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Buddy, as an experienced options trader, this video is spot on. IMO this video is the most important video to watch and remember when it comes to selling put options. Great job as usual 👍🏿
Hearing him talk about NOT using Margin made me feel a lot smarter. I have never used it and don't want to because I don't want to get caught with a bill to pay.
Randy, haven't gone through all of your videos but your presentations that I have watched are extremely helpful and well done. [I have subscribed as well. All the best]
I've been doing put options for a while and I came the same conclusion that it's dangerous to financially responsible people to trade anything with cash you don't have.
Secured put is my favorite strategy. I play high IV for better premium and I know its a bit riskier. But return percentage is huge. Its hard to lose even on a bad trade. Rollout my contract to minimize my loss. It's a bullish strategy for sure. When my contract moves quick with few days I will close it up even at 50% of my paid premium. I do this only if I see a nice pullback on a different stock that will bounce back. When you collect premiums that's more cash to make plays or hold cash.
this is such a fantastic video ,the information on selling puts was on point and also tell people it can be very risky so why not sell vertical spreads like bull put spreads and bear call spreads also iron condors...........selling puts alone is just too risky!
That's the biggest thing, don't sell more contracts than you can afford and always sell put contracts on companies you want in your portfolio long term! Awesome video!!!
This was an excellent video. I always knew trading on margin was risky, but I didn't think about this scenario you showed here playing out. Will Subscribe and follow up with your channel. Thanks for posting.
Great video! Very informative, could you do a video on how you organize all those trades? with all the different dates and types of trades I imagine it could get overwhelming
Good thoughts. I too have 3 trading accounts. It was a lesson learned years ago when Investrade got bought out. Under the new company rules I could no longer sell cash puts. For 2 months this went on without resolution. Screw then and I moved my account as well as my sons account. I never trade on margin. Sell put options only on stocks I don't mind owning. Since the beginning of the year my 3 accounts are up more than 25%, 35%,45% much of the gains are made by selling options.
Nice video, quick questions. If I already own a stock can I sell put options using the owned stock as collateral as opposed to CSP where i have to lay the money aside as collateral
It probably depends on your margin approval level. If you do that scenario, just please make sure you understand the ramifications if that CSP is assigned. Here is a video on margin if you'd like to check it out: th-cam.com/video/XU9LF5KmtJ8/w-d-xo.html
Make the trade and pocket the $43k. If it moves against you, just roll it down and out, you are only at $30 strike price. Even if you had to keep rolling it down and out, won't take too long to get near $0
any thoughts on selling long-dated Put options? Seems like most options traders prefer the near expiration dates, but if you really like the stock and the fundamentals, you confidently collect some greater premiums for selling longer dated Puts.
Hey Michael I have done that on a few occasions. I actually made a video on the subject. If you haven't seen it and would like to check it, out here's the link: th-cam.com/video/E47DYu6DLkI/w-d-xo.html
Hi Randy I watched couple of videos and immediately fell in love with the content you provide. It’s great to see the ups and downs of different options trading strategies. It’s my pleasure to subscribe to your channel. Keep it up 👍 . Greetings from Canada 🇨🇦
hi anf thank you for this video :) i would like to know how do you protect your puts in case the price goes down? do you keep track and simply sell them be4 expiration? what option will you buy to mitigate your risk? an in the money call? thamk you :)
Question 1: Do I only have to pay the difference if the price is below my put? Or always the total amount? Question2: Do I have to deliver money or just the 100 shares if I have any?
It depends on if you’re referring to selling a put or call option. Also, if you trade in what’s called cash settled options, shares are not actually called from you or put/sold to you. For example, if you sold a put option, and it was a cash settled option, it will be as you described. If the stock/ETF was below your strike price, at expiration cash, cash would be debited from your account. With physically settled options, if say, for example, you sold a put option and the stock/ETF was below your strike price at expiration, then the physical shares would be put into your account, and so you would have to have the cash to buy them. Here is a beginner option trading video series that might help if you’re new to options: th-cam.com/play/PL3j38I2YtGw1ajwTN6SxDkMN0yqEaYsGG.html
Awesome video. I just started selling put options 3 months ago and your videos have helped me understand the principles that are important to create that passive income. I only do cash secured puts so thanks for reiterating this because it can be tempting to use margin.
Hey Ben thanks for your comment and support! I agree it so tempting to use margin, especially with the interest charged being so low right now. But if you over leverage and are forced to liquidate during a market crash, you give back all the benefits of that cheap money. Let us know how you progress. We are rooting for you!
Very useful video with excellent advised! Thank you and congratulations! I sell put in IBKR using limited margins and have one question regarding margins with IBKR: do you know where, in IBKR, I can see my maximum exposure (what I would lose if all goes to zero)? I can see, in My Portfolio, my Gross Exposure but this is calculated as Market value / Total net Liquidation Value. However the Market Value of a sale of put does not represent my maximum loss! For example if I sell a put strike $20 and the Market Value is $1 my total exposure is NOT $100 as included in the IBKR Gross Exposure calculation but $2000 ($20*100). Very different! I currently use an excel spreadsheet to keep track of my exposure but there must something in IBKR ! Thank you! Andrea
I tried to find that same piece of information one time and I couldn’t locate it on IBKR. I do the same as you and use an excel spreadsheet. It would be worth a phone call to see if there’s somewhere we can keep an eye on that. If you happen to find it, please post a new comment here on TH-cam. That would be helpful.
@@StockandOptionMyLifeOfLearning thank you very much for your reply! Do you mean a phone call between us (you and me)? For me it would be fine! I will also try to ask the same question via message center to IBKR.
Thank you. It depends on the option trading strategy, margin type, and brokerage. With a covered call, most brokerages will hold the stock as collateral, which makes sense. Where it gets a little more unclear is when you’re selling naked put or call options. Depending on the type of account you have, your margin requirements, and the brokerage, that will determine how much and what type of collateral you’ll be required to have. Generally, brokerages will set aside cash. The biggest unknown is how much they require you to set aside. That’s more determined by if your account is a cash basis or margin. If it’s margin, it’s determined by what type of margin the account has.
If you use that much leverage it is just an absolute necessity to buy to close your position before expiration if the trade is starting to go against you. You can lose approximately 3-4x more than you would have otherwise made on the trade if you act fast enough (acceptable loss on a high probability trade), but otherwise you can completely decimate your account with one trade.
@hammertime NEVER close your trade for a loss. ALWAYS ROLL the strike further down, and to a farther out expiration, to earn a net credit. You make more money when you roll. You lose money if you close for a loss.
Correct me if I'm wrong, but my understanding with Selling a Put option is.......don't matter if the price goes up or down as long as it doesn't hit or go below your strike price, thus after expiration, you will collect the premium plus get "ALL" your collaterals back? RIght?
Great vid. One thing I'm confused about. If the stock falls below my strike price (ie 400) to say 380... I know I have to buy the stock at 400 but so I suffer the cash flow loss of 20 per share or can I keep my shares at 400 and wait for the mkt price to recover from 380 to 400+?
If you’ve sold a put option at a $400 strike price and the stock falls to 380, if you don’t do anything to adjust the position , the put option will be assigned and you’ll buy the shares for $400 per share. You then decide what you want to do. You don’t have to liquidate the position, you can just hold onto the shares if you want. Of course this is all contingent upon you having cash or buying power in your account to buy those shares or in other words, you don’t get a margin call because you didn’t have the money to buy the shares. But as long as you have the cash to own the shares, you can let the put option be assigned, you’ll buy the shares at $400 per share and then you do what you want with the shares.
If I sell a put option and the buyer sells to close that option I sold them for profit, does that effect me any? Or do I just retain the original premium with no losses?
It should not affect you. The only time it might affect you is when the buyer of an option assigns it. Option assignments are totally random. It's not like you sold a put option contract to the buyer and that one buyer assigns it that bought it from you. It's a total random event which options get assigned if a buyer decides to assign an option.
