Joshua, appreciate the content. I saw some negative comments but be encouraged instead. Once one masters selling options, there's no turning back. It's beautiful and I'm enjoying every sense of it.
This is a pretty old video, so you probably won't see this, Joshua, but I have NEVER had high IV opportunity explained to me in this way. I won't go into all the details, but for the longest time, I thought selling something like a put credit spread in a high IV environment made no sense. However, now I completely get it. Thank you, sir, you are a legend and you just gained a new subscriber.
I have been trading naked puts and calls for decades and have often done extremely well, particularly the past year. However lately because of the great volatility, buying to open has seemed impossible since every choice of expirations and priceing seems too expensive a start so to speak. Gee, I gotta pay $6 for a $30 call when the stock price is $26 with a 3 month expiration! My breakeven is the stoc getting up to $36 from $26! So, I must finally change my modus operandi and begin to Sell Puts and Calls to Open and Buy to close! Josh's video is the best of the half dozen I watched to help acquire this new skillset! For example, I learned his technique of picking the right strike to sell so as to make enough premium, yet not be too close and make it far too risky. So...Thanks Josh!
I would explain the problem in selling puts where the price continues to go down and you can’t roll them out anymore. Selling naked is very dangerous for many traders and can get you on lots of trouble. I personally do weekly OTM options at about 20 delta and collect premiums all day long and of I have to roll I can do. A week or two or even go to a monthly. If you buy monthly you limit your choices. Just the way I do it. 90% of my options expire worthless. The others usually expire in one or two additional rolls. I do this mainly to enhance my dividends as I am a long term investor.
Before selling the put, look at open interest and premium at same strike or lower strikes in future expiration dates. If interest is low, or the is not much premium to be able to roll the position, then look for a different set up. In many cases one can roll a position out a week and/or down to a lower strike and still collect premium.
@@gdepierro i would want to learn from you. I am in a long term side of investment, but normally fall into a magnitude of greedy and scare of losing profit. Recently, i learn Selling put and find it fits my personality (steady income n carry less risk). I am glad to find somebody could agree to be my mentor and show me all little tips and tricks of this business. If you don't mind, please inbox me @ rapajfamily@gmail.com
If selling puts do you need to actually own the stock since you have to have the money available in case you are called? Can you sell puts on stock you do not own?
No, you can sell puts on stocks you don't own or even plan on owning. Because you can also close one contract and then open another with more time if needed.
I've been doing okay selling covered calls. Just starting to sell puts. I'm thinking it might be easier to manage puts vs CCs. - Net position/profit/loss is much more direct and straightforward. - I can instantly get out to either capture a profit or cut a loss (rather than having to unwind the stock/call combo). - Multiple ways to mitigate loss (either roll it out, buy a vertical put, take assignment and sell calls, or just buy the put back for a defined loss). - Multiple ways to capture profit. Either ride the clock, or close the put when the stock rallies. Can't do this with a covered call...when the stock goes up, the call goes up. So I'm stuck until expiration. Much less flexibility to get out with a profit other than riding the clock and hoping the stock stays up enough til the end. I like doing trades that close out by the end of the week. But I guess I could do as you suggest...selling puts with a couple/few weeks til expiration, then closing them out after they lock in sufficient profit. This would give me additional time/premium buffer, while allowing me to still aim at getting in and out on a weekly basis. Thanks for the video. Mike
Good explanation. A question though- where do you put the stop loss when the trade starts going in opposite direction than what intended it to? at what point you decide to exit with losses rather than have the losses pile up- selling naked options (calls/ puts) has a non zero small probability of failure and the amount of loss is huge compared to the profits made per trade selling naked options- a potential unchecked loss could take very long and many a successful trades to just recover.
Depends on your strategy and every stock is different. Typically you would roll the trade out to buy yourself more time, collect premium and let the probabilities play out.
Its a great winning strategy used for stocks you want to own and get it at a discount but most traders want to profit on the sale of the PUT and most traders like to trade the front month. Going further out (say, 2 or 3 months out or more) and rolling after 30-50% of max profit and possibly adjusting the strike price works well in a bullish or flat market and can even withstand some level of declines. Balance with slowing entering into positions over a period of time. I like to keep a distance with the top names, MSFT, GS, HD, AAPL, BRK/B, V etc... Having a margin or portfolio margin account is key as well. Front month option trading has often led to losses with the gamma risk, not to mention the stress. Good luck.
Nice video, thanks for the information! I'll be sure to reach out to you on other videos you put out, as I am still learning and applying what I learn on the TOS paper money platform. Thanks again!
@@JoshuaBelanger Hi Josh! Thanks for your response! Im still learning trading options. Do you have any videos about buying call opt? Like the right way to but it haha. I already subscribed
I always struggle with the popular idea of closing early at 50%. Theta is the primary reason we're option sellers, and it collapses in the final week. But if you prefer chasing Vega more than theta, I guess it can make sense.
The popular idea is to just them expire worthless. To create a consistent outcomes, you need to have specific parameters. 50% isn't the holy grail. Stocks, ETF's and Indexes trade different. While decay does accelerate in the last two weeks to expiration, the contract becomes more senstive to changes in vol or gamma. It's a matter generating the most return on risk and managing it when the risk becomes greater than reward.
