out of that losing position and into one with a later expiration date. I was able to avoid assignment AND pocket an additional $300 in premiums. Thank you so much for your videos!
There are multiple solutions to this issue. 1. Always use a stable + blue chip stock. The best indicator is BETA < 1. The smaller BETA the better. Think long term, 1% a time is good enough. 2. 50ma, 200ma are on the uptrend. 3. If the price drops under the put strike after a catalyst, you can always roll out the put to the next period to reduce your immediate loss. This way you exchange time to cut loss. 4. Take the loss and close the position.
Your videos are better than going to college or university spending 4 years in it. You have knowledge and expierence, i appreciate you doing youtube and you deserve allot more love and subscribers.
Good video! I agree with monthly's when you sell puts, but I believe weekly's are better for selling calls. Short puts have nice quick returns when prices rise such as your two examples, but the same isn't true with calls, the price would need to substantially drop to buy back monthly calls so early, you're more likely to risk assignment / buy back at low profit or even loss, or sell far OTM and not receive good premium.
Man, this is some really valuable information without any bs. Takes time to understand but definitely worth it. Gonna watch more of your vids to wrap my head around your strategy. Good job. Thanks for sharing.
Randy's stuff is some of the best free information on options trading available. Definitely worth watching his older stuff, I've had great results using his tips.
This morning I was reflecting on everything I’ve learned about options trading in the last few months since I started, and I said to myself that I need to figure out what time frame is best for selling covered calls. Then this video just showed up in my feed! 😊 Thanks Randy!
Thank you very much Randy, for this very well researched, well explained, and very informative video on weeklies vs. monthlies. I've been trading options for a period of time, and this video just blew me away. Saying "excellent job" would be an understatement. Cheers.
I would think maybe cap would be better longer dated so u can go further otm and selling cc weekly would be better maybe bi weekly for more premiums.. I usually close out trades 60% and roll out a week further otm
Great video 👍 monthly options used to be good back in the days when we had a Bull market but nowadays it’s risky I get my options weekly and get them on wed 3 pm because you don’t know where the market headed at the beginning of the week. Great comparison 👌
I replicate the message ! Just found the channel as well. It was GREAT Food for Thought!! Made a LOT of Sense !! Was leaning towards Weeklys until watching and considering the Frequency of this all. The weeks fly by !! So that means way more attention to the account/positions and having to be put on more trades more often for not that much more gain, IF Any !!! PLUS the cost of the trades can and does add up !! So, it seems now that the Monthlys is the way to go, and if the Opportunity presents itself to exit the position early for a good profit percentage, all the better. Frees up the Capital for deployment into another trade/position ‼️ Thanks for helping me arrive at this conclusion/decision, Thanks to Your Video!!! ‼️👍🏻 😃 👏🏻
That's a great question. The answer is that it depends on how long you think it will take for the underlying to move to your expected spot. And then I always like to add a little more time just in case it takes a little bit longer.
There are no dumb questions if you’re trying to learn. If you’re looking at your overall account value, the option you sold will still be worth what you were paid for it as soon as you sell it, so although you receive cash, you also have a liability which offsets that cash. So your account value won’t go up until the value of the option you sold goes down. However, the cash in your account should immediately go up. I have heard of some brokers, not releasing people’s cash, if your broker is doing that, I would move somewhere else.
I only trade weekly on earnings if i want to be assigned on that stock for that price. And if the stock shoots up i'm buying back the weekly for a 30/50% profit overnight. I prefer monthly myself, more volume and longer period to be right.
I think that weeklies are better for buying strangles using just a small amount of the capital portfolio. Also it's crucial to define a stop profit to quick close the position with some benefits.
For me it works out to $100 a week either way. I also just focus on how much premium by how much I need to spend. MOXC for example was like $400 a monthly covered put for $1750. So the return is higher than say one weekly covered put for NIO for $4000+ to get $100. So whatever the return is better. I also just go buy how much cash i have
Hi Randy. I have been a subscriber for a while now and love your videos! Thank you very much! I don’t use a journal to record my options trades, but I have been using OptionStrat every time I open a trade. Then when I close the trade, I record in OptionStrat the prices. You can export the data to excel. Do you have an opinion on this or is there a better way to keep good records of P/L?
Thank you so much for that and for your support! Figuring out how to create an automatic way to track each position is on my to do list. Once I figure it out, I'm gonna offer it to you guys. However, my to do list really long so it might take a while. It's definitely something I'll probably have to pay somebody to do. But I hope to get it accomplished in the near future. I currently just use an excel spreadsheet etsy.me/3HHq5ge and I manually put it in there.
@@StockandOptionMyLifeOfLearning When do you roll the credit spread? do you think its better to roll when price is little Out of the money for getting credit as rolling should be done for credit only? How long do you roll out the credit spread? Thank you for the prompt reply!
All of that is situation specific, so it's hard to give you an overall general answer. What I will say is if I'm bullish on a stock and want to keep owning it, I'm more likely to sell out of the money covered calls. However, if I'm neutral or bearish on a position that's a covered call, I'm more likely to roll it at the money or possibly even in the money if I'm bearish. The same would apply to a short put option. If I'm bearish, I'm trying to get that new Short put option as far out the money as possible. And if I'm bullish, I'm OK rolling at the money or possibly even a little bit in the money.
You make some good points regarding selling monthly put options. I guess my only hesitation with going out that far (I usually sell 5-10 days) is if you get a month like February, 2020, I would sure rather be in a 1-2 week option than in a monthly. But I do recognize that those kind of months are few and far between. Enjoy your videos.
Hey Ethan thank you for sharing your thoughts and experience!! If we knew exactly what day that crash was going to happen in 2020, it would've been nice to have all our positions expire worthless the day before (weekly or monthly). However these things very seldom give a clear warning. When they happen, we generally don't know exactly how bad it's going to be. So all we can do is trade knowing, that another one is coming at some point and plan accordingly.
@@StockandOptionMyLifeOfLearning speaking of pull backs like that... if you end up in a "bad" trade that doesn't go your way, do you typically use stop loss and what percentage?
I do not use stop losses. My only stop loss is if the fundamentals of a company change. Just because some bad news comes out about a company I'm trading in, and the stock crashes a certain amount or percentage, IMO it doesn't mean it's necessarily time for me to get out. However if something fundamentally changed with the company, and I no longer feel comfortable owning a small piece of it, at that point, I'm out. We trade as if the companies we own might all crash tomorrow. We're not hoping for that, be we are prepared for that to happen because eventually, sometime over the next 3 to 5 years, the overall market is going to crash again.
Do you have any sort of spreadsheet that shows your historical performance of your option trades? And, regarding your subscription, what percent of your trades are cash secured puts (that's the only way I trade). Thanks!
Thank you so much for your support! 😊 It really means a lot to me. What did you have in mind when you say growth stocks? It can mean different things to different people. I only trade in companies that have a decent bit of history behind them that are proven to be consistently profitable, solid and have some amount of growth potential. I do not trade in companies that are new, speculative, and don't have a history of being profitable. But if you let me know what your idea of growth is, I'll get a better idea of what you had in mind.
You can find them under the “Post” section on the app or website. They are in order by date released. They are released every weekend. Here is the link to this past weekends Top 5: www.patreon.com/posts/top-5-stocks-12-75758165
How can you buy back an option contract when you sold it to someone to get the premium. Does that person have to agree to sell it back to you? What am I missing?
You can buy back an option at any time. It’s not that you’re selling to one person in particular, market makers sit in the middle and facilitate when you want to sell and when you want to buy. They then buy and sell those options to other traders when possible. That allows you to enter an exit whenever you like. That’s their job. To make a market if there isn’t a market or to act as a buyer or seller when there aren’t any buyers and sellers at that moment.