There are many more dangers to selling put options than simply using margin. Like in the volatile market we’ve been in lately, getting assigned 20% below your strike, etc. How to avoid and manage those risks
If you’re investing, you’re most likely going to have something at risk. But there’s ways to cap potential losses and or repair positions when they gone against you. If you wanted to cap potential losses, you could always do spreads. Here’s a playlist on spreads that I’ve created: th-cam.com/play/PL3j38I2YtGw272tus6umU_zxFdwnJ8E0c.html Here’s a playlist with some of the techniques we use to repair positions that go against us: th-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
Great content (as always). Quick question - If your ATT position moved against you would you roll the put to next month or wheel the trade into a covered call? Always conflicted on which one pays out better in the longer term. Best, Jason
Hey Jason thank you for your support and questions! I like to look at the overall return. For example is the stock about to go ex dividend? If so I would definitely let it be assigned to me if the return was better for the covered call including the dividend. However if it's not about to go ex dividend then I just run the two returns, covered call versus rolling the put option and go with the better return.
So if you have to buy the T and say at that point you really didn't really want to hold it, couldn't you just sell it right after you bought it? Assuming its close to the strike price of course.
Thanks for the question and your support! Yes absolutely. If the stock was assigned to you (you were long the AT&T) then you could just liquidate the position by selling the stock. Or before that happened, if you saw that there was not much time value left in the option, you could always roll the put option out to increase the time value which would decrease the likelihood of the stock being put into your account.
If it’s an American style option, it can be assigned at any time. If it’s a European style option then they are only assigned at expiration. Here’s a video I made on the subject if you’d like to check it out: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
Great video. I've learned a lot from you. And have referred you to others. Question - and maybe you have a video about this??? - why cash secured puts (or naked puts) as opposed to just buying a call option if you're that bullish on the stock??? I understand that with csp it's a win/win in some ways - you get the premium or you get the premium and the stocks. So you're not losing money. Is this the only reason not to buy a call option instead? Simply because you won't lose the premium you pay? Thanks so much!
Thank you so much for that Nancy and for your support! It really means a lot to me. I have spoke about buying versus selling options in several videos, but I haven't done one dedicated exclusively to that. The reason why I prefer to sell options is that we win: if the market goes in our direction, stays flat, or even declines some. Generally, when you buy an option, you only win if the underlying goes in your direction fast enough to beat the amount of time decay that the option loses. To me it's kind of like swimming upstream versus downstream. The technique that I use when I want to go long on a stock that does not pay dividends is to buy a DITM LEAPS call option. If you haven't seen it already, I made a video series about doing that. Here's the link if you'd like to check it out: th-cam.com/play/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7.html
Excellent video!!! How do you calculate 4,3% at 3:13? 10 contracts *30 =30000...If you have 408k in your account, it's more than 7%.. With that criterion, if you have for instance 50k in your account, you should not selling options in stocks more expensive than 25 $. Is that correct? Best!!!
At that time we had ~ $700k set aside for our positions. We don't keep all of our cash in any one account for reasons I have spoke about in our videos. It's harder to keep your position size under 5% when your account size is smaller. There are other ways to do it, such as with credit spreads (th-cam.com/video/0j6qvqna9aE/w-d-xo.html and th-cam.com/video/JS2GkXvRFwI/w-d-xo.html) and using PMCC (th-cam.com/video/aTRXzXEL4t4/w-d-xo.html), but you have to be very careful with those because they set a trader up for a complete loss if all their positions were to move against them. If at all possible, I like to keep my risk in any one position to at most 5% of my overall account. So yes, if you followed that same principal, you would only sell up to $2,500 worth of put/covered call options in any one position.
I’ve been starting to consider this for something like SPXL as I wouldn’t mind having the etf. And also thought this could be a good way to make some money to be able to buy more of it in the long run
So I might be confused here. For that time frame in April of 21' AT&T was trading around $22-23/share and nowhere close to $30/share. Was this just a hypothetical?
There are multiple ways to do that. Here a few of them along with videos about the strategy: 1) You could do PMCCs: th-cam.com/video/aTRXzXEL4t4/w-d-xo.html and th-cam.com/video/ywSROh42sq8/w-d-xo.html 2) Credit spreads: th-cam.com/video/0j6qvqna9aE/w-d-xo.html and th-cam.com/video/JS2GkXvRFwI/w-d-xo.html There are other ways but those are my 2 go to ways to minimize downside risk. A third way would be to buy puts or bearish put debit spreads as insurance. You might consider paying for them by selling covered calls. You could do that in individual stocks or in the over market.
Hello, amazing video, what % return is realistic by doing the wheel? If I have 100k is it realistic to expect 20k a year return with your trade alerts ? Of course there is not Guarantees
Hey Alen thank you for your question and support! I cannot say what another investor will do, but I can say is that we target around a 20%+ annualized non-leveraged return in our option trading account. Sometimes it won’t be that good but other times it’ll be better so that’s our goal is at least a 20% return. That return is derived from market conditions as well as decisions of each individual investor.
Amazing video as always and eye opener towards excessive leverage use ! And also like to know generally can a broker also force to hold premium received as a collateral and still required full deposit for the value of stocks ! Thanks
I haven't noticed that any of the brokers I have used over the years ever held the premium on top of cash for the underlying but I guess it's always possible.
Thank you for the explanation, What if the price falls below the strike price do we have a chance to wait for the expiration hoping for the price to go above the strike price ? Or we will be forced to buy the stocks before expiration ?
Hey Hussain thank you for your question and support! If it's a European style option then it should not be exercised before expiration. However if it's an American style option, like almost all the ones are that we trade, it can be exercised at any time until expiration. However it only makes sense for the option owner, the person who you sold it to, to exercise the option if there's no time value left in it. So generally speaking, as long as there's time value left it an option, it will not get assigned to you. However once there is no or nearly no time value left in an option, at that point it can be assigned at any time. If you haven't seen it already, you might find this video helpful: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
Hi Randy, excellent job, you caught my attention right away as someone who knows what they are talking about with option selling, so one more subscriber. I have doubled my account in 9 months and have done it staying small and primarily with cash secured puts. However, I am always wary of having a bunch of puts on and the market heads south in a major correction. I am always thinking about risk, never reward. How do you handle a portfolio full of downside risk. Do you hedge? Lately I have gone to more of a diagonal strategy because worst case scenario I have protection and know what my max risk is. Also how do you handle covered calls where the stock price runs and you have capped your gains? You probably have addressed this in other videos I suspect.
Thank you for that and for your support! Congratulations on your success! Considering risk 1st is IMO the best thing to do in option and stock trading, especially if you're using margin/leverage. We currently don't do anything to hedge because we are not using leverage and would be good if every put was assigned to us. We'd then begin selling CCs and collecting dividends if it's a dividend paying stock. If/when I have used a good bit of leverage in the past, we either hedged (by buying nearer term or LEAPS SPY puts) or used spreads to cap downside risk. Here's several other videos I've made, if you haven't seen them already, you might find them interesting: th-cam.com/video/6dtbDnpfuGM/w-d-xo.html and a covered call playlist that'll address your CC question: th-cam.com/play/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K.html
So is selling a put the same as naked short? Where does unlimited loss comes in I understand when you use margin but if you don't use margin where do people get this unlimited loss?
Hey John thank you for your question and support! When you sell a put, you have a bullish or neutral view of that stock. When you sell a put you technically do not have an unlimited loss potential. If you are using margin to sell puts, then you can definitely amplify your losses. But if you sell a put and have the money to buy the stock or ETF if it were put into your account, then your loss would be capped at what your strike price is the same as if you owned the stock out right. The stocks price cannot go negative. The unlimited loss factor comes into play if you sell naked call options. Since a stock or ETF could theoretically go to infinity, if you're selling naked call options, there could potentially be a situation where your losses just continue to grow forever and are "unlimited".
