Short Naked Put: Options Management Strategy
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- เผยแพร่เมื่อ 13 ก.ค. 2024
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Clear, simple and concise to understand. Thank you Dr. Jim
I love the way this guy talks … such intensity and clarity! He’d be a great star in an action movie! 😊😂😂
Thank you Dr. Jim. Excellent example of managing a short put.
Thanks for watching!
My strategy is that I accept the assignment and sell covered calls, and the covered call strike is equal to my put strike.
Yep - love it!
That's not a naked put though.
That's Cash Secured Put.
that's called the wheel
That only works assuming the SP doesn’t keep falling another 10, 20, 30+%. Then what?
thankyou God and Jim for these instructions xo
Awesome show Dr Jim
THANK YOU.. YOU ARE THE BEST !
fabulous!
When you roll out, you gotta manage the buy back price and note the sale price. The 50% won't apply. If I sold for $1, buy back for $3 and resell for $3.50 out in time I have to let the sucker decay for $3+ to make money.
Thanks! Subscribed 👍👏
Great video. Regarding the duration, for a short put which is the ideal starting duration? (Should it be slightly tailored if it's OTM, ATM or ITM, I know you recommend OTM but in some case I'm very bullish or I don't mind being exercises and then sell a Call to exit the position)
Doc awesome stuff like always. Thank you Jim
Thanks, Savino!
amazing video. I would love if you could give some examples as well. Like when you say roll out in time.. an example of a real option contract here would be great...I assume here "in time" means 21 DTE?
Intense information
Wow! This is useful esp when short leg become itm ! Dreadful nightmare! I learn to short call to neutralise! Thank u
Short puts work in index funds, but there are plenty of times a stock makes massive moves overnight while you can’t protect or remove your trade.
Often we don’t see these 50-80% overnight moves because the company is gone, so often these companies are never used for a backtest.
Enron would have technically been an amazing shock to sell puts on because of its high IV rank but it would have led to your entire account+ being lost in one night even with a small trade.
Thank you! This channel is so valuable
Welcome!
Perfect timing for me...I'm short Jun's $60 Put. Its looking like my strike is going to be challenged soon if the chart is any indication.
Excellent !!!!!!!!!!! Please keep posting more ways to mitigate option trades
I think you'll enjoy my channel as well :) I post lots of options trading videos that go very in-depth about trade management!
Dr. Jim.. The stuff is awesome. Never knew that there were so many options on a losing trade. Adding examples will make it more awesome. It makes it so easy to understand and eliminates any confusion. Thanks much.
Awesome material. Very well explained, thank you for it!
great vid! what's IVR though?
Great Job Jim🙏🙏🙏
🙏
I like this guy
Great video Dr. Jim!
I'm still unsure about the criteria to roll.
Do you roll when:
1) stock is still at OTM but have not reached 50% of profit at 21 DTE
2) stock is now testing your strike
3) stock breaches strike
4) stock testing breakeven
5) stock breaches breakeven
I can't speak for Dr Jim but if you are following the TasyTrade system then you want to roll the short put at 21 DTE even if its still OTM if it has not yet reached 50%. If you are not at 21 DTE yet and the stock is testing your strike I would do nothing. Puts often go ITM for a few days and then bounce back. If the stock breaches the strike then it depends on strength of the breach and your feeling about the underlying. If you don't mind holding the underlying then do nothing and allow for potential assignment or roll out to the next expiration. If the breach is substantial then use one of the defensive strategies Jim outlined, such as rolling/straddle/inversion.
Great video! thanks!
Awesome - thank you!
Great video. What do you do Jim if the stock starts to test or fall below your short put but your margin requirements are approaching your limit, would you just buy a put or what else would you suggest to do?
Here - you might have to consider closing the position. But we try and trade small enough so this doesn't happen
Do you not roll down AND out? Just roll out?
Also, for example, TSLA took a major dive two days ago and it breached my strikes (3/19 TSLA $650p). I immediately rolled down and out but could only do it for a credit all the way out till May 21st (5/21 TSLA $575p was where I rolled to).
Only for the stock to recover literally on the same day!
Should there be a timeframe in which you wait to see if the stock price recovers?
Should i roll the moment the stock price breach my short put? Or shoud i wait for the 21 DTE?
I like the video, but it would have been nice to show an example trade as well.
Nice
Can you clarify what “Width of inversion is less that total credit received”. How is that calculated?