Hey Martin thanks for the question and support! Although I like Tesla's products, it just doesn't fit the kind of company we like to trade. As it gets more mature and has a long track record of profitability, it might become a stock we track and trade. It's also difficult to find good, solid support and resistance because it moves so much in short periods of time. I will keep it in mind if I can work some discussion of the stock into a future video. Thank you for the suggestion!
Very interesting, I liked it, it was clear, concise and to the point AND it made sense! If I could I'd come and work for you for free just to learn the how too's.
Thank you for sharing Kyle! I've done the same thing. Right now we are trying to do that with our HRL positions because the June monthly strikes are limited to $5 increments and we've been selling the $47 and $48 strikes. So we are trying to roll them out the the Friday following the 3rd Friday of June.... we'll see what happens!
Do you practice any Bull Put Strategies or other such straddling strategies? If not, any particular reason? I see it on other TH-cam channels - would love to see your thinking on these strats.
Hey Sean thanks for your questions and support! We sell naked put options a lot as well as some covered calls. However we don't do much straddle or strangle trading. I have done a good bit of those types of trades in the past and just find that selling puts and covered calls (with a few PMCC positions sprinkled in) tends to fit our trading style best. I know there are traders that do very well with straddles and strangles, but it just doesn't match our view of the overall market direction, need for adjustment (especially in a diversified portfolio like we prefer).
I set alerts on the options I've bought and sold to track the extrinsic value left in them and for the ones I bought, to track them when their value goes up to a certain point. I also set alerts sometimes on underlying stock prices so that if the stock hits a certain price, it will alert me so I can review the position and decide if I want to adjust the option(s) or not.
That's a challenge! Unless your positions are very far OTM, when something happens like what happened in March 2020, you're going to most likely have some puts go ITM. If you are wanting to get some protection, then you do have some choices. You could do spreads (th-cam.com/video/JS2GkXvRFwI/w-d-xo.html) or you might also consider accumulating some LEAPS put options which should go up in value when the market declines. You could also purchase near term VIX call options but if it were me, I would prefer to buy the LEAPS put options. For our account, we just know that when that happens again, we will have a lot of put options ITM and we will either allow stock to be put to us and turn them into covered calls or PMCCs (th-cam.com/video/aTRXzXEL4t4/w-d-xo.html) or just roll them out until the market recovers.
Hi Randy. I just watched this one again. Great reinforcement to watch it again. One of the things that I know that you talked about, but haven't seen lately is when you enter sell put trade, what Delta do you normally prefer to target? Do you go for around .30 to be out of the money or do you go nearer to the money for better premium with the plan to adjust the position if it doesn't go your way? Thanks for the great work. I really enjoy your presentation style and like how go about trading. On edit, I think that I figured it out, but wonder if you could confirm. It appears that you do neither. It looks like you use the tech analysis to find a potential dollar level for the put and then determine if you can get a minimum of 30% COC return selling at that level. Is that correct?
Hey Sam thank you for that! If it's an option that will expire in less than 90 days, I generally don't look at Delta. My wish list is for the stock to recently have been declining but approaching an area where it found support and hopefully even looking like it is finding support again. Once I see that happening, depending on the overall market condition, if the markets are neutral or going up, I'll look to sell an option ATM or just barely OTM. If it's a bearish looking market, then I might consider selling it a little bit OTM. But once I see it at an area where it will most likely find support, and I believe the odds are in our favor of winning on the trade, I then want to collect as much premium as possible without selling an option that's ITM. I have sold ITM option but don't do it very often. The minimum return I'm usually looking for is around 20% annualized ROC. When the VIX is low like it is now, that can be more challenging but we like to try to realize at least a 20% ROC or better when we enter a new position.
Hey Luis that's a great question! There are a couple of options. If you were long stocks and the market is definitely trending down, you could sell ITM covered call options. You could also sell OTM put options and since volatility will be higher, you should still be able to make good returns even though the put options are OTM. If you felt really strong about the bear market, you could always sell call options.
It really depends on the return. If we will get a better return by letting the stock be assigned to us and selling covered calls with the dividend calculated in if it's a dividend paying stock, then we will do covered calls. However if the return is the same or rolling a put option is better than will stick with rolling the put options.
Thank you for these wonderful tips Randy. I always ask myself 5 reasons why I want this trade and do I mind owning these stocks at this strike price. I believe weekly put options have opportunity in this volitile market using arbitrage. I keep a close eye on the VIX and 10 year treasury yield using these as lead indicators, then eyeing for potential entry candidates looking for support at moving averages.
One way is to not sell the stock. Another way is to sell some positions in which you are showing a loss to offset some of the gains. You could always go back in after the required wash sale period: th-cam.com/video/xdcQCKZtJhI/w-d-xo.htmlsi=9bkzGHe4nE3gCxcm Then depending on how you’re set up, you may be able to use losses from other investments, or things like depreciation from real estate to offset some gains. Those are just a few that came to mind.
I by far make more on my trading and investments than I do on the TH-cam business. It’s a universe apart. But I do enjoy creating things, even if it is a how to video on trading and investing and I enjoy the interaction with my patrons and positive people on TH-cam. That’s the two reasons why I keep doing TH-cam.
This was really helpful, thank you! Unfortunately I’m held to 30 day holding periods due to the company I work for so I believe weeklys will be my best bet for now, would you agree with this?
Thank you for you support! I prefer monthly options but there are a few situations where I trade biweekly options. However my preference is definitely monthly options. If I’m trying to trade options that are pretty far OTM, I will even look at 60 day expirations with a plan to roll them when it gets close to 30 days out.
So basically if I have a cash secure put that expires this Friday and it’s out of the strike price meaning I don’t get assigned I can just let it expire and collect the full premium? I don’t have to close it myself? It will do automatically on expiration and I can repeat the process for the following week?
Yes that’s correct. If the option expires out of the money, then that position should just disappear over the weekend and it doesn’t cost you anything. You get to keep the entire premium.
There is always pin risk which is the small chance your short put is OTM at market close but then an event happens just after close (i.e. earnings) which moves the underlying significantly and your put is now deep ITM. I think option holders can exercise up until 5:30 pm so you could end up being assigned the shares which have also now moved 20% lower. A lot of people will BTC for $0.01 to avoid that risk or just close out the position once you have earned 90% of the premium since the remaining 10% you could gain isn't worth the risk.
Can we use strategy selling put and selling call together? (in one stock) And collect both premium? For example : Current stock price :$45 We sell put 2 weeks at strike : $42 Also we sell 2 weeks secured covered call at $48 (we own 100 share of stock at $45 price). Is this good idea too..? So we can collect both premium..?
Absolutely! I especially like to use that strategy when a position has moved against me. That's one reason why I generally only have on 1/2 a position size so I can sell additional options in one direction or the other.
Hey Kamran we generally choose our strike prices by looking at previous support. We look at support lines, moving averages, chanel tops and bottoms, previous highs usually turn into support, gaps which once filled tend to turn into support. Those are just a few of the ways that we come up with our strike prices.
@@StockandOptionMyLifeOfLearning I understand. Isn't the purpose of selling puts is to be assigned at a 'much' lower price than the market price? Such as 10-15% or several strikes under the current price? I prefer choosing a 15 delta or best available that gives me enough risk to reward ratio...
One of the great things about options is that you can use them for many purposes. For example if you only wanted to, you could use them to do exactly what you mentioned, have puts assigned to you. Or you might use options to generate cash flow. Or like we do, you might use them to do a combination of the two. Of course there are other reasons to use options, but as the two main reasons why we trade in them.
I think selling puts and CC in ETF can be good. You return won't be quite as good but it would be simpler and you could have fewer positions on while still being diversified.