I sold a put option and the price dipped below the strike price. I’m fine with getting assigned the shares, but it expires tomorrow and says my equity is down $300. Will that number go up at expiration
Hey Matthew whatever time value is left in the option will be 100% gone at expiration. So if you have some time value premium left in it, and the stock stays where it’s at or better yet moves in your direction, then your profit should go up. If however the stock moves against you, then your profit will most likely go down if the decrease in the underlying price is greater than the amount of time value left in the option.
Hello, thank you for the video. If the price goes below the strike price then we have to buy the options at the strike price. It depends on the buyer correct to buy or it will automatically be bought into my account at expiry?
Thanks for your question and support! It is up to the owner of the put. However most if not all brokerages now automatically exercise ITM options at expiry unless the owner request otherwise.
I have a put option that expires in 16 days. It is currently OTM. Can it be assigned to me if it goes ITM BEFORE expiration? Thank you! Love your channel!
Thank you for your question and support Kamran! If it's an American style option, which most options are, then it can be assigned at any point until expiration. However they generally are not assigned unless there's little or no time value left in the option. If you'd like more information about option assignment you might like to check out the video I made on that subject: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
I believe the trade you're referring to is the T $30 third Friday of May puts that we sold for $0.77 on 4/22/21. We actually bought them back before expiration to close the position out 6 days later on 4/22/21 for $0.16. So we netted a profit of $0.61 per share minus commission.
Do you have any regrets on AT&T ($T) being your choice to sell a cash secured PUT on? You sold 10x $30 PUT options to get assigned last year. Within the past year, AT&T has steadily and gradually DECLINED from around $30/share to $23/share and upon assignment, if you were still holding onto those 10k shares, you'd be down $7,000. Zooming out on the AT&T chart, this stock is clearly moving in a long term downtrend and I don't see that changing any time soon with their dividend payout and debt level on the balance sheet. I'm curious to know your thoughts on AT&T ($T) not being a growth stock yet being a candidate for options investing. I would only ever want to sell covered calls and cash secured puts on stocks and ETFs I have a long term bullish outlook on. Stocks that I would want to invest in for life, such as $SPY, $TSLA, $AAPL, $MSFT. What were you thinking when choosing $T? I genuinely want to learn where you're coming from with that decision.
We’ve been out of that position for a long time and it ended up being a very profitable position for us. I am willing to trade in AT&T again, however, as you mentioned it’s been in a prolonged down trend so we haven’t been able to. We’ll see if it finds support again around 22.5. If it does, then I may be willing to trade options in it again. I don’t mind trading options in companies that don’t have high growth but I do want them to be growing. I also only trade options in companies that have a proven track record in good and bad times. As such, I am willing to trade in AAPL, MSFT and to some degree SPY. However, even though I like TSLAs products, I don’t feel comfortable trading options in it at this time.
Our account is not that large but it is definitely larger than the average trader. I understand that a new trader will not be able to do that, I was new and had a small account at one time also. If you'd like to see more techniques about how to trade with a smaller account you might like to check out these videos: th-cam.com/video/laQVd2VwN6A/w-d-xo.html and th-cam.com/video/0j6qvqna9aE/w-d-xo.html Thanks for your support!
If you sell out options and you get assigned you just start selling call options on those shares...it's called the whell strategy...and if you start to run the wheel strategy ON MARGIN well that's how you really max out your gains lol but learn how to run this strategy rolling down up up and out down and out ext get some instincts under your belt and always keep your eyes on the odds gl go make money
I have never heard of there being a restriction regarding when you can buy an option you’ve sold back to close a position out as long as it’s before the option expires. You might want to double check with your broker to make sure there’s no unique restrictions, but I’ve never heard of any.
I typically don't use stop losses on options. However, I do set alerts when options reach certain price points or certain amounts of extrinsic value to remind me to review the position.
Great video thanks! Question: are all your puts cash secured? I'm asking, because if all those ~50 positions get assigned, I don't think $300k would be enough, right? And it looked like you are using some margin, if I saw correctly
Thank you for that and for your support! I do not keep all of my cash at one brokerage. I do that because if a broker were to go belly up, or decide to limit how much cash we were able to pull out of it, if we had all the cash at one broker, it could be a problem. Because of that, I spread the cash around and have it parked at several different brokerages. However we have the ability to wire funds into this main option trading account when the need arises.
Hi, I like your videos. Just a question though, the example you gave of buyer exercising their right to make you buy 1000 shares of AT&T at 30$ per share if it falls at 20$, can't you just buy back the options for a loss instead if there is enough time premium left on those contracts? that way you save yourselves thousands of dollars?
Absolutely! You can always buy an option back that you sold anytime before expiration or before it gets exercised. I made a video on option assignment. If you haven’t seen it and would like to check it out, here’s the link: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
If you sell a $30 strike put and haven’t bought it back to close the position out then as long as that put is still open the put option seller is committed to buying the stock at that strike price through expiration day or until the seller of that option buys it back to close it out.
@@StockandOptionMyLifeOfLearning I think I you sale a $30 strike with an expiration day you can’t close it because you get pay the prime I am not good in option so I want to know if is it correct.?
It really depends on the position. If the position has moved in your favor and or time value has eaten away at the option premium enough you might be able to buy it back for less than you sold it initially, before expiration.
Thank you for your question? The last trade we did in AT&T was closed out for a really good profit on 4/22/2021. Since then, the technicals just haven't looked solid enough for us to do a trade in it.
Can you please clarify my query on Selling PUT option. I am new in option so trying to understand few things. For ex: I want to buy a stock at $10 which is currently at $10.30. Since i need to buy that at $10 and i know it will in reach there in few days. So my questions are 1. Can i take the expiry day too long(6 months) so that the premium value($1) of that option will be more and if it reach to $10 in 2 days can i execute my put option in 2 days and get the higher premium value?
Thank you for your question and support! Yes you can always sell the farther dated put to get more upfront cash, but you can’t force assignment if you are the seller. Only the buyer can force assignment. As longer as there’s time value left in the put option, the likelihood of the buyer assigning it is pretty small. If you’re hoping to get assigned earlier but still want to sell a farther dated put, you might consider selling one that’s ITM. You wouldn’t get as much time value premium but your odds of being assigned early go up. Just make sure the math works out so your cost basis would be $10 or less, if that’s your goal.
May I ask a quick question? If I get assigned on a very in the money put, can I just turn around and sell a call on my 100 shares at my cost basis regardless of the current share price? Is my thought process too simple? Thanks.
Yes you absolutely can sell a call option at any strike price you choose as long as you’re comfortable with the possibility of it being called away/sold at that strike price. It’s totally up to you.
What do you think he meant by that? Mass destruction for whom? I saw your other video. 4.9 Billion! And 55,000 Puts at 1.50 for 7,500,000!!! But "weapon of Mass Destruction" ... I can't even imagine how, unless you bet on a company that crashes to zero! Am I wrong.?.(Edit" or is it because I'm on Robinhood where you can't Sell Naked Puts and I'm missing half the picture.?.)
I believe he was referring more to traders who either use too much leverage our margin. For example, let's say you had a $50,000 account and your broker will let you trade as if you had a $100,000 account. He's referring to traders that over leverage or use margin trading options so that when the market goes against them, which it inevitably will, their account goes to zero or close to it. So he was referring to selling naked puts and maybe also buying options with 100% of a traders capital in such a way, that eventually their account will get decimated with no hope of rebounding without a cash infusion.
For free? You might be able to find it on Yahoo finance or somewhere like that. I know on my two trading platforms, ETrade and Interactive brokers, I'm able to view that in their charting system. I add it in as a column on my watchlist. If you haven't done it already, you might want to contact Schwab because many times, they have that feature available but it's hidden by default. You have to know how to get to it to add it to your platform.