At around 13:10 you use delta as an indicator of the percentage chance of your success selling it. Market Wizard Tony Saliba on page 41 of his latest book says ":Delta is NOT (his capitalization)in any way the probability of an option expiring in-the-money"". He later stated that the moment you put on a trade, anything could happen (makes sense in this age of Trump tweets)... So...what do you think of this...?
@@JoshuaBelanger Sorry, I shouldn't have been such a troll on my original post. No hate... I kinda had a knee jerk reaction cuz there are many statements made about options that are stated just because someone else said it... I've amended my original post. Here's the wording from Tony's book (page 41) "Urban legends and fallacies:no matter what you have heard or read, the delta is NOT in any way the probability of an option expiring in-the-money. An option delta is merely a mathematical measure; it would require perfect and uninterrupted hedging to be reliable." I didn't say you were wrong, but I did say that one of the most respected option traders ever thinks differently, and when I heard him explain it...it made total sense. There wasn't any "Mis-information" in my original statement, but I definitely should have been better mannered. My apologies...
Great detailed video. I'm sure trading seems fun if you know what you're dealing. As a beginner, it's been a while since I traded and I think I'm a bit rusty. Can you try to explain how to close a naked short put trade? I know that you have to buy to get out of a selling position, but by how much? Above or below the strike?
Bro when you are short a call or put options contract SELL TO OPEN, you BUY TO CLOSE or buying back the shares to close the position to avoid being exercised. Thats why you are paid a premium to cover the losses if the option expires in the money or youvare exercised prior to expiration...
I personally use my entire account balance and sell weekly puts that have above an 90% otm probability. Been working very nicely for me for the past year. Very consistent income.
I would listen VERY CAREFULLY. As a person that has blown out his account twice, I have had to learn the hard way about exposing myself to ANY 1 strategy and market assumption for the bulk of my portfolio
I wanna know what is the difference in gains by buying a stock , or selling a put option , I've been thinking about it and its almost the same. maybe u can make a video about it
Thank you for your content, question: When selling quality underline put options say 20%otm What is the defense if stocks drop below the strike price overnight? Or on a massive overnight drop what if options prices have gone from say $1.00 to $10.50 Thank you
That is called single stock risk. It all depends on the stock. If you're in a bio-tech play ahead of an FDA announcement. That could happen. There's a few different ways to try to work out of that, but it's not easy and would require capital.
In an ETN such as GASL which is suppose to Reverse split soon. Would there be any good advantage with options? and do they apply split on the options purchased? or are their exceptions with ETNs? Good video
ETNs are not equities. An option on an ETN is really a credit derivative. And in many cases the ETN is a synthetic, so it is a debt obligation tracking an index or basket of something (stock, commodity, REIT, MLP) issued by an institution. So an option on an ETN can be a double derivative in a way.
Hi Joshua, I sold some ITM puts hoping to get some some theta. They expire in two days. Will I get assigned short or long shares once they expire? Can I know for sure? Also I can roll them for credit- that seems like a good choice perhaps. Can you guide me a bit on the best decision to make? Thanks. I enjoy your videos.
If that was the case, you would want to sell OTM. Depending on who much they are ITM, you could be assigned. I'm not able to advise on what you should do.
An ITM option has less extrinsic value (theta & vega) than an OTM option. Whenever your option is ITM, you're at risk of assignment. If your short put expires ITM, you will be assigned 100 (long) shares of the underlying.
Joshua, Hi - great informative video. Since I am a trader and know little of this process may I ask: Is there a service that I may subscribe to that will from a probability standpoint recommend an ongoing feed of Puts I can sell so that I will realize more assured monthly income and less situations where I am say hitting a default where I end up shelling out funds to buy large blocks of stocks? Thanks.
You say take profits. I have just been holding till the contract expires cuz I didn't know you can take profits. How would you do that? You buy it back?
It's common for novice traders or investors to do that. But it's very risky to that and you're gambling. Educate yourself on how gamma accelerates in the the last week of expiration. The order would be Buy-To-Close.
So if I want to get my profit and my collateral back I would have to buy my contract? Basically buy a put that I started when selling a put? Lets say my premium is $95 and I'm up $60 on the contract, to get my profit I would buy a put? Basically buy the contract I started? (Said this twice because I can't seem to find this info).
When you initiate a short options contract transaction (selling an option) and collect premium, it's sell-to-open. To close that same option contract position, it's buy-to-close.
Thank you. How would you have managed the trade if the trade was going against you? If you were in a retirement account would you just put on a wide put credit spread?
You either roll out further to get more time to play out while collecting more premiums. In some situations, you're managing the overall loss. In a retirement account, you would look to buy the OTM put to create a spread.
SPY puts expire 3 times a week. So if you sell SPY puts and they expire worthless you keep the premium. But what happens if they expire in the money? How does that work...??
I have a put option that expires this Friday. The option is selling at 3 cents, and my account won't let me sell to close in less than 5 cent increments. I am worried about getting assigned. (I don't know what's going to happen.) But if I do get assigned to buy the underlying shares, my strike price is $2, and the shares are selling at $2.40. Couldn't I turn around and sell the shares and make my money back?
I've tried to sell puts. But it looks like you have to have the cash available in your account for if you are assigned unfortunately. I have some cash, but a lot in other stocks.
@@Painfulwhale360 I suppose he means buy back the put (which is now more expensive than when you shorted it!), then short another put (or two) at a lower strike and with more time until expiration. Hopefully, the "roll out and forward" will at least pay for the put you had to buy back.