Awesome breakdown on weeklies vs monthlies! Just out of curiosity, is your profit target for a position based on trend and feel, or do you shoot for a concrete percent of the contract value to close out? I have been having great success with a 50-65% target to close, but occasionally a favorable move manifests and I can get closer to 85-90%
Thank you for your questions and support! I definitely watch the trend and how stocks are moving, however \our absolute cut off of when we are definitely looking to do something with a position is when there's only 10% to 20% time value left in the position. There are some factors that will put that on hold but that's our general rule of thumb. However if a position moves in our favor very fast and momentum is starting to fade, then we will look to close the position out when there's more than 10 or 20% time value left if we see another position that offers a better opportunity for the cash we set aside for that initial position.
I generally stick with positions and just keep collecting premium thus reducing my overall out-of-pocket cost unless something fundamentally changes with the company, so that I know longer feel comfortable owning it. So, if it breaks down fundamentally, at that point, I'm out no matter what my profit or loss is. But through the ups and downs, I just focus on trying to collect as much premium as possible and adjusting strike prices along the way.
You didn’t cover the negative side of monthly’s vs weekly’s. I.E when the trade doesn’t go your way, so you are stuck holding that contract, while the weekly has theta burning much faster and will expire earlier. Also, in the case of a covered call, if your contract goes in the money early, you are now waiting weeks in “hopes” that it dips back down so your shares do not get called away. Or, if you are fine with the shares being called away, you are still waiting 3 weeks for that to happen. You could be 3 more contracts deep in premium while waiting. Also, you briefly mentioned that the premium you receive from weekly’s is higher, but you didnt state by how much, which matters greatly. A .25 delta (safe) contract expiring next week on AAPL right now will get you $85 in premium, while the one month out .25 delta only gets you $140. I can sell 4 weekly’s for roughly $320 vice the monthly’s $140. I’m not saying monthly’s are bad, but more information is necessary to show both sides.
I recently discovered this awesome channel. Thanks for the great and informative advices about options. Would you pls elaborate how to calculate total return and margin requirement for short puts? I have been computing total return to current initial margin % ( try to be more conservative) , but heard you compute a total return to cash to cash %....
Thank you for that and for your support! The margin requirement is most likely different for various brokerages as well as the type of margin you're approved for. For example we have portfolio margin which allows for extreme leverage if we chose to use it. Typically most people have margin in which they're required to have about 30% to 50% of the total possible out-of-pocket cost. But you really want to check with your broker to get the exact numbers. On Interactive Brokers where we do most of our option trading, there's actually a screen we can go to that shows the current margin requirement for each one of our positions. Also when we place a trade, before we actually submit the trade, there’s a screen that shows the initial margin requirement as well as post trade margin requirement. Here is how I calculate an annualized return. For example let’s say that we sell a put option at a $100 strike price that has 30 days left until it expires and we get $2 per share for it. $2 option premium / 30 days (life of option if stayed in position until expiration) x 365 days (to annualize the return) / $100 (strike price) = 24.3% annualized non-leveraged cash on cash return.
When selling a put, if the stock gets to or.below the strike does it automatically.assign you the shares or can they not be assigned to you until expiration? Or is it as soon as it reaches or goes below the strike price? Thanks in advance? I guess the same question goes for selling a covered call
Thanks for your question and support! If a stock gets to the short strike price the option is not automatically assigned. It's only when there's little or no time value left in the option that your chances of getting assigned early go way up. If its an American style option (which most options are) then it can be assigned at any time, but it doesn't make sense for the trader that bought the option to assign it and give you the time value left in the option when they can just sell the option back and pocket the time value. If you haven't seen it already, here is a link for a video I made on option assignment: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
I've done some research on covered calls. My findings are that the theoretical returns don't seem to match the actual ones. When a stock blows up or blows down you have a problem. If it shoots higher, you get a small amount of that gain and now have to repurchase the stock at a much higher price if you want to keep writing calls on it. If it collapses in price (like a lot of growth stocks have done recently) what's your protection on the downside? Also, I have not seen any videos on covered call writing discuss wash sales which are a huge pain in the butt from a tax perspective.
Thank you for sharing your thoughts! It also depends on how you're trading. For example, if you're good owning a stock and sell a put option just to collect some cash while you wait for the stock to come down and it blows past your put, you're actually in better shape than if you had bought the stock outright. However, if you're trading with a tremendous amount of margin or leverage, and your whole account goes against you, you can be wiped out. You asked, if a stock price collapses, what's your protection to the downside? If you're doing credit spreads then your long put would be your protection. However if you're doing cash secured put options, then you're in the same position as someone that owns a stock outright. If you're doing naked put options, you could be in trouble depending on how low the stock goes.
Thank you so much for that and for your support Derick! Whenever I do a trade, after the market closes, I talk through my thinking on that trade. So in that sense, you could say I teach my strategies Trade by Trade. (th-cam.com/video/Ve_P62GhX1M/w-d-xo.html)
I see cool. I’ve only been trading monthlies so far, mostly credit spreads, iron condors etc bagging 800-1000 pm w a 40k acc. I’m thinking of scaling those profits w a bigger account but unsure how. Any tips Randy!
If you haven't seen it already, I made a video with some tips last week. Here's the link if you'd like to check it out: th-cam.com/video/I23Wkri53Ig/w-d-xo.html
5% exposure for each trade means you have a large portfolio. That means you have 20 positions ! That is not how most people starting out do it. But it is good to see you demonstrate the best position. I wonder why you sell more puts than covered calls ?
Hey Brendan thank you for your support! We do covered calls also, although we don't typically initiate them as a covered call. If a stock is put into our account as a result of the selling put options that we're selling, then we immediately turn it into a covered call position. I'm definitely not opposed to initiating positions as a covered call, I've just found that our return is typically a little bit better with short put options than covered calls.
@@StockandOptionMyLifeOfLearning But don't you need a lot more capital to cover short put options ? I mean, if the market tanks you are going to need a lot of money in the bank to take and pay for all the stocks ?
If you are not using margin or leverage, then the cash you set aside for the short put options would be the exact same amount as if you bought the stock at that short put option strike price you're considering and do a covered call position. So the cash requirement would be the same if you're not going to use margin or leverage.
Hi, If I exit with 20-25% of the premium received in credit spreads with 10-15 delta can I be profitable? As in many cases I am making profits but one big loss wipes out previous gains, do you suggest 2x or 3x stop loss?
There are a lot of factors that go into answering your first questions about would it be profitable so I can't really answer that question with the information you provided. However, as far as your second question, I generally like to work positions if they go against me. As long as nothing has fundamentally changed with a company I'm trading in, I usually try to stick with them and work the position. There are a lot of ways you can do that. Here's a playlist dedicated to repairing positions that go against you: th-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
Hi, great video, thanks. Could you cover trading high IVR or IVP stocks, or during those times, is that something you look for? And could you cover, it seems that in monthly you might make more money when the stock goes up, for ex sell a monthly get $2, weekly get $0.60, stock goes up $1, that monthly you can cover for $1.50, profit $0.50, but the weekly cover for $0.20, profit $0.40 (or something like that...). It'll be great if you could explore these 2 topics?
Thank you for your support and suggestions! If you haven't seen it already, you might want to check out the video I did on When to sell put options. Here's the link if you're interested: th-cam.com/video/PPS5TcCYMvE/w-d-xo.html I'll also see if I can work them into future videos.
Hey there, I would like to ask you in terms of rolling a credit spread when a winning trade becomes a losing trade (Stock price gets closer to strike before expirations), by rolling a spread, it essentially means closing and opening a new position right (new expiration and new strike price), may i know does it mean that losses will be realised by rolling the spreads? Thanks
Yes you are closing the old position and opening a new one. I actually have a video I'm finishing up now that I'll be releasing on Saturday about how to adjust credit spreads that go against you. As far as will it be a realized loss, you may want to check with your tax advisor about that. If you did all four legs as one order, you could actually structure it so that, hopefully you walk away with cash in your pocket. However from a tax standpoint, I can't tell you with absolute certainty whether it'll be a realized loss or if it will result in building up losses or gains in a position for a later date. That would be a tax professional question.