Yeah! Don’t mess with that leverage nonsense. I got a margin account but have the margin money turned off. DONT WANT IT,gotta protect myself from myself and their greed.
Do you look for stocks that have very low volatility and are essentially trading sideways? I seem to keep rolling options out because they're moving against me, especially in this market with falling share prices. What seemed to be reasonable strike prices for put options suddenly became too high with 50% drops in the underlying stock. Don't really want to own these stocks until we see where the bottom is.
Yeah several stocks have dropped quite a bit especially technology stocks. We generally like to have most of our positions in mature, solid, stable dividend paying companies. We will sprinkle in a little bit of non-dividend paying stocks here and there but at least 90% of our portfolio are in the type of companies I described above. The perfect set up is when a stock has had a recent decline, but is leveling off around support. That's generally when we like to initiate option trades by selling put options in them.
I don't have the timestamp that you're referring to, but please note that this video was released 13 months ago. Although I would trade in T again, we have not done a trade in T since 4/22/21 because the technicals haven't look solid to me especially considering the restructuring it was going through and the uncertainty surrounding it.
If I want to buy a stock that currently trades at $42 and I want to sell a put option for a strike price of $30 because that’s how much I want to pay for the 100 shares does this mean that if the stock doesn’t go below $30 a strike price that I will lose my $3000??
No. When you sell a put option, you pocket however much option premium you received for selling that option. If the stock is not assigned to you by expiration, then you keep the option premium and there’s no consequences. If the stock is assigned to you at $30 per share, you still get to keep the option premium, but you would buy the stock for $30 per share. If you are newer to options trading, this video will help: th-cam.com/video/bKLxEY3BolY/w-d-xo.htmlsi=I9KhcoqpSCEuPyOr
I just released a video about Warren Buffett selling options. Here's the link if you guys haven't seen it already: th-cam.com/video/xof4y3nd5N0/w-d-xo.html
I have found selling naked puts far more successful than cover calls. My issue with covered calls is so many times my holding has passed my strike price. I generally use a strike 5-10% above current based on volatility
I define return on risk on a naked short put as the credit received / the margin power reduction. Further, I calculate the annualized return based on the dte. I noticed that my put credit spreads for the same dte return about the same annualized return because while the credit received is lower of course, the margin requirement is also lower. Hope that adds to the discussion.
Thanks for your insight and support!. If you use margin, you are charged interest. That rate varies so if a trader is going to use it, it'd be worth finding out what rate you would be charged. Also please know what can happen to your account if the market crashes like it did last year.
It has been my experience with Schwab that they don't charge margin interest until you are actually assigned the stock from a put expiring in the money. That is when you are actually borrowing the money to pay for the stock. Selling a put on margin that expires worthless or is rolled, or closed out before expiration does not cost me margin interest. Check with your broker to confirm what is considered a balance that is subject to margin interest.
I just sold a property in Portland and I'm thinking to put the cash in stocks, I know everyone is saying it's ripe enough, but Is this a good time to buy stocks? How long until a full recovery? How are other people in the same market raking in over $200k gains with months, I'm really just confused at this point
There is always risk in every investment. That's why it's important to take calculated risk and understand what you're investing in before you invest or trade. I don't know what you're referring to when you say people are raking in over $200,000 our games in months, but I'd also be cautious of anyone claiming to make wild gains. I'm not saying it doesn't happen, I'm just saying, if I'm going to follow someone, I want to see their track record over a long period of time. I don't want to see the best trade they made in the past five years, which is what a lot of people tend to talk about. Then they tend to not talk about the ones that go against them.
Oh gotcha. I thought he was basically saying that it was a bad trade since T has gone down so much since then. I’m still learning about selling put options…
If you were selling put options and they were assigned to you but you didn’t have the money to buy them completely, the stock would still most be assigned to you. However your account would most likely go negative. You could then sell the stock you were assigned to recoup at least some of the cash. Where it gets to be a problem is say for example you sold one put option contract at $100 per share. In order to cover that completely, you would need $10,000 if you didn’t use any margin or leverage. However let’s say that you only had $4000 in your account. Since you had to buy the stock at 10,000 you potentially have a -$6000 cash in your account. If the stock was trading at say $20 per share then when you sold it back you would get $2,000. So even after selling the stock back, your account would still be -$4000. That’s where it can be a problem. When the stock crashes far enough that even once you liquidate the position, your account is still negative in capital.
![How to ROLL OVER PUT OPTIONS (for a Living) [How to ROLL a DEEP IN THE MONEY PUT OPTION]](http://i.ytimg.com/vi/8bhzg6eZFhQ/mqdefault.jpg)
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Buddy, as an experienced options trader, this video is spot on. IMO this video is the most important video to watch and remember when it comes to selling put options. Great job as usual 👍🏿
Thank you for your comment and support Jermaine! It really means a lot to me. 😊
This really was an incredibly easy to follow, thorough video on selling puts. Great work.
Thank you for that Ray and for your support! 😊 It means a lot!
One of the best option channels i've seen so far. Great content 👍🏻
Thank you for that! I really appreciate it. 😊
I agree!
Hearing him talk about NOT using Margin made me feel a lot smarter. I have never used it and don't want to because I don't want to get caught with a bill to pay.
Thanks for transparency. Great video.
Randy, haven't gone through all of your videos but your presentations that I have watched are extremely helpful and well done. [I have subscribed as well. All the best]
Thank you 😊
I always use XLF and I’ve never been disappointed. Reasonably priced and well worth owning 😌
I've been doing put options for a while and I came the same conclusion that it's dangerous to financially responsible people to trade anything with cash you don't have.
Thank you for sharing JJ!
Leverage or margin is always a risky proposition. Cash is king and margin needs to be properly understood before being used... if ever.
Secured put is my favorite strategy. I play high IV for better premium and I know its a bit riskier. But return percentage is huge. Its hard to lose even on a bad trade. Rollout my contract to minimize my loss. It's a bullish strategy for sure. When my contract moves quick with few days I will close it up even at 50% of my paid premium. I do this only if I see a nice pullback on a different stock that will bounce back. When you collect premiums that's more cash to make plays or hold cash.
Thank you for sharing and for your support!
Thank you, you are correct. Using any margin at all is the worse move you can make.
Hey Dan, thank you for that and for your support!
Your channel is great man! Keep it up. I watch them all.
Thank you for your support 😊
Thank you for this content, you are a great presenter.
Thank you
this is such a fantastic video ,the information on selling puts was on point and also tell people it can be very risky so why not sell vertical spreads like bull put spreads and bear call spreads also iron condors...........selling puts alone is just too risky!
That's the biggest thing, don't sell more contracts than you can afford and always sell put contracts on companies you want in your portfolio long term! Awesome video!!!
Thank you so much for that and for your support! Well said.
Yep, margin can be bad! Learned the hard way. Thanks for the video!
GRAT EXPLANATION, THANK YOU SO MUCH RANDY
Thank you for your support!
Knowing risk is important. Great video Randy!
Thank you!
This was an excellent video. I always knew trading on margin was risky, but I didn't think about this scenario you showed here playing out. Will Subscribe and follow up with your channel. Thanks for posting.
Glad it was helpful!
Great video! Very informative, could you do a video on how you organize all those trades? with all the different dates and types of trades I imagine it could get overwhelming
Thank you for your support! 😊 Thank you also for the suggestion! I think it's a really good idea. I'll work that into future videos.
Started selling calls and puts has made me a better investor and your channel has been awesome education series! Thank you!