When do you get out the position if the put option you sold starts to move down and even gets in the money? Your max profit in the example is $550 (.55 for 10 options) but your risk is $44,450 (45 put option times 10 minus the premium collected, also this is without commissions) if the stock goes to 0.
***** Going to 0 is an extreme example but if it happens once you are wiped out and can trade no more.The price does not even have to go to 0 to hurt you financially it can go in the money by just $5 and that would make you a $4450 loser. You are better off doing an out of the money put option credit spread.But even still it would take you so many trades to win to make up for one big loss. You still did not answer my question when to get out of your hypothetical trade if the stock starts to get in the money.
+a gravante You can set a mechanical stop for yourself, something like; At three times the premium collected you'll close the position for a loss, otherwise you'll roll it. Or, a better solution for your question would be to only sell uncovered positions (Puts or Calls) on ETFs, it's almost impossible for an ETF to go to zero but you're also not going to get the high levels of IV that Josh is talking about. Less risk, less return. .
+sarah sean It is possible with the example given. Markets can gap and do. They also crash.Not often but they do. The safe way is to sell spreads to protect your account in case of a huge move against you.
Great video but I do not agree with the logic of closing the trade at 50% profit. It assumes that the remaining 50% equity left on the existing trade is somehow more risky then the next “opportunity” you are going to enter. If the trade reaches 50% value within a very short time (say 10 days or less) then it makes sense to me to take that profit off the table and move on to the next trade. Otherwise I do not see the logic of cutting the trade short and not letting it go to expiry or near expiry.
I think this is up to the trader. It appears Joshua will will give up Theta for gamma. That works for him. I have to agree that taking a decent profit and moving on to another trade makes sense. Rinse and repeat. No need to get super greedy on one trade.
Yea that’s pretty appealing to most traders but keep in mind that short order can still be executed 1:15 after market close so you can still get assigned that’s why it’s best to close before the expiration before something unexpected happens👍🏽
Why does everyone talk about selling puts vs selling calls? Doesn't the market fall faster than it goes up? So why would we want to give that advantage to the buyer of our option? Also, doesn't ImpVol increase as it falls? So won't that mean we would lose even more if it went down?
That is why puts trade higher than calls in equities and indexes. It would, but there's a natural drift higher in the markets. Keep cash on hand and roll out to let probability come back in your favor.
what do you mean charts are not necessary for options trading? you need to see price action and trend. fundamentals don't do it for me even though I am a new trader.
Sounds like you're tying to this in a retirement account. If so, then you can't use margin, it's cash secured. In that event, it's optimal to buy a lower OTM delta put to create a short spread.
{Forbidden.Knowledge} Be very very careful with this advice. TSLA is incredible volatile. It has had swings of over 100 a day. You want to make sure you sell far enough OTM and the underlying doesn’t tank or you will be sorry
hello Joshua, thank you for your content. Can you please make a backtest video on how you would manage a losing naked put trade? perhaps using delta neutral hedging. Thanks
You left out the most important part: The Huge amount of cash that must be invested in a non-margin trade, such as a 401K or IRA; namely, the full amlunt that must be paid if the Put is assigned (below the strike price). In your example, 10 contracts of a 45 strike equals $45,000! A tremendous 5-6 week investment for earning maybe $250 (half of full premium). That's what keeps most small-medium funded traders from using this strategy. Larry from Scottsdale
401k and IRA's have restrictions such as being non-margin. That is a situation you would look to sell something closer to At-the-money so you can take in more premium. One could look to purchase another put at a lower strike to create a spread to reduce the amount needed for trade.
I disagree with buying back options that are out of money to avoid gamma risk. The last couple of cents is free money as the risk of floor falling out of stock that is far out of money is very small. If your brokerage allows you to leverage up to 200% of money, and you have sufficient buying power and sideline cash, you can collect the "easy" last few pennies. The theta decay in the last week is the fastest. The only time I would consider buying back out of money puts is if you are no longer confident in it expiring out of money due to fundamental changes in market conditions or underlying stock.
@@JoshuaBelanger Its OK. I plan on going on margin if assigned on blue chip stocks. There is zero chance of losing your complete portfolio on strong blue chip stocks even at 100% margin, especially if margin rate is fraction of dividend rate.
Help please. I got flat footed and failed to close a naked call position (TSLA @ 1500). 200 shares short were assigned. Now I'm in damage control mode. My concern is margin call/gap up soon. Would you suggest a covered put strategy? If so what strike prices/exp suggestions. REALLY would appreciate it. I feel like a dummy.
how can you sell 10 puts when you have only a limited amt of funds. my acct is only $2,000.00 can I make money selling puts if I don't have a large acct that is, will my broker allow me to do that if I have limited funds?
You can sell puts on lower priced stock with an account that size, but it should never be more than 1. Trade size is so important at all times. Don't risk more than 5% of your account! which in this case is 100.
hmmm... how about selling a naked put on a stock that is going up and you believe will continue to go up. And sell an ITM put. This way you get time decay, plus as the stock goes up the put will lose value.
Believing it will go up doesn't mean it will go up. ITM puts carry a higher risk of being assigned compared to OTM. ITM options have very less extrinsic value, which would work to your benefit.
Close before you get assigned. The extrinsic value is peanuts. The intrinsic value depreciation is ton more. I can never figure out why writing options and holding one trade for 20-30 days to make 30 cents when you can trade other options and make 700%. Whatever. Then they tell me you have a 90% chance of being right. Well, I'd rather have a 60% chance of being right and make a 300% return then be 90% right and make piddly and then 1 out of 10 times lose my shirt.