I understand how a monthly is better if it is in your favor, but wouldn't a weekly option limit your risk due to faster time decay and let u roll forward & down OR take a smaller loss and let us react quicker to the market if the stock moves against you? This is assuming we do not have many trades open and hv the time to manage the few trades that we have.
Hey Jack thank you for your question and support! It's true that you are at risk for a shorter amount if time, while the actual risk is the strike price minus the premium received. If a trader wanted to only be in positions for a week then weeklys are probably the best option. However from my experience, a trader can do all the things with monthlies that they can with weeklies except have the quicker expiration. They can roll up, down, out and close early, it's just that they get more money upfront.
@@StockandOptionMyLifeOfLearning can you explain the more money up front comment you made. Wouldnt you need to wait the whole month to collect the bigger premium since time decay is longer?
Hey Shaun if say you sell a 30 day put option in XYZ at the $100 strike, you'd get more for that option than if you sold the 7 day put option in XYZ at the $100 strike. You generally get more for a farther dated put option than a shorter dated one.
Yes that's correct. There should be more time value premium in the longer term option than in the shorted one. The exception is if an option is very DITM. Sometimes with those options, there won't be any time value premium.
I have rolled over one of my sold put options twice as it was DITM. i got a credit premium $200 when i rolled it the first time, but the credit reduced to $50 when i rolled it the second time. Does it considered a loss?
It sounds like you would have a loss on your initial trade that went from OTM to DITM. But on your subsequent trades, since you're able to pocket a smaller and smaller credit, you most likely are showing a profit on those. If you're asking for tax purposes it'd be good to ask a tax person because they may also look at it as an overall position and your overall trades for the year as compared to each individual trade.
@@StockandOptionMyLifeOfLearning No, i was not asking from tax perspective. I was wondering whether rollover to a lesser credit the second or third time considered a loss? Or is it still considered as profit as long as it has a credit value? Thanks.
It probably depends on how you look at it personally. If you consider how much you sold an option for and then what it cost you to buy it back then that will be pretty straightforward. If you sold it for more than it cost to buy it then it's a profit. However other option traders will look at what they netted on the roll. For example what did it cost you to buy to close the near term option and sell to open the farther dated option. Did you get a credit? So it really depends on how you like to look at your own profit and loss.
As long as the credit you received is more than the debit you paid, you received a NET credit. That makes it profitable. No one ever went broke receiving a net profit. Maybe the first roll or the second roll wasn't AS profitable as the initial trade, but so what.
Thank you for your suggestion and support! I will see if I can work it into a future video. We have a short position on in BABA right now. We will be doing something with it this week by Friday.
We are predominately sellers of options. However on occasion, for example with a LEAP option, we will buy options. But 95%+ of the time, we are option sellers. Thank you for your consideration!
Hey Randy, thank you for these videos. I really like your content it’s very clear and direct. How can I Join your network to get DAILY alerts of your trades. I have been trading CSP for the past 4 months but to your point my money is sitting on the side line and I haven’t been making enough trades so it will be very helpful to work with a team to find solid companies.
Hey Moe thank you for that! 😊 If you'd like to join, here is the link: www.patreon.com/mylifeoflearning Here are the various levels you might consider: "Friend" gives you all our actual trades in our main option trading account as well as ROTH (retirement) account that we did that week, but not until after the market closes either Friday night or over the weekend. "MVP" gives you all our trades in our main option trading account as well as ROTH (retirement) account after the market closes each trading day. It also gives you an update at the end of the day of any open limit orders we have sitting out there and any adjustments we made to those open orders that day. "Live Alerts!" gives you all our actual trades real time. As soon as we know an order has been filled, you will get an alert. We generally do trades anywhere from 2 to 5 days a week. We generally do around 40+ option trades a month and 1 out right stock purchase a week. Let me know if you have any other questions! Thank you for your support!
Say if I sell put and got $45 in premium Few weeks later the stock price went up and this contract now cost $2 If I buy to close is my net profit $45-$2 = $43? Is that how selling put works ?
Yes that’s correct. 👍 In you scenario it sounds like you received $0.45 per share when you sold and it cost you $0.02 per share to buy it back equals a net of $0.43 per share x 100 shares or $43 per contract profit minus any commission.
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Hi. Are your trades published Live in Discord or Patreon? I saw only end of day in one of Patreon levels.
Hey Jay if a patron is signed up for the Live Alerts Tier, then they have access to my trades which are posted as soon as I know an order gets filled on Patreon and under the Live Alerts tab on Discord. This Discord is only available to our patrons: discord.gg/aME3hMdM
Some of the lower tiers, get access to those post after the market closes or at the end of the trading week. But the Live Alerts tier Patrons, gets an alert of all the details on my trades as soon as I know the trade went through.
Let me know if you have any other questions.
I know this is an older video but wanted you to know that even your older videos are helping those of us new to trading options. Thank you Randy.
Thank you for that! 😊
Simply the best option channel there is, very easy to understand. You've converted me from a weekly seller to a monthly!
Thank you 😊
Just wanted to let you and your other subscribers know how one of your videos helped me save a trade that had turned against me. I sold a put with an expiration date of May 14, 2021. The price of the stock dropped well below my strike price, and if I didn’t do something, the stock would be assigned to me. I’m relatively new to options trading, so I wasn’t sure what to do. I remembered that this was something that you had covered in one of your videos on how and when to close or exit a position. While watching the video, I was able to roll out of that losing position and into one with a later expiration date. I was able to avoid assignment AND pocket an additional $300 in premiums. Thank you so much for your videos!
That's awesome! Thank you very much for sharing! 👏😊
There are multiple solutions to this issue.
1. Always use a stable + blue chip stock. The best indicator is BETA < 1. The smaller BETA the better. Think long term, 1% a time is good enough.
2. 50ma, 200ma are on the uptrend.
3. If the price drops under the put strike after a catalyst, you can always roll out the put to the next period to reduce your immediate loss. This way you exchange time to cut loss.
4. Take the loss and close the position.
Your videos are better than going to college or university spending 4 years in it.
You have knowledge and expierence, i appreciate you doing youtube and you deserve allot more love and subscribers.
Your awesome! Thank you so much for your support! 😊
University Knowledge is wealth buddy.....in stock market trading...u r bound to lose money anytime sooner or later
Great job 👍
Thank you for your support! 😊 It means a lot!
Good video! I agree with monthly's when you sell puts, but I believe weekly's are better for selling calls. Short puts have nice quick returns when prices rise such as your two examples, but the same isn't true with calls, the price would need to substantially drop to buy back monthly calls so early, you're more likely to risk assignment / buy back at low profit or even loss, or sell far OTM and not receive good premium.
Thank you for sharing your thoughts on the subject and for your support! 👏
Nice one man! Smashing it 👊👊
Thanks CJ!
This is good for small accounts?
Man, this is some really valuable information without any bs. Takes time to understand but definitely worth it. Gonna watch more of your vids to wrap my head around your strategy. Good job. Thanks for sharing.
Randy's stuff is some of the best free information on options trading available. Definitely worth watching his older stuff, I've had great results using his tips.
Thank you for that Kyle!
Thank you for your support!
Not an advisor but THANK you for the info and the conviction you tell it with
This morning I was reflecting on everything I’ve learned about options trading in the last few months since I started, and I said to myself that I need to figure out what time frame is best for selling covered calls. Then this video just showed up in my feed! 😊 Thanks Randy!
Thank you so much for sharing and for your support! 👏😊
This is a great video. Now I understand the difference between weekly and monthly options. Thank you Randy. 👍
Glad it was helpful! 😊
Excellent stuff as usual.
Thank you for your support! 😊
Thank you very much Randy, for this very well researched, well explained, and very informative video on weeklies vs. monthlies. I've been trading options for a period of time, and this video just blew me away. Saying "excellent job" would be an understatement. Cheers.