Thank you so much for that! I really appreciate it. 😊
Amazing video, thanks a lot
Good thoughts. I too have 3 trading accounts. It was a lesson learned years ago when Investrade got bought out. Under the new company rules I could no longer sell cash puts. For 2 months this went on without resolution. Screw then and I moved my account as well as my sons account. I never trade on margin. Sell put options only on stocks I don't mind owning. Since the beginning of the year my 3 accounts are up more than 25%, 35%,45% much of the gains are made by selling options.
Thank you for sharing 👍
Nice video, quick questions. If I already own a stock can I sell put options using the owned stock as collateral as opposed to CSP where i have to lay the money aside as collateral
It probably depends on your margin approval level. If you do that scenario, just please make sure you understand the ramifications if that CSP is assigned. Here is a video on margin if you'd like to check it out: th-cam.com/video/XU9LF5KmtJ8/w-d-xo.html
Make the trade and pocket the $43k. If it moves against you, just roll it down and out, you are only at $30 strike price. Even if you had to keep rolling it down and out, won't take too long to get near $0
THANK YOU RANDY.
any thoughts on selling long-dated Put options? Seems like most options traders prefer the near expiration dates, but if you really like the stock and the fundamentals, you confidently collect some greater premiums for selling longer dated Puts.
Hey Michael I have done that on a few occasions. I actually made a video on the subject. If you haven't seen it and would like to check it, out here's the link: th-cam.com/video/E47DYu6DLkI/w-d-xo.html
Hi Randy
I watched couple of videos and immediately fell in love with the content you provide. It’s great to see the ups and downs of different options trading strategies. It’s my pleasure to subscribe to your channel. Keep it up 👍 . Greetings from Canada 🇨🇦
Thank you for that 😊 and for your support!
Really appreciate your videos. The margin example is very useful
Thank you for that Philip and for your support! 😊 It really means a lot.
hi anf thank you for this video :) i would like to know how do you protect your puts in case the price goes down? do you keep track and simply sell them be4 expiration? what option will you buy to mitigate your risk? an in the money call? thamk you :)
This video will help answer some of those questions: th-cam.com/video/910pc4WbGRs/w-d-xo.html
Question 1: Do I only have to pay the difference if the price is below my put? Or always the total amount? Question2: Do I have to deliver money or just the 100 shares if I have any?
It depends on if you’re referring to selling a put or call option. Also, if you trade in what’s called cash settled options, shares are not actually called from you or put/sold to you.
For example, if you sold a put option, and it was a cash settled option, it will be as you described. If the stock/ETF was below your strike price, at expiration cash, cash would be debited from your account. With physically settled options, if say, for example, you sold a put option and the stock/ETF was below your strike price at expiration, then the physical shares would be put into your account, and so you would have to have the cash to buy them.
Here is a beginner option trading video series that might help if you’re new to options: th-cam.com/play/PL3j38I2YtGw1ajwTN6SxDkMN0yqEaYsGG.html
Awesome video. I just started selling put options 3 months ago and your videos have helped me understand the principles that are important to create that passive income. I only do cash secured puts so thanks for reiterating this because it can be tempting to use margin.
Hey Ben thanks for your comment and support! I agree it so tempting to use margin, especially with the interest charged being so low right now. But if you over leverage and are forced to liquidate during a market crash, you give back all the benefits of that cheap money. Let us know how you progress. We are rooting for you!
The only time I use margin is if I'm transferring money to my brokerage account, and I don't want to wait for it to clear before making a trade.
Very useful video with excellent advised! Thank you and congratulations!
I sell put in IBKR using limited margins and have one question regarding margins with IBKR: do you know where, in IBKR, I can see my maximum exposure (what I would lose if all goes to zero)?
I can see, in My Portfolio, my Gross Exposure but this is calculated as Market value / Total net Liquidation Value.
However the Market Value of a sale of put does not represent my maximum loss! For example if I sell a put strike $20 and the Market Value is $1 my total exposure is NOT $100 as included in the IBKR Gross Exposure calculation but $2000 ($20*100). Very different!
I currently use an excel spreadsheet to keep track of my exposure but there must something in IBKR !
Thank you!
Andrea
I tried to find that same piece of information one time and I couldn’t locate it on IBKR. I do the same as you and use an excel spreadsheet. It would be worth a phone call to see if there’s somewhere we can keep an eye on that. If you happen to find it, please post a new comment here on TH-cam. That would be helpful.
@@StockandOptionMyLifeOfLearning thank you very much for your reply! Do you mean a phone call between us (you and me)? For me it would be fine! I will also try to ask the same question via message center to IBKR.
I apologize I meant calling IBKR to make sure you get the correct answer or if I get a chance I will call them. 👍
@@StockandOptionMyLifeOfLearning Ok! I send an email and let you know about the reply!
Great video, can you have equity as collateral for the options or do you have to keep it in cash?
Thank you.
It depends on the option trading strategy, margin type, and brokerage. With a covered call, most brokerages will hold the stock as collateral, which makes sense.
Where it gets a little more unclear is when you’re selling naked put or call options. Depending on the type of account you have, your margin requirements, and the brokerage, that will determine how much and what type of collateral you’ll be required to have. Generally, brokerages will set aside cash. The biggest unknown is how much they require you to set aside. That’s more determined by if your account is a cash basis or margin. If it’s margin, it’s determined by what type of margin the account has.
@@StockandOptionMyLifeOfLearning Thanks! That's good to know! looking forward to your next video!
If you use that much leverage it is just an absolute necessity to buy to close your position before expiration if the trade is starting to go against you. You can lose approximately 3-4x more than you would have otherwise made on the trade if you act fast enough (acceptable loss on a high probability trade), but otherwise you can completely decimate your account with one trade.
Thank you for that. I totally agree!
@hammertime NEVER close your trade for a loss. ALWAYS ROLL the strike further down, and to a farther out expiration, to earn a net credit. You make more money when you roll. You lose money if you close for a loss.
Correct me if I'm wrong, but my understanding with Selling a Put option is.......don't matter if the price goes up or down as long as it doesn't hit or go below your strike price, thus after expiration, you will collect the premium plus get "ALL" your collaterals back? RIght?
Yes that’s it!
@@StockandOptionMyLifeOfLearning Awesome! Sound simple enough. Thanks.
Great vid. One thing I'm confused about. If the stock falls below my strike price (ie 400) to say 380... I know I have to buy the stock at 400 but so I suffer the cash flow loss of 20 per share or can I keep my shares at 400 and wait for the mkt price to recover from 380 to 400+?
If you’ve sold a put option at a $400 strike price and the stock falls to 380, if you don’t do anything to adjust the position , the put option will be assigned and you’ll buy the shares for $400 per share. You then decide what you want to do. You don’t have to liquidate the position, you can just hold onto the shares if you want.
Of course this is all contingent upon you having cash or buying power in your account to buy those shares or in other words, you don’t get a margin call because you didn’t have the money to buy the shares.
But as long as you have the cash to own the shares, you can let the put option be assigned, you’ll buy the shares at $400 per share and then you do what you want with the shares.
@@StockandOptionMyLifeOfLearning thank you so much for the detailed response. That helps!
Very clear, thank you!
Thank you so much for your support! I really appreciate it. 😊
Very good
Thank you
How do you determine what the strike price will be?
Here’s a video I made on that subject if you’d like to check it out: th-cam.com/video/9L8avDcF664/w-d-xo.html
Nice, well presented plain english.
Thank you so much for that Joshua!
If I sell a put option and the buyer sells to close that option I sold them for profit, does that effect me any? Or do I just retain the original premium with no losses?
It should not affect you. The only time it might affect you is when the buyer of an option assigns it. Option assignments are totally random. It's not like you sold a put option contract to the buyer and that one buyer assigns it that bought it from you. It's a total random event which options get assigned if a buyer decides to assign an option.
VIAC is killing me right now for April 16. 3 weeks away and I’m already thinking I’m gonna have to roll that one out.....
VIAC has had a big drop this year. I hope it works out for you. Let us know how you trade it and how it turns out please Eric.