Selling puts actually have a more valuable function that people do talks about. You can use it if you actually want to own the stock but think it’s overvalued. You sell the strike at the price you want to own 100 shares. If it hits you buy 100 shares at a price you wanted. If it doesn’t you get paid to wait for that price. I don’t see the reason to use this as a trade when compared to buying calls and spreads. Seems kind of over rated when looking from risk to reward
Ok dude selling at about 50% assumes the stock price is affected by the value of your put. I highly doubt that. Keep it till expiration. Won't make a difference
Writing naked calls or puts is the best options strategy to add to your portfolio :) you receive a credit to cover losses in case of in the money expiration or unexpected exercise. Upon expiration if the option is in the money, you are responsible to deliver shares if its an equity option(buying the stock) or cash if its a european style option. If option expires out of the money you keep the credit that was given to you when you executed the trade SELL TO OPEN. You need a level 5 account and a minimum of $10,000 to implement this type of trading
It’s 10x less capital requirements, 10x more premium, 10x less risky to just trade a vertical spread. Trading naked makes no sense in the long run and is very dangerous.
He tells someone else that you need to have capital enough to have the underlying put to you. That makes these cash covered puts. Same risk as covered calls.
Here's an example, if i dont honor my stop loss and close my trade whenever my position is profitable, most people would consider that dumb. But that is exactly what it looks like selling options.
Joshua, appreciate the content. I saw some negative comments but be encouraged instead.
Once one masters selling options, there's no turning back. It's beautiful and I'm enjoying every sense of it.
I lean towards being a buyer and seller of options. One way isn't the holy grail!
This is a pretty old video, so you probably won't see this, Joshua, but I have NEVER had high IV opportunity explained to me in this way. I won't go into all the details, but for the longest time, I thought selling something like a put credit spread in a high IV environment made no sense. However, now I completely get it. Thank you, sir, you are a legend and you just gained a new subscriber.
Thanks for the comment!
I have been trading naked puts and calls for decades and have often done extremely well, particularly the past year. However lately because of the great volatility, buying to open has seemed impossible since every choice of expirations and priceing seems too expensive a start so to speak. Gee, I gotta pay $6 for a $30 call when the stock price is $26 with a 3 month expiration! My breakeven is the stoc getting up to $36 from $26! So, I must finally change my modus operandi and begin to Sell Puts and Calls to Open and Buy to close! Josh's video is the best of the half dozen I watched to help acquire this new skillset! For example, I learned his technique of picking the right strike to sell so as to make enough premium, yet not be too close and make it far too risky. So...Thanks Josh!
andy crowder from wyatt research is the king of selling puts!straight and to the point!
you are definitely his promoter..
I hope you can make a video of a Short Put going bad. How to repair it , or your recommended secondary exits.
Selling naked puts should only be done when you are okay and have the capital to own the underlying
You would want to do a roll over, plenty of videos on it
I would explain the problem in selling puts where the price continues to go down and you can’t roll them out anymore. Selling naked is very dangerous for many traders and can get you on lots of trouble. I personally do weekly OTM options at about 20 delta and collect premiums all day long and of I have to roll I can do. A week or two or even go to a monthly. If you buy monthly you limit your choices. Just the way I do it. 90% of my options expire worthless. The others usually expire in one or two additional rolls. I do this mainly to enhance my dividends as I am a long term investor.
Before selling the put, look at open interest and premium at same strike or lower strikes in future expiration dates. If interest is low, or the is not much premium to be able to roll the position, then look for a different set up. In many cases one can roll a position out a week and/or down to a lower strike and still collect premium.
@@gdepierro i would want to learn from you. I am in a long term side of investment, but normally fall into a magnitude of greedy and scare of losing profit. Recently, i learn Selling put and find it fits my personality (steady income n carry less risk). I am glad to find somebody could agree to be my mentor and show me all little tips and tricks of this business. If you don't mind, please inbox me @ rapajfamily@gmail.com
If selling puts do you need to actually own the stock since you have to have the money available in case you are called? Can you sell puts on stock you do not own?
No, you can sell puts on stocks you don't own or even plan on owning. Because you can also close one contract and then open another with more time if needed.
This video has instructions that can take you years to come with yourself
Really clear and concise and helpful. thanks.
I've been doing okay selling covered calls. Just starting to sell puts. I'm thinking it might be easier to manage puts vs CCs.
- Net position/profit/loss is much more direct and straightforward.
- I can instantly get out to either capture a profit or cut a loss (rather than having to unwind the stock/call combo).
- Multiple ways to mitigate loss (either roll it out, buy a vertical put, take assignment and sell calls, or just buy the put back for a defined loss).
- Multiple ways to capture profit. Either ride the clock, or close the put when the stock rallies. Can't do this with a covered call...when the stock goes up, the call goes up. So I'm stuck until expiration. Much less flexibility to get out with a profit other than riding the clock and hoping the stock stays up enough til the end.
I like doing trades that close out by the end of the week. But I guess I could do as you suggest...selling puts with a couple/few weeks til expiration, then closing them out after they lock in sufficient profit. This would give me additional time/premium buffer, while allowing me to still aim at getting in and out on a weekly basis.