Thank you so much for that Greg! It really does mean a lot. 😊
I would think maybe cap would be better longer dated so u can go further otm and selling cc weekly would be better maybe bi weekly for more premiums.. I usually close out trades 60% and roll out a week further otm
Great video 👍 monthly options used to be good back in the days when we had a Bull market but nowadays it’s risky I get my options weekly and get them on wed 3 pm because you don’t know where the market headed at the beginning of the week. Great comparison 👌
Hey Ali thank you for sharing your strategy and for your support!
Just found your channel. Your videos have very valuable info, yet presented in a simple, easy to understand way. Thank you!
Thank you so much for that! 😊
I replicate the message ! Just found the channel as well. It was GREAT Food for Thought!! Made a LOT of Sense !! Was leaning towards Weeklys until watching and considering the Frequency of this all. The weeks fly by !! So that means way more attention to the account/positions and having to be put on more trades more often for not that much more gain, IF Any !!! PLUS the cost of the trades can and does add up !! So, it seems now that the Monthlys is the way to go, and if the Opportunity presents itself to exit the position early for a good profit percentage, all the better. Frees up the Capital for deployment into another trade/position ‼️ Thanks for helping me arrive at this conclusion/decision, Thanks to Your Video!!! ‼️👍🏻 😃 👏🏻
Just found your channel! For the exact reasons you've mentioned I chose to sell monthly options. Nobody got time for that :)
I'm right there with you! Thank you for your support!
For option buying which is better?
That's a great question. The answer is that it depends on how long you think it will take for the underlying to move to your expected spot. And then I always like to add a little more time just in case it takes a little bit longer.
I think this is not such a dumb question. When I sell a call or put and therefore collect premium, why doesn’t my account balance go up?
There are no dumb questions if you’re trying to learn. If you’re looking at your overall account value, the option you sold will still be worth what you were paid for it as soon as you sell it, so although you receive cash, you also have a liability which offsets that cash. So your account value won’t go up until the value of the option you sold goes down.
However, the cash in your account should immediately go up. I have heard of some brokers, not releasing people’s cash, if your broker is doing that, I would move somewhere else.
Enjoyed this video. You're easy to listen to.
Thank you so much for that and for your support! 😊 I really appreciate it.
Hi Randy, Thanks for the excellent video! I learned a lot from it. Great job!
Thank you for your support! 😊
I only trade weekly on earnings if i want to be assigned on that stock for that price. And if the stock shoots up i'm buying back the weekly for a 30/50% profit overnight. I prefer monthly myself, more volume and longer period to be right.
Thank you for sharing and for your support!
I think that weeklies are better for buying strangles using just a small amount of the capital portfolio. Also it's crucial to define a stop profit to quick close the position with some benefits.
Hey Miguel thank you for sharing!
U explanation is clear and good
I like u frank honest approach
U don't hard sell and made good sense with a cautious risk averse
Thank you very much for that and for your support! I really appreciate it. 😊
For me it works out to $100 a week either way. I also just focus on how much premium by how much I need to spend. MOXC for example was like $400 a monthly covered put for $1750. So the return is higher than say one weekly covered put for NIO for $4000+ to get $100. So whatever the return is better. I also just go buy how much cash i have
Thank you for sharing and for your support!
Hi Randy. I have been a subscriber for a while now and love your videos! Thank you very much!
I don’t use a journal to record my options trades, but I have been using OptionStrat every time I open a trade. Then when I close the trade, I record in OptionStrat the prices. You can export the data to excel. Do you have an opinion on this or is there a better way to keep good records of P/L?
Thank you so much for that and for your support!
Figuring out how to create an automatic way to track each position is on my to do list. Once I figure it out, I'm gonna offer it to you guys. However, my to do list really long so it might take a while. It's definitely something I'll probably have to pay somebody to do. But I hope to get it accomplished in the near future. I currently just use an excel spreadsheet etsy.me/3HHq5ge and I manually put it in there.
Great video! Always struggled with which was better. Subbed
Thank you for that Ralph and for your support! 😊
for credit spreads what expiration is more profitable ?monthly/weekly expiration ?
I prefer monthlies for the reasons mentioned in this video.
@@StockandOptionMyLifeOfLearning When do you roll the credit spread? do you think its better to roll when price is little Out of the money for getting credit as rolling should be done for credit only? How long do you roll out the credit spread? Thank you for the prompt reply!
All of that is situation specific, so it's hard to give you an overall general answer.
What I will say is if I'm bullish on a stock and want to keep owning it, I'm more likely to sell out of the money covered calls. However, if I'm neutral or bearish on a position that's a covered call, I'm more likely to roll it at the money or possibly even in the money if I'm bearish.
The same would apply to a short put option. If I'm bearish, I'm trying to get that new Short put option as far out the money as possible. And if I'm bullish, I'm OK rolling at the money or possibly even a little bit in the money.
You make some good points regarding selling monthly put options. I guess my only hesitation with going out that far (I usually sell 5-10 days) is if you get a month like February, 2020, I would sure rather be in a 1-2 week option than in a monthly. But I do recognize that those kind of months are few and far between. Enjoy your videos.
Hey Ethan thank you for sharing your thoughts and experience!! If we knew exactly what day that crash was going to happen in 2020, it would've been nice to have all our positions expire worthless the day before (weekly or monthly). However these things very seldom give a clear warning. When they happen, we generally don't know exactly how bad it's going to be. So all we can do is trade knowing, that another one is coming at some point and plan accordingly.
@@StockandOptionMyLifeOfLearning speaking of pull backs like that... if you end up in a "bad" trade that doesn't go your way, do you typically use stop loss and what percentage?
I do not use stop losses. My only stop loss is if the fundamentals of a company change. Just because some bad news comes out about a company I'm trading in, and the stock crashes a certain amount or percentage, IMO it doesn't mean it's necessarily time for me to get out.
However if something fundamentally changed with the company, and I no longer feel comfortable owning a small piece of it, at that point, I'm out. We trade as if the companies we own might all crash tomorrow. We're not hoping for that, be we are prepared for that to happen because eventually, sometime over the next 3 to 5 years, the overall market is going to crash again.
Do you have any sort of spreadsheet that shows your historical performance of your option trades? And, regarding your subscription, what percent of your trades are cash secured puts (that's the only way I trade). Thanks!
I shares my results in this video series: th-cam.com/play/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9.html
Is it better to sell PUTS OR calls ??
I think it's a personal preference, but my favorite is to sell put options and my second favorite is to do covered calls or PMCCs
Great video, any option allocation for growth stocks, if yes, which growth stocks do you trade?
Thank you so much for your support! 😊 It really means a lot to me.
What did you have in mind when you say growth stocks? It can mean different things to different people. I only trade in companies that have a decent bit of history behind them that are proven to be consistently profitable, solid and have some amount of growth potential. I do not trade in companies that are new, speculative, and don't have a history of being profitable. But if you let me know what your idea of growth is, I'll get a better idea of what you had in mind.
Hi Randy; I signed up for your 5 stock service but Injust do not know how to access the post. thank yoi
You can find them under the “Post” section on the app or website. They are in order by date released. They are released every weekend. Here is the link to this past weekends Top 5: www.patreon.com/posts/top-5-stocks-12-75758165
You are absolutely correct!
Are these cash covered puts or naked? Thanks
Thank you for your question and support! They are cash secured and naked put options.
How can you buy back an option contract when you sold it to someone to get the premium. Does that person have to agree to sell it back to you? What am I missing?
You can buy back an option at any time. It’s not that you’re selling to one person in particular, market makers sit in the middle and facilitate when you want to sell and when you want to buy. They then buy and sell those options to other traders when possible. That allows you to enter an exit whenever you like. That’s their job. To make a market if there isn’t a market or to act as a buyer or seller when there aren’t any buyers and sellers at that moment.