❤
Hi Dr. J... thanks for everything... please, what do you mean by extending break even point?
When you adjust by adding a credit to your position, your break-even point at expiration is wider. For example, of you have a Short Put at the 50 strike that you sold for $2, your BEP is 48...but if you adjust and collect another $1, your new BEP is now 47.
Well done.
Thank you!
When i roll over the sell put will i get hit with a wash sell , not able to deduct losses on taxe ,if i dont wait 30 days ?
Hey Doc... When you speak of "Less than the total credit received", does this width include the amount you are getting for selling the call or the amount collected so far?
For example: If I am short the 29p and the stock is at 25... I have collected 2.02 in credit so far and was looking to sell the 26c for 1.19.
pretty good! could you add call skew/put skew adjustment into this series?
That's a great idea...I'll make a note of this for the future
Dr. Jim, when adding a short call to manage a losing short put, do you recommend using the same expiration date for the call as the short put?
That's generally what most people do, but you could sell a shorter term call if you only wanted to make a quick adjustment to collect a little additional credit. But I wouldn't sell a longer-dated call because once the put expires, you'll just have a short naked call, which is a very different and more risky position.
Ya let's go
🚀
When would you consider Assignment (to Wheel) over Rolling? e.g. Take Assignment, then Sell Weekly Covered Calls at assigned strike price reduce cost basis and exit
Yep - definitely!
@@jschultzf3 Hi Doc, when do you roll vs take assignment and sell covered calls to exit? What's the decision criteria to choose between these two strategies? Thanks!
Where can I find that nice Tastyworks jacket? only in Chicago😁?
What if it's an underlying I like and don't mind holding. Should I take the loss or allow the assignment and hold sell covered calls until it bounces back?
You could certainly get assigned and sell calls, love it.
Hi man what is rolling out in time ?
The good Dr......and what is the strategy if the stock just keeps tanking. How many rolls is your limit to cut bait.
I was on TSLA 850 put for 10 months. I rolled it out monthly for peanuts. I was down 35k at one point. Thank God it came back and it expired worthless in November, 2021. It was a pain. Could not sleep sometimes 😛
What happens when you naked sell some puts of let say 100$ stock and pretty high IV and then it gaps (opens with 1$ let say) over night and in the morning it is not going to be your alarm clock who will awake you, but your broker/margin call ? I will leave this for you guys to figure out (I know that thinking in absolutes is bad, but I still wrote this)
awesome video. Why don't you consider rolling down your short put but only rolling out? ty
My guess: rolling it down locks in your loss... you buy it back (at a loss) for a higher price, then sell it at a lower strike for even less. Rolling it out usually gives you a better chance at rolling for a credit (instead of debit) due to the increase in time.
Thanks for posting... selling short puts on stocks I want to own is my bread & butter
🍞🧈
to defend a short naked put.. short the underlying at the strike price. be safe. be green.
Gamma Scalping - love it
That strategy works if the stock keeps falling but if the stock rebounds, you are in a world of pain.
what is the margin impact on adding a short call ?
None - you're already margined on the short put
It’s like a Nickelodeon show... hilarious 🎯
Say u sell put for $1 credit at $100 strike. underlying at $120. when the stock falls to $105, the Put price usually jump to $2-$3. is that where u determine the 2x loss limit? to clarify, my question is before the underlying even hit our strike price, the price of the put option would be ELEVATED.
Interesting scenario where you hit your loss threshold before strike is hit. This won't usually happen, but it could...if it did, and you had loss mechanics, then I would follow those first
@@jschultzf3 thx for the feedback. However this thing happens often.....(or am i just being that unlucky).
Is there a named strategy for the following: e.g. visa trading at 90, sell a 85 strike put, visa goes down to 85 and you think it will go lower, so you short 100 shares. At expiration, your short put is itm, you get assigned thus eliminating your short 100 shares, and you keep the original premium collected.
Yep - that's gamma scalping
Sounds like dynamic hedging a net short volatility portfolio...
You didn't mention what happens the 50% of the time (statistically) Visa goes right back up -- not only are you getting cooked by your short shares now, your short put is gaining slower and slower compared to the growing losses in the shares! You're getting burned by short gamma!