Thanks for the video. Mike
That's the beauty of selling options. The underlying can go 3 ways (with a limit on the downside) and u still make money
I’m new to options but apparently for selling options, 45 days to expiration is ideal. That’s what the guys at tasty trade say.
Good explanation. A question though- where do you put the stop loss when the trade starts going in opposite direction than what intended it to? at what point you decide to exit with losses rather than have the losses pile up- selling naked options (calls/ puts) has a non zero small probability of failure and the amount of loss is huge compared to the profits made per trade selling naked options- a potential unchecked loss could take very long and many a successful trades to just recover.
Depends on your strategy and every stock is different. Typically you would roll the trade out to buy yourself more time, collect premium and let the probabilities play out.
How do I consider underlying has high IV? Any particular benchmark?
You'd compare the previous IV in a time frame and than rank it.
@@JoshuaBelanger but obviously IV is high before earnings. But otherwise what percent would you like to see, e.g. at least 90%?
Its a great winning strategy used for stocks you want to own and get it at a discount but most traders want to profit on the sale of the PUT and most traders like to trade the front month. Going further out (say, 2 or 3 months out or more) and rolling after 30-50% of max profit and possibly adjusting the strike price works well in a bullish or flat market and can even withstand some level of declines. Balance with slowing entering into positions over a period of time. I like to keep a distance with the top names, MSFT, GS, HD, AAPL, BRK/B, V etc... Having a margin or portfolio margin account is key as well. Front month option trading has often led to losses with the gamma risk, not to mention the stress. Good luck.
Sounds like that works for you.
Nice video, thanks for the information! I'll be sure to reach out to you on other videos you put out, as I am still learning and applying what I learn on the TOS paper money platform. Thanks again!
Dino De Rosa are you still trading? If so how’s it going?
When selling puts does the strike price need to be greater than the current stock price or less?? Thanks
Depends on the desired risk and what your looking to do.
@@JoshuaBelanger
Hi Josh! Thanks for your response!
Im still learning trading options.
Do you have any videos about buying call opt?
Like the right way to but it haha.
I already subscribed
Strike less than share price
I always struggle with the popular idea of closing early at 50%. Theta is the primary reason we're option sellers, and it collapses in the final week. But if you prefer chasing Vega more than theta, I guess it can make sense.
The popular idea is to just them expire worthless. To create a consistent outcomes, you need to have specific parameters. 50% isn't the holy grail. Stocks, ETF's and Indexes trade different. While decay does accelerate in the last two weeks to expiration, the contract becomes more senstive to changes in vol or gamma. It's a matter generating the most return on risk and managing it when the risk becomes greater than reward.
At around 13:10 you use delta as an indicator of the percentage chance of your success selling it. Market Wizard Tony Saliba on page 41 of his latest book says ":Delta is NOT (his capitalization)in any way the probability of an option expiring in-the-money"".
He later stated that the moment you put on a trade, anything could happen (makes sense in this age of Trump tweets)...
So...what do you think of this...?
On no! What is the delta of you spreading mis-information?
@@JoshuaBelanger Sorry, I shouldn't have been such a troll on my original post. No hate... I kinda had a knee jerk reaction cuz there are many statements made about options that are stated just because someone else said it...
I've amended my original post.
Here's the wording from Tony's book (page 41) "Urban legends and fallacies:no matter what you have heard or read, the delta is NOT in any way the probability of an option expiring in-the-money. An option delta is merely a mathematical measure; it would require perfect and uninterrupted hedging to be reliable."
I didn't say you were wrong, but I did say that one of the most respected option traders ever thinks differently, and when I heard him explain it...it made total sense.
There wasn't any "Mis-information" in my original statement, but I definitely should have been better mannered.
My apologies...
Great video! Visuals really helped. I hope that you create more videos where you back the visuals up with a verbal explanation
I think I'm going to have to watch this video over and over a few times to understand everything you're saying Joshua. Thanks for the explaination!
+Tanvir Hafiz Same here, it's sorta confusing.
I think you gotta understand what buying put and call, selling put and call are.
so is that a cash secure put strategy?
It can be cash secured or use margin. Cash secured will use a lot of capital and returns are a lot lower vs. Margin.
@@JoshuaBelanger so with this strategy you have to have a margin account rite?
@@soothingdreams2697 Yeah, I use margin account. Cash secured would be in IRA or cash account.
Great detailed video. I'm sure trading seems fun if you know what you're dealing.
As a beginner, it's been a while since I traded and I think I'm a bit rusty. Can you try to explain how to close a naked short put trade?
I know that you have to buy to get out of a selling position, but by how much? Above or below the strike?
Bro when you are short a call or put options contract SELL TO OPEN, you BUY TO CLOSE or buying back the shares to close the position to avoid being exercised. Thats why you are paid a premium to cover the losses if the option expires in the money or youvare exercised prior to expiration...
Sell put or buy put which one is good
Where can I find the expiration date"Find options that expire 5-6 weeks from entry date"
The brokerage would have the expirations listed out. You can how thinkorswim lists the expiration on the platform.
I personally use my entire account balance and sell weekly puts that have above an 90% otm probability. Been working very nicely for me for the past year. Very consistent income.
You're trading like a cowboy! Stocks have been going higher for the last 7 months. You'll get destroyed when that stops happening.
I would listen VERY CAREFULLY. As a person that has blown out his account twice, I have had to learn the hard way about exposing myself to ANY 1 strategy and market assumption for the bulk of my portfolio
This videos helps beginners thank you . I had time to screenshot and take notes . Looking forward to your other videos.