Good video. What you think of trading tesla option, if you can show video of this will be good
Hey Martin thanks for the question and support! Although I like Tesla's products, it just doesn't fit the kind of company we like to trade. As it gets more mature and has a long track record of profitability, it might become a stock we track and trade. It's also difficult to find good, solid support and resistance because it moves so much in short periods of time. I will keep it in mind if I can work some discussion of the stock into a future video. Thank you for the suggestion!
Great video!!!
Thank you for your support 😊
So informative and engaging, absolute pleasure watching your videos, thanks for sharing all this knowledge..
Thank you so much for that and for your support! 😊
Very interesting, I liked it, it was clear, concise and to the point AND it made sense! If I could I'd come and work for you for free just to learn the how too's.
Thank you!
The only reason I use weekly's is to get as close to 30-40 DTE when opening a new position once the stock I'm tracking hits it's entry point.
Thank you for sharing Kyle! I've done the same thing. Right now we are trying to do that with our HRL positions because the June monthly strikes are limited to $5 increments and we've been selling the $47 and $48 strikes. So we are trying to roll them out the the Friday following the 3rd Friday of June.... we'll see what happens!
Do you practice any Bull Put Strategies or other such straddling strategies? If not, any particular reason? I see it on other TH-cam channels - would love to see your thinking on these strats.
Hey Sean thanks for your questions and support! We sell naked put options a lot as well as some covered calls. However we don't do much straddle or strangle trading. I have done a good bit of those types of trades in the past and just find that selling puts and covered calls (with a few PMCC positions sprinkled in) tends to fit our trading style best. I know there are traders that do very well with straddles and strangles, but it just doesn't match our view of the overall market direction, need for adjustment (especially in a diversified portfolio like we prefer).
What kind of alerts do u set to help you track your positions? Or do you set alerts?
I set alerts on the options I've bought and sold to track the extrinsic value left in them and for the ones I bought, to track them when their value goes up to a certain point. I also set alerts sometimes on underlying stock prices so that if the stock hits a certain price, it will alert me so I can review the position and decide if I want to adjust the option(s) or not.
I am wondering how can we make sure that in broad market stock correction we won’t face with situation having multiple put in the money?
That's a challenge! Unless your positions are very far OTM, when something happens like what happened in March 2020, you're going to most likely have some puts go ITM.
If you are wanting to get some protection, then you do have some choices. You could do spreads (th-cam.com/video/JS2GkXvRFwI/w-d-xo.html) or you might also consider accumulating some LEAPS put options which should go up in value when the market declines. You could also purchase near term VIX call options but if it were me, I would prefer to buy the LEAPS put options.
For our account, we just know that when that happens again, we will have a lot of put options ITM and we will either allow stock to be put to us and turn them into covered calls or PMCCs (th-cam.com/video/aTRXzXEL4t4/w-d-xo.html) or just roll them out until the market recovers.
Hi Randy. I just watched this one again. Great reinforcement to watch it again. One of the things that I know that you talked about, but haven't seen lately is when you enter sell put trade, what Delta do you normally prefer to target? Do you go for around .30 to be out of the money or do you go nearer to the money for better premium with the plan to adjust the position if it doesn't go your way? Thanks for the great work. I really enjoy your presentation style and like how go about trading.
On edit, I think that I figured it out, but wonder if you could confirm. It appears that you do neither. It looks like you use the tech analysis to find a potential dollar level for the put and then determine if you can get a minimum of 30% COC return selling at that level. Is that correct?
Hey Sam thank you for that!
If it's an option that will expire in less than 90 days, I generally don't look at Delta. My wish list is for the stock to recently have been declining but approaching an area where it found support and hopefully even looking like it is finding support again. Once I see that happening, depending on the overall market condition, if the markets are neutral or going up, I'll look to sell an option ATM or just barely OTM. If it's a bearish looking market, then I might consider selling it a little bit OTM.
But once I see it at an area where it will most likely find support, and I believe the odds are in our favor of winning on the trade, I then want to collect as much premium as possible without selling an option that's ITM. I have sold ITM option but don't do it very often.
The minimum return I'm usually looking for is around 20% annualized ROC. When the VIX is low like it is now, that can be more challenging but we like to try to realize at least a 20% ROC or better when we enter a new position.
@@StockandOptionMyLifeOfLearning Awesome. Makes sense. Thanks, Randy.
Hello, CSP works god when we have bull market, what do do trade in bear market? Por man covered calls o something different? thank you
Hey Luis that's a great question! There are a couple of options. If you were long stocks and the market is definitely trending down, you could sell ITM covered call options. You could also sell OTM put options and since volatility will be higher, you should still be able to make good returns even though the put options are OTM. If you felt really strong about the bear market, you could always sell call options.
@@StockandOptionMyLifeOfLearning and roll puts options or to be assigned and sell CC?
It really depends on the return. If we will get a better return by letting the stock be assigned to us and selling covered calls with the dividend calculated in if it's a dividend paying stock, then we will do covered calls. However if the return is the same or rolling a put option is better than will stick with rolling the put options.
Thank you for these wonderful tips Randy. I always ask myself 5 reasons why I want this trade and do I mind owning these stocks at this strike price. I believe weekly put options have opportunity in this volitile market using arbitrage. I keep a close eye on the VIX and 10 year treasury yield using these as lead indicators, then eyeing for potential entry candidates looking for support at moving averages.
Thank you for sharing your strategy Jason and for your support! I really appreciate it. 😊
@@StockandOptionMyLifeOfLearning does this strategy apply to the call side?
I prefer it with puts and calls.
How do we pay less taxes on stock gains , ? Thxs
One way is to not sell the stock. Another way is to sell some positions in which you are showing a loss to offset some of the gains. You could always go back in after the required wash sale period: th-cam.com/video/xdcQCKZtJhI/w-d-xo.htmlsi=9bkzGHe4nE3gCxcm
Then depending on how you’re set up, you may be able to use losses from other investments, or things like depreciation from real estate to offset some gains. Those are just a few that came to mind.
New subscriber
I like your channel
Thanks for good information
Thank you for that and for your support!
Hey Randy. On an hourly basis, do you make more in your trading or TH-cam business?
I by far make more on my trading and investments than I do on the TH-cam business. It’s a universe apart.
But I do enjoy creating things, even if it is a how to video on trading and investing and I enjoy the interaction with my patrons and positive people on TH-cam.
That’s the two reasons why I keep doing TH-cam.
What delta on the monthly do you look at?
When I sell options, I don’t necessarily focus on the Delta, unless I’m trying to repair a position. My main focus is on support and resistance.
Good stuff!!
Thank you for your support Gerald!
This was really helpful, thank you! Unfortunately I’m held to 30 day holding periods due to the company I work for so I believe weeklys will be my best bet for now, would you agree with this?
Thank you for you support! I prefer monthly options but there are a few situations where I trade biweekly options. However my preference is definitely monthly options.
If I’m trying to trade options that are pretty far OTM, I will even look at 60 day expirations with a plan to roll them when it gets close to 30 days out.
So basically if I have a cash secure put that expires this Friday and it’s out of the strike price meaning I don’t get assigned I can just let it expire and collect the full premium? I don’t have to close it myself? It will do automatically on expiration and I can repeat the process for the following week?
Yes that’s correct. If the option expires out of the money, then that position should just disappear over the weekend and it doesn’t cost you anything. You get to keep the entire premium.
@@StockandOptionMyLifeOfLearning Perfect. Thank you.
There is always pin risk which is the small chance your short put is OTM at market close but then an event happens just after close (i.e. earnings) which moves the underlying significantly and your put is now deep ITM. I think option holders can exercise up until 5:30 pm so you could end up being assigned the shares which have also now moved 20% lower. A lot of people will BTC for $0.01 to avoid that risk or just close out the position once you have earned 90% of the premium since the remaining 10% you could gain isn't worth the risk.