@@StockandOptionMyLifeOfLearning it’s dropped 50% in the last 2 weeks!😱 I’ll give an update closer to exp date......🤞🏼🤞🏼
GREAT way of explaining this THANK YOU! So awesome!
Hey Charles thank you so much for that and for your support! 😊
Great breakdown mate! 👊🏼👊🏼
Thanks CJ!
There are many more dangers to selling put options than simply using margin. Like in the volatile market we’ve been in lately, getting assigned 20% below your strike, etc. How to avoid and manage those risks
If you’re investing, you’re most likely going to have something at risk. But there’s ways to cap potential losses and or repair positions when they gone against you. If you wanted to cap potential losses, you could always do spreads. Here’s a playlist on spreads that I’ve created: th-cam.com/play/PL3j38I2YtGw272tus6umU_zxFdwnJ8E0c.html
Here’s a playlist with some of the techniques we use to repair positions that go against us: th-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
Great content (as always). Quick question - If your ATT position moved against you would you roll the put to next month or wheel the trade into a covered call? Always conflicted on which one pays out better in the longer term. Best, Jason
Hey Jason thank you for your support and questions! I like to look at the overall return. For example is the stock about to go ex dividend? If so I would definitely let it be assigned to me if the return was better for the covered call including the dividend. However if it's not about to go ex dividend then I just run the two returns, covered call versus rolling the put option and go with the better return.
Thanks
So if you have to buy the T and say at that point you really didn't really want to hold it, couldn't you just sell it right after you bought it? Assuming its close to the strike price of course.
Thanks for the question and your support! Yes absolutely. If the stock was assigned to you (you were long the AT&T) then you could just liquidate the position by selling the stock. Or before that happened, if you saw that there was not much time value left in the option, you could always roll the put option out to increase the time value which would decrease the likelihood of the stock being put into your account.
@@StockandOptionMyLifeOfLearning Thanks, I'm just now learning, appreciate your help.
I thought they will assign the stock on expiration day, not before. Can you explain
If it’s an American style option, it can be assigned at any time. If it’s a European style option then they are only assigned at expiration. Here’s a video I made on the subject if you’d like to check it out: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
Thanks for your great 👍work
Thank you so much for your support! I really appreciate it. 😊
Great video. I've learned a lot from you. And have referred you to others. Question - and maybe you have a video about this??? - why cash secured puts (or naked puts) as opposed to just buying a call option if you're that bullish on the stock???
I understand that with csp it's a win/win in some ways - you get the premium or you get the premium and the stocks. So you're not losing money. Is this the only reason not to buy a call option instead? Simply because you won't lose the premium you pay?
Thanks so much!
Thank you so much for that Nancy and for your support! It really means a lot to me.
I have spoke about buying versus selling options in several videos, but I haven't done one dedicated exclusively to that. The reason why I prefer to sell options is that we win: if the market goes in our direction, stays flat, or even declines some.
Generally, when you buy an option, you only win if the underlying goes in your direction fast enough to beat the amount of time decay that the option loses. To me it's kind of like swimming upstream versus downstream.
The technique that I use when I want to go long on a stock that does not pay dividends is to buy a DITM LEAPS call option. If you haven't seen it already, I made a video series about doing that. Here's the link if you'd like to check it out: th-cam.com/play/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7.html
Solid style.
Thank you for your support Richard! 😊
This is definitely one of the best video. It save me.
Thank you so much for your support Martin! 😊 I always appreciate it. 👏
Excellent video!!! How do you calculate 4,3% at 3:13? 10 contracts *30 =30000...If you have 408k in your account, it's more than 7%..
With that criterion, if you have for instance 50k in your account, you should not selling options in stocks more expensive than 25 $. Is that correct?
Best!!!
At that time we had ~ $700k set aside for our positions. We don't keep all of our cash in any one account for reasons I have spoke about in our videos. It's harder to keep your position size under 5% when your account size is smaller. There are other ways to do it, such as with credit spreads (th-cam.com/video/0j6qvqna9aE/w-d-xo.html and th-cam.com/video/JS2GkXvRFwI/w-d-xo.html) and using PMCC (th-cam.com/video/aTRXzXEL4t4/w-d-xo.html), but you have to be very careful with those because they set a trader up for a complete loss if all their positions were to move against them.
If at all possible, I like to keep my risk in any one position to at most 5% of my overall account. So yes, if you followed that same principal, you would only sell up to $2,500 worth of put/covered call options in any one position.
@@StockandOptionMyLifeOfLearning thanks a lot...very clear your videos
awesome, thanks
You're welcome! 😊
I’ve been starting to consider this for something like SPXL as I wouldn’t mind having the etf. And also thought this could be a good way to make some money to be able to buy more of it in the long run
Thank you for sharing. Let us know how it goes.
So I might be confused here. For that time frame in April of 21' AT&T was trading around $22-23/share and nowhere close to $30/share. Was this just a hypothetical?
Could you give me a timestamp please and I'll let you know exactly. Thanks!
is there a good strategy to mitigate the downside risk of selling put options, for example when the stock tanks?
There are multiple ways to do that. Here a few of them along with videos about the strategy:
1) You could do PMCCs: th-cam.com/video/aTRXzXEL4t4/w-d-xo.html and th-cam.com/video/ywSROh42sq8/w-d-xo.html
2) Credit spreads: th-cam.com/video/0j6qvqna9aE/w-d-xo.html and th-cam.com/video/JS2GkXvRFwI/w-d-xo.html
There are other ways but those are my 2 go to ways to minimize downside risk.
A third way would be to buy puts or bearish put debit spreads as insurance. You might consider paying for them by selling covered calls. You could do that in individual stocks or in the over market.
Hello, amazing video, what % return is realistic by doing the wheel? If I have 100k is it realistic to expect 20k a year return with your trade alerts ? Of course there is not Guarantees
Hey Alen thank you for your question and support! I cannot say what another investor will do, but I can say is that we target around a 20%+ annualized non-leveraged return in our option trading account. Sometimes it won’t be that good but other times it’ll be better so that’s our goal is at least a 20% return. That return is derived from market conditions as well as decisions of each individual investor.
Amazing video as always and eye opener towards excessive leverage use ! And also like to know generally can a broker also force to hold premium received as a collateral and still required full deposit for the value of stocks !
Thanks
I haven't noticed that any of the brokers I have used over the years ever held the premium on top of cash for the underlying but I guess it's always possible.
Thank you for the explanation, What if the price falls below the strike price do we have a chance to wait for the expiration hoping for the price to go above the strike price ? Or we will be forced to buy the stocks before expiration ?
Hey Hussain thank you for your question and support! If it's a European style option then it should not be exercised before expiration. However if it's an American style option, like almost all the ones are that we trade, it can be exercised at any time until expiration.
However it only makes sense for the option owner, the person who you sold it to, to exercise the option if there's no time value left in it. So generally speaking, as long as there's time value left it an option, it will not get assigned to you. However once there is no or nearly no time value left in an option, at that point it can be assigned at any time. If you haven't seen it already, you might find this video helpful: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
Hi Randy, excellent job, you caught my attention right away as someone who knows what they are talking about with option selling, so one more subscriber. I have doubled my account in 9 months and have done it staying small and primarily with cash secured puts. However, I am always wary of having a bunch of puts on and the market heads south in a major correction. I am always thinking about risk, never reward. How do you handle a portfolio full of downside risk. Do you hedge? Lately I have gone to more of a diagonal strategy because worst case scenario I have protection and know what my max risk is. Also how do you handle covered calls where the stock price runs and you have capped your gains? You probably have addressed this in other videos I suspect.
Thank you for that and for your support! Congratulations on your success! Considering risk 1st is IMO the best thing to do in option and stock trading, especially if you're using margin/leverage. We currently don't do anything to hedge because we are not using leverage and would be good if every put was assigned to us. We'd then begin selling CCs and collecting dividends if it's a dividend paying stock.