Excellent video
Glad you liked it
I wanna know what is the difference in gains by buying a stock , or selling a put option , I've been thinking about it and its almost the same. maybe u can make a video about it
Option contracts are a leveraged vehicle, the gains wouldn't be the same. You use less capital with options vs. owning equity.
It is not what you did , but rather how to did it step by step from how you opened to how you closed out the trade.
It sounds like you enjoyed what was covered.
Thank you for your content, question: When selling quality underline put options say 20%otm What is the defense if stocks drop below the strike price overnight? Or on a massive overnight drop what if options prices have gone from say $1.00 to $10.50 Thank you
DUSTIN BRADLEY your screwed make sure you sell puts on stocks you wish to own. The most important rule this video let out.
That is called single stock risk. It all depends on the stock. If you're in a bio-tech play ahead of an FDA announcement. That could happen. There's a few different ways to try to work out of that, but it's not easy and would require capital.
@@JoshuaBelanger Oh is that whats its called "single stock risk" thats funny
@@gdepierro it sounds like he doesn’t even know what to do😂😂😂when shit happens
thanks you very much, very clear explanation on selling put!
In an ETN such as GASL which is suppose to Reverse split soon. Would there be any good advantage with options? and do they apply split on the options purchased? or are their exceptions with ETNs? Good video
ETNs are not equities. An option on an ETN is really a credit derivative. And in many cases the ETN is a synthetic, so it is a debt obligation tracking an index or basket of something (stock, commodity, REIT, MLP) issued by an institution. So an option on an ETN can be a double derivative in a way.
Thank you Joshua for the lesson. Greatly appreciated.
i love to sell put options one or two weeks out on FCX!!!
Please is there a class that I can take for doing Covered calls.i really love this concept. I really want to learn how to do covered calls. thank you.
Is selling a put option DITM a good or bad idea?
Hi Joshua, I sold some ITM puts hoping to get some some theta. They expire in two days. Will I get assigned short or long shares once they expire? Can I know for sure? Also I can roll them for credit- that seems like a good choice perhaps. Can you guide me a bit on the best decision to make? Thanks. I enjoy your videos.
If that was the case, you would want to sell OTM. Depending on who much they are ITM, you could be assigned. I'm not able to advise on what you should do.
An ITM option has less extrinsic value (theta & vega) than an OTM option. Whenever your option is ITM, you're at risk of assignment. If your short put expires ITM, you will be assigned 100 (long) shares of the underlying.
Joshua, Hi - great informative video. Since I am a trader and know little of this process may I ask: Is there a service that I may subscribe to that will from a probability standpoint recommend an ongoing feed of Puts I can sell so that I will realize more assured monthly income and less situations where I am say hitting a default where I end up shelling out funds to buy large blocks of stocks? Thanks.
There's no guarantee in the markets.
U use the delta/OTM probability to gauge. The delta of your position will also change with time, depending if underlying goes up or down.
If there is a big gap up ,how do you make adjustments.
You would close the trade out because it would be profitable.
You say take profits. I have just been holding till the contract expires cuz I didn't know you can take profits. How would you do that? You buy it back?
It's common for novice traders or investors to do that. But it's very risky to that and you're gambling. Educate yourself on how gamma accelerates in the the last week of expiration. The order would be Buy-To-Close.
So if I want to get my profit and my collateral back I would have to buy my contract? Basically buy a put that I started when selling a put? Lets say my premium is $95 and I'm up $60 on the contract, to get my profit I would buy a put? Basically buy the contract I started? (Said this twice because I can't seem to find this info).
When you initiate a short options contract transaction (selling an option) and collect premium, it's sell-to-open.
To close that same option contract position, it's buy-to-close.
what is melk?
Nice Josh... i think getting a grasp on selling vol is the whole trick to options
Thank you. How would you have managed the trade if the trade was going against you?
If you were in a retirement account would you just put on a wide put credit spread?
You either roll out further to get more time to play out while collecting more premiums. In some situations, you're managing the overall loss.
In a retirement account, you would look to buy the OTM put to create a spread.
SVXY has been my favorite for put writing, been working out reasonably well
Lol
I heard it's a can't lose moneymaker.
SPY puts expire 3 times a week. So if you sell SPY puts and they expire worthless you keep the premium. But what happens if they expire in the money? How does that work...??
You would be put 100 shares of SPY for each contract. The strike price of put sold minus premium collected is your new breakeven price.
I have a put option that expires this Friday. The option is selling at 3 cents, and my account won't let me sell to close in less than 5 cent increments. I am worried about getting assigned. (I don't know what's going to happen.)
But if I do get assigned to buy the underlying shares, my strike price is $2, and the shares are selling at $2.40. Couldn't I turn around and sell the shares and make my money back?
Would need more context than that. Short or long the put? Either way, you don't want to mess with the stock, just close out the option.
I've tried to sell puts. But it looks like you have to have the cash available in your account for if you are assigned unfortunately. I have some cash, but a lot in other stocks.
To avoid being assigned if the put went in-the-money, you would look to roll out and forward.
Joshua M. Belanger roll out and forward? Man I have a lot to learn 😂
@@Painfulwhale360 That's the great thing about life.
@@Painfulwhale360 I suppose he means buy back the put (which is now more expensive than when you shorted it!), then short another put (or two) at a lower strike and with more time until expiration. Hopefully, the "roll out and forward" will at least pay for the put you had to buy back.