By the time you get ready to add the short shares, you must already "get" that your original assumptions didn't hold, so why cobble together two sub optimal solutions (the short put for which you must at least now have an opinion on gamma or _something_ after the stress that position has faced, and the shares which would be _sold low after a big fall_ ... _selling low_ and reversing portfolio delta? That's a very strong opinion that directly contradicts "but I want to keep my short delta -0.50 put" ). I believe this strategy has a negative expected value, unless you hedge delta (shorting shares) either much earlier in the short put lifecycle or not really at all.
Another way is to form a firm opinion on forward volatility and decide either to weather the storm (maintain a short volatility posture) or to defend...against delta (short _maybe 50_ shares, roll down, convert into a vertical -- these are not great scenarios)...or defend against gamma (roll out), etc.
Patrick Boyle's channel has a great, clear explanation of the costs/payout under conditions like you described:
th-cam.com/video/fdothdFa5TU/w-d-xo.html
Couldn’t help but notice behind you. Dr. Jim is a fellow sword friend?
Yes, I have a collection lol. They're trophies from a few bodybuilding shows I completed in.
Do one on Put Credit Spreads !
Did one on Verticals in this playlist
@@jschultzf3 Thanks 💪
When you say roll over, you mean close out position and start a new leg?
I just mean roll it out in time...keep the same position, but just move it out to the next cycle
In the case of a fall below the short put strike, how would you feel about rolling the 1 lot short put out in time another month to a 2 lot short put at a far lower strike? This could ensure collection of another credit, but trades that for adding risk via size of the trade.
Interesting idea - I don't love it because of the added risk, but it's a viable alternative, yes.
Good video, but terrible sound quality, could you record again ? Or do something ?
Agreed - we've leveled up the mic quality for future vids. Sorry about this!
Jim you and your cohorts are wonderful BUT please realize 60% to 70% of folks who put REAL money with Tastyworks are retirement accounts. Thus, their short put spreads are going to be hedged. They can't go naked NVDA . The heck with delta I want to see where support is. Here down near -215/+205 I receive $1.16. for March 18 for 30 days max. My real point is that Feb was a bad month. NFLX put on around mid Jan dumped around 100 points to now. Maybe talk a little more about catching a falling knife. Thank you
First
Fire Up Chips.
I just take the stock at a discount!
💰
3:30 But how can you sell a short call if you don't 100 shares as collateral? Are you talking about a naked call?
Tastyworks probably allow naked calls....you would probably have to buy 100 shares and open a short call. I like the idea but probably would not recommend it...The danger in this 'straddle' idea is that the "short put' side could be assigned early (if it's in the money) and you will be left holding a useless 'short call' and now stuck with another '100 assigned shares' (u lose money in the assignment)..now you have 200 shares in total...lol. You can hold the stock if you really like and rely on hope that it goes back up. Easiest for me to just roll it in time to 'collect credits' and 'roll down' if possible and if I get early assigned then so be it. Milk it on the other end using covered calls.
Not a fan of clipping the profit at 50% .So many scenarios where things are working so well as one reaches 50% that at least 75-80% comes next fairly consistently .
When you roll a short put for a credit, is that profitable?
Why buy it back for 50% win only? Why not let the winner run? Have you tried to let it expire worthless, or to buy it back for 95% win? If you did, what was your experience?
Percentage of profit is simply a (strict) target to stick to so your emotions (greed) don't deviate you from your plan. Keeps the green-eyed monster in check. Especially in today's market, where a 75% gain one day can be a (5%) loss the next. I fell victim to this bout a week ago with my COIN puts. You can always close for 50%, securing your win, then re-enter the trade or find a similar setup.
I appreciate all the videos you posted but the vocabulary that you use is very hard to understand for someone who is not a regular trader like rollovers I have never even seen that as a option using my brokerage
Or you get assigned.
Why 50%?
Our research has shown it's superior over time to holding till expiration
@@jschultzf3 I see, well thanks for educating! 👍🏻
or if you like the stock just keep it.
short naked put on a small account is literally not practical but
QUESTION: Can you virtually roll until you're right?
If you don't run out of capital, don't make substantial mistakes, the underlying eventually comes back, etc -- yes you can often "hold out"
But you could also accidentally make the P/L recovery worse or even ineffective: if you keep losing too much to slippage (eg thinly traded underlyings or longer durations), if you continually roll when the IV curves invert between your expiration and the next, etc...
Point is: it can work, but rolling means renewing risk!
Terrible sound mate.
bro change ur mic. this mic sounds terrible for real. greatt infformation but this mic HURTS my ears
No doubt - we've scooped up a better one for future vids.
Awesome show Dr Jim
Thank you!