If/when I have used a good bit of leverage in the past, we either hedged (by buying nearer term or LEAPS SPY puts) or used spreads to cap downside risk. Here's several other videos I've made, if you haven't seen them already, you might find them interesting: th-cam.com/video/6dtbDnpfuGM/w-d-xo.html and a covered call playlist that'll address your CC question: th-cam.com/play/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K.html
So is selling a put the same as naked short? Where does unlimited loss comes in I understand when you use margin but if you don't use margin where do people get this unlimited loss?
Hey John thank you for your question and support! When you sell a put, you have a bullish or neutral view of that stock. When you sell a put you technically do not have an unlimited loss potential. If you are using margin to sell puts, then you can definitely amplify your losses. But if you sell a put and have the money to buy the stock or ETF if it were put into your account, then your loss would be capped at what your strike price is the same as if you owned the stock out right. The stocks price cannot go negative.
The unlimited loss factor comes into play if you sell naked call options. Since a stock or ETF could theoretically go to infinity, if you're selling naked call options, there could potentially be a situation where your losses just continue to grow forever and are "unlimited".
I sold a put option and the price dipped below the strike price. I’m fine with getting assigned the shares, but it expires tomorrow and says my equity is down $300. Will that number go up at expiration
Hey Matthew whatever time value is left in the option will be 100% gone at expiration. So if you have some time value premium left in it, and the stock stays where it’s at or better yet moves in your direction, then your profit should go up. If however the stock moves against you, then your profit will most likely go down if the decrease in the underlying price is greater than the amount of time value left in the option.
Hello, thank you for the video.
If the price goes below the strike price then we have to buy the options at the strike price. It depends on the buyer correct to buy or it will automatically be bought into my account at expiry?
Thanks for your question and support! It is up to the owner of the put. However most if not all brokerages now automatically exercise ITM options at expiry unless the owner request otherwise.
I have a put option that expires in 16 days. It is currently OTM. Can it be assigned to me if it goes ITM BEFORE expiration? Thank you! Love your channel!
Thank you for your question and support Kamran!
If it's an American style option, which most options are, then it can be assigned at any point until expiration. However they generally are not assigned unless there's little or no time value left in the option. If you'd like more information about option assignment you might like to check out the video I made on that subject: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
AT&T at $30 per share?
looks like AT&T dipped below $30.00 before your expiration. Did the buyer exercise the options? How much did you lose?
I believe the trade you're referring to is the T $30 third Friday of May puts that we sold for $0.77 on 4/22/21. We actually bought them back before expiration to close the position out 6 days later on 4/22/21 for $0.16. So we netted a profit of $0.61 per share minus commission.
Do you have any regrets on AT&T ($T) being your choice to sell a cash secured PUT on? You sold 10x $30 PUT options to get assigned last year. Within the past year, AT&T has steadily and gradually DECLINED from around $30/share to $23/share and upon assignment, if you were still holding onto those 10k shares, you'd be down $7,000. Zooming out on the AT&T chart, this stock is clearly moving in a long term downtrend and I don't see that changing any time soon with their dividend payout and debt level on the balance sheet. I'm curious to know your thoughts on AT&T ($T) not being a growth stock yet being a candidate for options investing. I would only ever want to sell covered calls and cash secured puts on stocks and ETFs I have a long term bullish outlook on. Stocks that I would want to invest in for life, such as $SPY, $TSLA, $AAPL, $MSFT. What were you thinking when choosing $T? I genuinely want to learn where you're coming from with that decision.
We’ve been out of that position for a long time and it ended up being a very profitable position for us. I am willing to trade in AT&T again, however, as you mentioned it’s been in a prolonged down trend so we haven’t been able to. We’ll see if it finds support again around 22.5. If it does, then I may be willing to trade options in it again.
I don’t mind trading options in companies that don’t have high growth but I do want them to be growing. I also only trade options in companies that have a proven track record in good and bad times. As such, I am willing to trade in AAPL, MSFT and to some degree SPY. However, even though I like TSLAs products, I don’t feel comfortable trading options in it at this time.
Great video so you saying 4.3 % off your total acct that means you will have to have an acct over 1 million thats alot of money for the regular joe
Our account is not that large but it is definitely larger than the average trader. I understand that a new trader will not be able to do that, I was new and had a small account at one time also. If you'd like to see more techniques about how to trade with a smaller account you might like to check out these videos: th-cam.com/video/laQVd2VwN6A/w-d-xo.html and th-cam.com/video/0j6qvqna9aE/w-d-xo.html
Thanks for your support!
If you sell out options and you get assigned you just start selling call options on those shares...it's called the whell strategy...and if you start to run the wheel strategy ON MARGIN well that's how you really max out your gains lol but learn how to run this strategy rolling down up up and out down and out ext get some instincts under your belt and always keep your eyes on the odds gl go make money
Thank you for sharing your strategy and for your support!
hi about STOP LOSS on selling option?and is ti alright to BUY BACK the next day to CLOSE POSITION in order to keep contract expiry for ONEday ?
I have never heard of there being a restriction regarding when you can buy an option you’ve sold back to close a position out as long as it’s before the option expires. You might want to double check with your broker to make sure there’s no unique restrictions, but I’ve never heard of any.
Sounds Good. As We Use STOP LOSS On Stocks, & How Does That Work On OPTIONS?
I typically don't use stop losses on options. However, I do set alerts when options reach certain price points or certain amounts of extrinsic value to remind me to review the position.
Great video thanks! Question: are all your puts cash secured? I'm asking, because if all those ~50 positions get assigned, I don't think $300k would be enough, right? And it looked like you are using some margin, if I saw correctly
Thank you for that and for your support! I do not keep all of my cash at one brokerage. I do that because if a broker were to go belly up, or decide to limit how much cash we were able to pull out of it, if we had all the cash at one broker, it could be a problem. Because of that, I spread the cash around and have it parked at several different brokerages. However we have the ability to wire funds into this main option trading account when the need arises.
Hi, I like your videos. Just a question though, the example you gave of buyer exercising their right to make you buy 1000 shares of AT&T at 30$ per share if it falls at 20$, can't you just buy back the options for a loss instead if there is enough time premium left on those contracts? that way you save yourselves thousands of dollars?
Absolutely! You can always buy an option back that you sold anytime before expiration or before it gets exercised. I made a video on option assignment. If you haven’t seen it and would like to check it out, here’s the link: th-cam.com/video/RrWEqdmUYOI/w-d-xo.html
So what happen if the AT&T will go down to $25 is it mean that you have to pay $30 if so you will lose 5x3000=15000 is it correct thanks
If you sell a $30 strike put and haven’t bought it back to close the position out then as long as that put is still open the put option seller is committed to buying the stock at that strike price through expiration day or until the seller of that option buys it back to close it out.
@@StockandOptionMyLifeOfLearning I think I you sale a $30 strike with an expiration day you can’t close it because you get pay the prime I am not good in option so I want to know if is it correct.?
It really depends on the position. If the position has moved in your favor and or time value has eaten away at the option premium enough you might be able to buy it back for less than you sold it initially, before expiration.
Dude AT and T is $24 at the lowest
Did you get the shares assigned?
Thank you for your question? The last trade we did in AT&T was closed out for a really good profit on 4/22/2021. Since then, the technicals just haven't looked solid enough for us to do a trade in it.
Can you please clarify my query on Selling PUT option. I am new in option so trying to understand few things. For ex: I want to buy a stock at $10 which is currently at $10.30. Since i need to buy that at $10 and i know it will in reach there in few days. So my questions are 1. Can i take the expiry day too long(6 months) so that the premium value($1) of that option will be more and if it reach to $10 in 2 days can i execute my put option in 2 days and get the higher premium value?