Good job
do you need to own stock shares to buy and sell puts
No.
How do you track if a stock was to fall in price
Track if a stock were to fall in price?
What about a stock on a downward trend? Good idea?
I don't know.
Try it out and let me know.
selling put can only be used on bull market however when it comes to bear market you just need to do the opposite way, selling call
This is a very Tasty Trade method that you have come up with. Good job outta you!
Thank you!!
When do you get out the position if the put option you sold starts to move down and even gets in the money? Your max profit in the example is $550 (.55 for 10 options) but your risk is $44,450 (45 put option times 10 minus the premium collected, also this is without commissions) if the stock goes to 0.
***** Going to 0 is an extreme example but if it happens once you are wiped out and can trade no more.The price does not even have to go to 0 to hurt you financially it can go in the money by just $5 and that would make you a $4450 loser. You are better off doing an out of the money put option credit spread.But even still it would take you so many trades to win to make up for one big loss. You still did not answer my question when to get out of your hypothetical trade if the stock starts to get in the money.
+a gravante You can set a mechanical stop for yourself, something like; At three times the premium collected you'll close the position for a loss, otherwise you'll roll it. Or, a better solution for your question would be to only sell uncovered positions (Puts or Calls) on ETFs, it's almost impossible for an ETF to go to zero but you're also not going to get the high levels of IV that Josh is talking about. Less risk, less return. .
+sarah sean It is possible with the example given. Markets can gap and do. They also crash.Not often but they do. The safe way is to sell spreads to protect your account in case of a huge move against you.
a gravante uv
Great video but I do not agree with the logic of closing the trade at 50% profit. It assumes that the remaining 50% equity left on the existing trade is somehow more risky then the next “opportunity” you are going to enter. If the trade reaches 50% value within a very short time (say 10 days or less) then it makes sense to me to take that profit off the table and move on to the next trade. Otherwise I do not see the logic of cutting the trade short and not letting it go to expiry or near expiry.
One greek that sums that up... Gamma risk!
I think this is up to the trader. It appears Joshua will will give up Theta for gamma. That works for him. I have to agree that taking a decent profit and moving on to another trade makes sense. Rinse and repeat. No need to get super greedy on one trade.
I like making the whole premium
Yea that’s pretty appealing to most traders but keep in mind that short order can still be executed 1:15 after market close so you can still get assigned that’s why it’s best to close before the expiration before something unexpected happens👍🏽
Hi, How do you set the Avg.ImpileVolatility studies in your TOS? Can you share with your viewers?
Website is no longer working?
It redirects to www.countervest.com.
thanks fr the video
Why does everyone talk about selling puts vs selling calls? Doesn't the market fall faster than it goes up? So why would we want to give that advantage to the buyer of our option? Also, doesn't ImpVol increase as it falls? So won't that mean we would lose even more if it went down?
That is why puts trade higher than calls in equities and indexes. It would, but there's a natural drift higher in the markets. Keep cash on hand and roll out to let probability come back in your favor.
Can you tell me the best indicators to sell Puts?
Thanks
It's discussed that in the video.
What is considered High Implied Volatility. Is it different for each stock or just above the average for that stock or just greater then say 20.
what do you mean charts are not necessary for options trading? you need to see price action and trend. fundamentals don't do it for me even though I am a new trader.
Great video
Just tried to sell 10 puts on ebay...it's asking me for $50,000 on margin for this to make $1000 in profit. How is that good?
Sounds like you're tying to this in a retirement account. If so, then you can't use margin, it's cash secured.
In that event, it's optimal to buy a lower OTM delta put to create a short spread.
Joshua, "Could have WENT"? Could have went? Attended English class in middle school? Was sick on the day they taught grammar?
u bein a lil bich
if you sell itm puts will you be given the shares + premium immediately ?
Does anyone have any good stock they recommend that would be great for this strategy?
{Forbidden.Knowledge} Be very very careful with this advice. TSLA is incredible volatile. It has had swings of over 100 a day. You want to make sure you sell far enough OTM and the underlying doesn’t tank or you will be sorry
If you buy ABC put for 1.85 at 41 strike price, then the following day ABC drops to 38 is that good or bad
if you buy put then the stock is drop this is good for you, but if you sell put this is bad for you, you get me?
u buy put meaning u are betting it will drop so when the stock dropped to 38, u made money!
Hard to follow along when the numbers are so small.
Possibly the dumbest comment I've ever seen.
@@rotagbhd You can read the small numbers on the chart? Are you normally this rude?
i like the presentation but i think its risky without stop
You can use a stop-loss or buy a lower put to create a spread to limit loses. There's always a trade off.
Very well explained, interested in learning more. Thank you.
hello Joshua, thank you for your content.
Can you please make a backtest video on how you would manage a losing naked put trade? perhaps using delta neutral hedging.
Thanks
You left out the most important part: The Huge amount of cash that must be invested in a non-margin trade, such as a 401K or IRA; namely, the full amlunt that must be paid if the Put is assigned (below the strike price). In your example, 10 contracts of a 45 strike equals $45,000! A tremendous 5-6 week investment for earning maybe $250 (half of full premium).
That's what keeps most small-medium funded traders from using this strategy.
Larry from Scottsdale
401k and IRA's have restrictions such as being non-margin.
That is a situation you would look to sell something closer to At-the-money so you can take in more premium.