Thank you for that Chris! Well said. 👏
Can we use strategy selling put and selling call together? (in one stock) And collect both premium? For example :
Current stock price :$45
We sell put 2 weeks at strike : $42
Also we sell 2 weeks secured covered call at $48 (we own 100 share of stock at $45 price). Is this good idea too..?
So we can collect both premium..?
Absolutely! I especially like to use that strategy when a position has moved against me. That's one reason why I generally only have on 1/2 a position size so I can sell additional options in one direction or the other.
@@StockandOptionMyLifeOfLearning do you have what’s up group that we can learn about option more..? Thank you
I have Patreon and my Discord is available to my Patrons. www.patreon.com/mylifeoflearning
Can’t you cancel the sell contract early for a %?
Yes you can always close out a contract you have sold short early by buying it to close it out.
How do you choose your strike prices when selling cs puts? Delta? Support lines?
Hey Kamran we generally choose our strike prices by looking at previous support. We look at support lines, moving averages, chanel tops and bottoms, previous highs usually turn into support, gaps which once filled tend to turn into support. Those are just a few of the ways that we come up with our strike prices.
@@StockandOptionMyLifeOfLearning I understand. Isn't the purpose of selling puts is to be assigned at a 'much' lower price than the market price? Such as 10-15% or several strikes under the current price? I prefer choosing a 15 delta or best available that gives me enough risk to reward ratio...
One of the great things about options is that you can use them for many purposes. For example if you only wanted to, you could use them to do exactly what you mentioned, have puts assigned to you. Or you might use options to generate cash flow. Or like we do, you might use them to do a combination of the two. Of course there are other reasons to use options, but as the two main reasons why we trade in them.
@@StockandOptionMyLifeOfLearning Would you recommend selling puts and CC on ETFs such as VTI and SPY?
I think selling puts and CC in ETF can be good. You return won't be quite as good but it would be simpler and you could have fewer positions on while still being diversified.
Awesome breakdown on weeklies vs monthlies! Just out of curiosity, is your profit target for a position based on trend and feel, or do you shoot for a concrete percent of the contract value to close out? I have been having great success with a 50-65% target to close, but occasionally a favorable move manifests and I can get closer to 85-90%
Thank you for your questions and support! I definitely watch the trend and how stocks are moving, however
\our absolute cut off of when we are definitely looking to do something with a position is when there's only 10% to 20% time value left in the position. There are some factors that will put that on hold but that's our general rule of thumb.
However if a position moves in our favor very fast and momentum is starting to fade, then we will look to close the position out when there's more than 10 or 20% time value left if we see another position that offers a better opportunity for the cash we set aside for that initial position.
when do you cut the loss for ccs and pcs?
I generally stick with positions and just keep collecting premium thus reducing my overall out-of-pocket cost unless something fundamentally changes with the company, so that I know longer feel comfortable owning it. So, if it breaks down fundamentally, at that point, I'm out no matter what my profit or loss is. But through the ups and downs, I just focus on trying to collect as much premium as possible and adjusting strike prices along the way.
You didn’t cover the negative side of monthly’s vs weekly’s. I.E when the trade doesn’t go your way, so you are stuck holding that contract, while the weekly has theta burning much faster and will expire earlier. Also, in the case of a covered call, if your contract goes in the money early, you are now waiting weeks in “hopes” that it dips back down so your shares do not get called away. Or, if you are fine with the shares being called away, you are still waiting 3 weeks for that to happen. You could be 3 more contracts deep in premium while waiting.
Also, you briefly mentioned that the premium you receive from weekly’s is higher, but you didnt state by how much, which matters greatly. A .25 delta (safe) contract expiring next week on AAPL right now will get you $85 in premium, while the one month out .25 delta only gets you $140. I can sell 4 weekly’s for roughly $320 vice the monthly’s $140.
I’m not saying monthly’s are bad, but more information is necessary to show both sides.
Thank you for sharing your thoughts.
I recently discovered this awesome channel. Thanks for the great and informative advices about options. Would you pls elaborate how to calculate total return and margin requirement for short puts? I have been computing total return to current initial margin % ( try to be more conservative) , but heard you compute a total return to cash to cash %....
Thank you for that and for your support! The margin requirement is most likely different for various brokerages as well as the type of margin you're approved for. For example we have portfolio margin which allows for extreme leverage if we chose to use it.
Typically most people have margin in which they're required to have about 30% to 50% of the total possible out-of-pocket cost. But you really want to check with your broker to get the exact numbers. On Interactive Brokers where we do most of our option trading, there's actually a screen we can go to that shows the current margin requirement for each one of our positions. Also when we place a trade, before we actually submit the trade, there’s a screen that shows the initial margin requirement as well as post trade margin requirement.
Here is how I calculate an annualized return. For example let’s say that we sell a put option at a $100 strike price that has 30 days left until it expires and we get $2 per share for it.
$2 option premium / 30 days (life of option if stayed in position until expiration) x 365 days (to annualize the return) / $100 (strike price) = 24.3% annualized non-leveraged cash on cash return.
When selling a put, if the stock gets to or.below the strike does it automatically.assign you the shares or can they not be assigned to you until expiration? Or is it as soon as it reaches or goes below the strike price? Thanks in advance? I guess the same question goes for selling a covered call
Thanks for your question and support! If a stock gets to the short strike price the option is not automatically assigned. It's only when there's little or no time value left in the option that your chances of getting assigned early go way up. If its an American style option (which most options are) then it can be assigned at any time, but it doesn't make sense for the trader that bought the option to assign it and give you the time value left in the option when they can just sell the option back and pocket the time value. If you haven't seen it already, here is a link for a video I made on option assignment: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
I've done some research on covered calls. My findings are that the theoretical returns don't seem to match the actual ones. When a stock blows up or blows down you have a problem. If it shoots higher, you get a small amount of that gain and now have to repurchase the stock at a much higher price if you want to keep writing calls on it. If it collapses in price (like a lot of growth stocks have done recently) what's your protection on the downside? Also, I have not seen any videos on covered call writing discuss wash sales which are a huge pain in the butt from a tax perspective.
Thank you for sharing your thoughts! It also depends on how you're trading. For example, if you're good owning a stock and sell a put option just to collect some cash while you wait for the stock to come down and it blows past your put, you're actually in better shape than if you had bought the stock outright. However, if you're trading with a tremendous amount of margin or leverage, and your whole account goes against you, you can be wiped out.
You asked, if a stock price collapses, what's your protection to the downside? If you're doing credit spreads then your long put would be your protection. However if you're doing cash secured put options, then you're in the same position as someone that owns a stock outright. If you're doing naked put options, you could be in trouble depending on how low the stock goes.
Hi Randy, you deff had the best one regarding weeklies vs monthlies :))
Can l ask if you do teach your strategies via Patreon?
Cheers!
Thank you so much for that and for your support Derick! Whenever I do a trade, after the market closes, I talk through my thinking on that trade. So in that sense, you could say I teach my strategies Trade by Trade. (th-cam.com/video/Ve_P62GhX1M/w-d-xo.html)
I see cool. I’ve only been trading monthlies so far, mostly credit spreads, iron condors etc bagging 800-1000 pm w a 40k acc. I’m thinking of scaling those profits w a bigger account but unsure how. Any tips Randy!
If you haven't seen it already, I made a video with some tips last week. Here's the link if you'd like to check it out: th-cam.com/video/I23Wkri53Ig/w-d-xo.html
5% exposure for each trade means you have a large portfolio. That means you have 20 positions ! That is not how most people starting out do it. But it is good to see you demonstrate the best position. I wonder why you sell more puts than covered calls ?
Hey Brendan thank you for your support! We do covered calls also, although we don't typically initiate them as a covered call. If a stock is put into our account as a result of the selling put options that we're selling, then we immediately turn it into a covered call position. I'm definitely not opposed to initiating positions as a covered call, I've just found that our return is typically a little bit better with short put options than covered calls.
@@StockandOptionMyLifeOfLearning But don't you need a lot more capital to cover short put options ? I mean, if the market tanks you are going to need a lot of money in the bank to take and pay for all the stocks ?