Thank you for your question and support! Yes you can always sell the farther dated put to get more upfront cash, but you can’t force assignment if you are the seller. Only the buyer can force assignment. As longer as there’s time value left in the put option, the likelihood of the buyer assigning it is pretty small.
If you’re hoping to get assigned earlier but still want to sell a farther dated put, you might consider selling one that’s ITM. You wouldn’t get as much time value premium but your odds of being assigned early go up. Just make sure the math works out so your cost basis would be $10 or less, if that’s your goal.
Turn out April 16th was a good date but wow did it tank after!
If you give me a timestamp I can reply to the comment with insight.
good topic
Thank you for that and for your support! 😊
Turn the Volume
Thanks for the suggestion.
May I ask a quick question? If I get assigned on a very in the money put, can I just turn around and sell a call on my 100 shares at my cost basis regardless of the current share price? Is my thought process too simple? Thanks.
Yes you absolutely can sell a call option at any strike price you choose as long as you’re comfortable with the possibility of it being called away/sold at that strike price. It’s totally up to you.
@@StockandOptionMyLifeOfLearning Thank you, appreciate your channel!
Good job
Thank you for your support!
My mistake is selling options out of the money beca the premium
Thank you for sharing
What do you think he meant by that? Mass destruction for whom? I saw your other video. 4.9 Billion! And 55,000 Puts at 1.50 for 7,500,000!!! But "weapon of Mass Destruction" ... I can't even imagine how, unless you bet on a company that crashes to zero! Am I wrong.?.(Edit" or is it because I'm on Robinhood where you can't Sell Naked Puts and I'm missing half the picture.?.)
I believe he was referring more to traders who either use too much leverage our margin.
For example, let's say you had a $50,000 account and your broker will let you trade as if you had a $100,000 account. He's referring to traders that over leverage or use margin trading options so that when the market goes against them, which it inevitably will, their account goes to zero or close to it.
So he was referring to selling naked puts and maybe also buying options with 100% of a traders capital in such a way, that eventually their account will get decimated with no hope of rebounding without a cash infusion.
Randy, where I can get an underlyings current IV Rank or IV Percentile data for free? I use Schwab and can't find it on their platform.
For free? You might be able to find it on Yahoo finance or somewhere like that. I know on my two trading platforms, ETrade and Interactive brokers, I'm able to view that in their charting system. I add it in as a column on my watchlist. If you haven't done it already, you might want to contact Schwab because many times, they have that feature available but it's hidden by default. You have to know how to get to it to add it to your platform.
Thanks for the tip… will contact Schwab tomorrow
Yeah! Don’t mess with that leverage nonsense. I got a margin account but have the margin money turned off. DONT WANT IT,gotta protect myself from myself and their greed.
Thank you for sharing! I like that. 👏
Do you look for stocks that have very low volatility and are essentially trading sideways? I seem to keep rolling options out because they're moving against me, especially in this market with falling share prices. What seemed to be reasonable strike prices for put options suddenly became too high with 50% drops in the underlying stock. Don't really want to own these stocks until we see where the bottom is.
Yeah several stocks have dropped quite a bit especially technology stocks. We generally like to have most of our positions in mature, solid, stable dividend paying companies. We will sprinkle in a little bit of non-dividend paying stocks here and there but at least 90% of our portfolio are in the type of companies I described above. The perfect set up is when a stock has had a recent decline, but is leveling off around support. That's generally when we like to initiate option trades by selling put options in them.
Wow, if you would have done this T trade you would be in deep doo doo as of today, T has lost 35% since this video. Great breakdown!!!
I don't have the timestamp that you're referring to, but please note that this video was released 13 months ago. Although I would trade in T again, we have not done a trade in T since 4/22/21 because the technicals haven't look solid to me especially considering the restructuring it was going through and the uncertainty surrounding it.
If I want to buy a stock that currently trades at $42 and I want to sell a put option for a strike price of $30 because that’s how much I want to pay for the 100 shares does this mean that if the stock doesn’t go below $30 a strike price that I will lose my $3000??
No. When you sell a put option, you pocket however much option premium you received for selling that option. If the stock is not assigned to you by expiration, then you keep the option premium and there’s no consequences. If the stock is assigned to you at $30 per share, you still get to keep the option premium, but you would buy the stock for $30 per share.
If you are newer to options trading, this video will help: th-cam.com/video/bKLxEY3BolY/w-d-xo.htmlsi=I9KhcoqpSCEuPyOr
Warren said that about Put Options? If you Sell them on companies you wouldn't want yo own?
I just released a video about Warren Buffett selling options. Here's the link if you guys haven't seen it already: th-cam.com/video/xof4y3nd5N0/w-d-xo.html
Att is $15 now..
It sure has been beaten down! We exited that AT&T position long ago, for a profit.
I have found selling naked puts far more successful than cover calls. My issue with covered calls is so many times my holding has passed my strike price. I generally use a strike 5-10% above current based on volatility
Thank you for sharing Larry and for your support! Our minds think alike. 😁
nice!
Thank you for your support Chris!
Selling strange will help to offset losses, if stock moves against you.
Thank you for sharing
I define return on risk on a naked short put as the credit received / the margin power reduction. Further, I calculate the annualized return based on the dte.
I noticed that my put credit spreads for the same dte return about the same annualized return because while the credit received is lower of course, the margin requirement is also lower.
Hope that adds to the discussion.
I may add that if you use margin (borrowed cash) from your broker, you will get charged a ridiculous interest rate.
Thanks for your insight and support!. If you use margin, you are charged interest. That rate varies so if a trader is going to use it, it'd be worth finding out what rate you would be charged. Also please know what can happen to your account if the market crashes like it did last year.
It has been my experience with Schwab that they don't charge margin interest until you are actually assigned the stock from a put expiring in the money. That is when you are actually borrowing the money to pay for the stock. Selling a put on margin that expires worthless or is rolled, or closed out before expiration does not cost me margin interest. Check with your broker to confirm what is considered a balance that is subject to margin interest.
Thank you, just like Warren buffet! No laverage
Thank you for your support!
I just sold a property in Portland and I'm thinking to put the cash in stocks, I know everyone is saying it's ripe enough, but Is this a good time to buy stocks? How long until a full recovery? How are other people in the same market raking in over $200k gains with months, I'm really just confused at this point
There is always risk in every investment. That's why it's important to take calculated risk and understand what you're investing in before you invest or trade.
I don't know what you're referring to when you say people are raking in over $200,000 our games in months, but I'd also be cautious of anyone claiming to make wild gains. I'm not saying it doesn't happen, I'm just saying, if I'm going to follow someone, I want to see their track record over a long period of time. I don't want to see the best trade they made in the past five years, which is what a lot of people tend to talk about. Then they tend to not talk about the ones that go against them.
Excellent example of how a margin trade can wipe out an account. Thank you!
Thank you for your support!
That didn’t sound like he was supporting you lol
Since we don’t trade on margin I think he was just saying it was a good example.
Oh gotcha. I thought he was basically saying that it was a bad trade since T has gone down so much since then.
I’m still learning about selling put options…
If you were selling put options and they were assigned to you but you didn’t have the money to buy them completely, the stock would still most be assigned to you. However your account would most likely go negative. You could then sell the stock you were assigned to recoup at least some of the cash. Where it gets to be a problem is say for example you sold one put option contract at $100 per share. In order to cover that completely, you would need $10,000 if you didn’t use any margin or leverage.
However let’s say that you only had $4000 in your account. Since you had to buy the stock at 10,000 you potentially have a -$6000 cash in your account. If the stock was trading at say $20 per share then when you sold it back you would get $2,000. So even after selling the stock back, your account would still be -$4000. That’s where it can be a problem. When the stock crashes far enough that even once you liquidate the position, your account is still negative in capital.