One could look to purchase another put at a lower strike to create a spread to reduce the amount needed for trade.
I disagree with buying back options that are out of money to avoid gamma risk. The last couple of cents is free money as the risk of floor falling out of stock that is far out of money is very small. If your brokerage allows you to leverage up to 200% of money, and you have sufficient buying power and sideline cash, you can collect the "easy" last few pennies. The theta decay in the last week is the fastest. The only time I would consider buying back out of money puts is if you are no longer confident in it expiring out of money due to fundamental changes in market conditions or underlying stock.
You sound reckless!
@@JoshuaBelanger Its OK. I plan on going on margin if assigned on blue chip stocks. There is zero chance of losing your complete portfolio on strong blue chip stocks even at 100% margin, especially if margin rate is fraction of dividend rate.
Excel sheet is not clear.
Good information but this is a misleading title. You are literally saying NOT to take "max profits".
Max profits = optimal profit vs risk.
@@JoshuaBelanger hey mate you put a video on how to make a million in ayear using spx options.Is that something real?
Use RH and the most you can lose is what you put in. yes?
No, that mentality would apply to BUYING options, not selling options.
Help please. I got flat footed and failed to close a naked call position (TSLA @ 1500). 200 shares short were assigned. Now I'm in damage control mode. My concern is margin call/gap up soon. Would you suggest a covered put strategy? If so what strike prices/exp suggestions. REALLY would appreciate it. I feel like a dummy.
You're in a tough spot.
how can you sell 10 puts when you have only a limited amt of funds. my acct is only $2,000.00 can I make money selling puts if I don't have a large acct that is, will my broker allow me to do that if I have limited funds?
You can sell puts on lower priced stock with an account that size, but it should never be more than 1. Trade size is so important at all times. Don't risk more than 5% of your account! which in this case is 100.
meziggy Are you a risk taker because I what to introduce you to an investment platform called dascoin
hmmm... how about selling a naked put on a stock that is going up and you believe will continue to go up. And sell an ITM put. This way you get time decay, plus as the stock goes up the put will lose value.
Believing it will go up doesn't mean it will go up. ITM puts carry a higher risk of being assigned compared to OTM. ITM options have very less extrinsic value, which would work to your benefit.
Close before you get assigned. The extrinsic value is peanuts. The intrinsic value depreciation is ton more. I can never figure out why writing options and holding one trade for 20-30 days to make 30 cents when you can trade other options and make 700%. Whatever. Then they tell me you have a 90% chance of being right. Well, I'd rather have a 60% chance of being right and make a 300% return then be 90% right and make piddly and then 1 out of 10 times lose my shirt.
SUPER TARGET :) BRO :)
"S"-specially, not "X"-specially. Thank you for your efforts.
Selling puts actually have a more valuable function that people do talks about. You can use it if you actually want to own the stock but think it’s overvalued. You sell the strike at the price you want to own 100 shares. If it hits you buy 100 shares at a price you wanted. If it doesn’t you get paid to wait for that price. I don’t see the reason to use this as a trade when compared to buying calls and spreads. Seems kind of over rated when looking from risk to reward
Ok dude selling at about 50% assumes the stock price is affected by the value of your put. I highly doubt that. Keep it till expiration. Won't make a difference
It does make a difference. Money at risk is lost opportunity if rate of return isn't the same.
Thanks a lot 👍
You are welcome
Writing naked calls or puts is the best options strategy to add to your portfolio :) you receive a credit to cover losses in case of in the money expiration or unexpected exercise. Upon expiration if the option is in the money, you are responsible to deliver shares if its an equity option(buying the stock) or cash if its a european style option. If option expires out of the money you keep the credit that was given to you when you executed the trade SELL TO OPEN. You need a level 5 account and a minimum of $10,000 to implement this type of trading
You are crazy, unless you are willing to assume huge risk. Without any risk mitigation, this is the best way to get wiped out.
Your account will be wiped out if you sell naked calls with a $10,000 capital base.
It’s 10x less capital requirements, 10x more premium, 10x less risky to just trade a vertical spread. Trading naked makes no sense in the long run and is very dangerous.
And your 10x incorrect.
He tells someone else that you need to have capital enough to have the underlying put to you. That makes these cash covered puts. Same risk as covered calls.
One trader's profit is another trader's loss.
Don't lose.
Thank you for the video. BUT you say opportunity way way too often. Replace opportunity with Trade, the next trade, our trade, thr trade
Holy long-winded explanation. Put me to sleep.
Too bad because you missed some valuable information
in the long run this will loose you money .
5 to 6 weeks of expiration is poor and perhaps outdated strategy
i like 2 to 3 days.
@@Dan16673 Same here. I like to put time on my side, take the money and run.. Who knows if the planet as we know it will be here in 6 weeks?
@@davidchristie3245 yup using theta is great
Gave up after 12 mins. Get to the point please.
Too long.
Rambling....
Muhamad Toyep Exactly. This guy doesn't know shit. Selling puts OTM is as dumb as it gets.
John Smith Neither selling OTM or ITM puts is dumb. You my friend clearly have very little sense. Not sure why I just responded to this
+John Smith STFU
Matt Harris, why would you trade with an unlimited risk potential for a defined profit? huh smart guy?
Here's an example, if i dont honor my stop loss and close my trade whenever my position is profitable, most people would consider that dumb. But that is exactly what it looks like selling options.
crappy!
Great video
Thank you !