If you are not using margin or leverage, then the cash you set aside for the short put options would be the exact same amount as if you bought the stock at that short put option strike price you're considering and do a covered call position. So the cash requirement would be the same if you're not going to use margin or leverage.
Hi, If I exit with 20-25% of the premium received in credit spreads with 10-15 delta can I be profitable? As in many cases I am making profits but one big loss wipes out previous gains, do you suggest 2x or 3x stop loss?
There are a lot of factors that go into answering your first questions about would it be profitable so I can't really answer that question with the information you provided. However, as far as your second question, I generally like to work positions if they go against me. As long as nothing has fundamentally changed with a company I'm trading in, I usually try to stick with them and work the position. There are a lot of ways you can do that. Here's a playlist dedicated to repairing positions that go against you: th-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
Hi, great video, thanks. Could you cover trading high IVR or IVP stocks, or during those times, is that something you look for? And could you cover, it seems that in monthly you might make more money when the stock goes up, for ex sell a monthly get $2, weekly get $0.60, stock goes up $1, that monthly you can cover for $1.50, profit $0.50, but the weekly cover for $0.20, profit $0.40 (or something like that...). It'll be great if you could explore these 2 topics?
Thank you for your support and suggestions! If you haven't seen it already, you might want to check out the video I did on When to sell put options. Here's the link if you're interested: th-cam.com/video/PPS5TcCYMvE/w-d-xo.html
I'll also see if I can work them into future videos.
Hey there, I would like to ask you in terms of rolling a credit spread when a winning trade becomes a losing trade (Stock price gets closer to strike before expirations), by rolling a spread, it essentially means closing and opening a new position right (new expiration and new strike price), may i know does it mean that losses will be realised by rolling the spreads? Thanks
Yes you are closing the old position and opening a new one. I actually have a video I'm finishing up now that I'll be releasing on Saturday about how to adjust credit spreads that go against you.
As far as will it be a realized loss, you may want to check with your tax advisor about that. If you did all four legs as one order, you could actually structure it so that, hopefully you walk away with cash in your pocket. However from a tax standpoint, I can't tell you with absolute certainty whether it'll be a realized loss or if it will result in building up losses or gains in a position for a later date. That would be a tax professional question.
Just close the position at a loss and open another position independently is easier to track and also easier to do your taxes at the end of the year
I understand how a monthly is better if it is in your favor, but wouldn't a weekly option limit your risk due to faster time decay and let u roll forward & down OR take a smaller loss and let us react quicker to the market if the stock moves against you? This is assuming we do not have many trades open and hv the time to manage the few trades that we have.
Hey Jack thank you for your question and support! It's true that you are at risk for a shorter amount if time, while the actual risk is the strike price minus the premium received. If a trader wanted to only be in positions for a week then weeklys are probably the best option. However from my experience, a trader can do all the things with monthlies that they can with weeklies except have the quicker expiration. They can roll up, down, out and close early, it's just that they get more money upfront.
@@StockandOptionMyLifeOfLearning can you explain the more money up front comment you made. Wouldnt you need to wait the whole month to collect the bigger premium since time decay is longer?
Hey Shaun if say you sell a 30 day put option in XYZ at the $100 strike, you'd get more for that option than if you sold the 7 day put option in XYZ at the $100 strike. You generally get more for a farther dated put option than a shorter dated one.
@@StockandOptionMyLifeOfLearning oh is that because there is more time for the option to go ITM?
Yes that's correct. There should be more time value premium in the longer term option than in the shorted one. The exception is if an option is very DITM. Sometimes with those options, there won't be any time value premium.
I have rolled over one of my sold put options twice as it was DITM.
i got a credit premium $200 when i rolled it the first time, but the credit reduced to $50 when i rolled it the second time.
Does it considered a loss?
It sounds like you would have a loss on your initial trade that went from OTM to DITM. But on your subsequent trades, since you're able to pocket a smaller and smaller credit, you most likely are showing a profit on those. If you're asking for tax purposes it'd be good to ask a tax person because they may also look at it as an overall position and your overall trades for the year as compared to each individual trade.
@@StockandOptionMyLifeOfLearning
No, i was not asking from tax perspective.
I was wondering whether rollover to a lesser credit the second or third time considered a loss?
Or is it still considered as profit as long as it has a credit value?
Thanks.
It probably depends on how you look at it personally. If you consider how much you sold an option for and then what it cost you to buy it back then that will be pretty straightforward. If you sold it for more than it cost to buy it then it's a profit.
However other option traders will look at what they netted on the roll. For example what did it cost you to buy to close the near term option and sell to open the farther dated option. Did you get a credit? So it really depends on how you like to look at your own profit and loss.
As long as the credit you received is more than the debit you paid, you received a NET credit. That makes it profitable. No one ever went broke receiving a net profit. Maybe the first roll or the second roll wasn't AS profitable as the initial trade, but so what.
Can u please do a clip on long put march 2022 for Baba for example
Much appreciated
Thank you for your suggestion and support! I will see if I can work it into a future video. We have a short position on in BABA right now. We will be doing something with it this week by Friday.
@@StockandOptionMyLifeOfLearning thanks
If u run a short and long option trade service happy to learn from u
We are predominately sellers of options. However on occasion, for example with a LEAP option, we will buy options. But 95%+ of the time, we are option sellers. Thank you for your consideration!
The biggest reason was not mentioned...stock appreciation.
Thank you for mentioning it! 👏
Poor people think about what there can buy with their money, Rich people think about what there can invest in with their money 💰💰💰;..
Well said! 👏 Thanks for your support!
Yeah, but that is because poor people don’t have the money to invest.
thank you
Thank you for your support!
Good stuff Randy been watching all your videos lately, thanks for being so upfront and detailed.
Thank you for your support! It means a lot.
Hey Randy, thank you for these videos. I really like your content it’s very clear and direct. How can I Join your network to get DAILY alerts of your trades. I have been trading CSP for the past 4 months but to your point my money is sitting on the side line and I haven’t been making enough trades so it will be very helpful to work with a team to find solid companies.
Hey Moe thank you for that! 😊 If you'd like to join, here is the link: www.patreon.com/mylifeoflearning
Here are the various levels you might consider:
"Friend" gives you all our actual trades in our main option trading account as well as ROTH (retirement) account that we did that week, but not until after the market closes either Friday night or over the weekend.
"MVP" gives you all our trades in our main option trading account as well as ROTH (retirement) account after the market closes each trading day. It also gives you an update at the end of the day of any open limit orders we have sitting out there and any adjustments we made to those open orders that day.
"Live Alerts!" gives you all our actual trades real time. As soon as we know an order has been filled, you will get an alert.
We generally do trades anywhere from 2 to 5 days a week. We generally do around 40+ option trades a month and 1 out right stock purchase a week.
Let me know if you have any other questions! Thank you for your support!
Looking at this from all angles and I'd have to say, I'd live my life and let my bank do my investing.
Thanks for sharing your thoughts Eric and for your support!
Dont forget gamma risk. That is another disadvantage of weekly options imo. If it goes against you gamma would ramp up the delta.
Thank you for that and for your support! I agree with you that gamma is important especially as an option gets close to ATM or is ITM.
no dislikes?? WHAA.. im already paying extra attention (investing extra attention)
Hey Jack thanks for checking it out!
Say if I sell put and got $45 in premium
Few weeks later the stock price went up and this contract now cost $2
If I buy to close is my net profit $45-$2 = $43? Is that how selling put works ?
Yes that’s correct. 👍 In you scenario it sounds like you received $0.45 per share when you sold and it cost you $0.02 per share to buy it back equals a net of $0.43 per share x 100 shares or $43 per contract profit minus any commission.
If I sell monthly I will have to place my targets even deeper OTM, so the option premium will reflect, good video though.
Thank you for your support!