Everything Options

Sanrith Descartes · Feb 17, 2021

Going to start a thread to track the life of one of my option trades. Writing puts is a great way to make money, but what happens when you get assigned and take possession of the stock? You shift gears and sell calls against it, of course.

So I wrote puts against KO with a $50 strike for 25 cent premium and got assigned. Since I got 24.3(after fee) premium my cost basis is $49.757
Now I begin to sell weekly covered calls on the KO
Week 1: $50 strike, 14.3 premium, -0.014 to close = 0.129 profit
Week 2: $51.5 strike, 22.3 premium, -0.034 to close = 0.189 profit
Week 3: $52 strike, 11.3 premium, -0.034 to close = 0.079 profit
Week 4: $51.5 strike, 19.3 premium, currently open = pending

Current cost basis $49.36 (with 0.193 in collected premium)

So far in 4 weeks I have made about 60 cents in premium on a stock selling for $50 (so about 1.2%). Over a year thats 15.6% + 3.25% for annual dividends for a total of 18.85% annual return and I still hold the stock. Its not SPAC-like or anything, but it is solid low volatility return. Eventually I will get assigned and sell it, but it will be at a profit.

This is the back half of writing puts for profit. Your money is always making money.

Happysmiles · Feb 17, 2021

Ok so honestly dumb question here. But where is this money going to and coming from? I tried an option trade a few months ago (before this thread) with Robinhood. I lost my $70.00 and didn't get the stock. Fine, not a huge deal. But like who got my $70.00, and who would have paid me $150.00 if I turned a profit?

Sanrith Descartes · Feb 17, 2021

Happysmiles said:
Ok so honestly dumb question here. But where is this money going to and coming from? I tried an option trade a few months ago (before this thread) with Robinhood. I lost my $70.00 and didn't get the stock. Fine, not a huge deal. But like who got my $70.00, and who would have paid me $150.00 if I turned a profit?

Go back to page one of this thread. Its being built to help people learn about options.

Fogel · Feb 17, 2021

Happysmiles said:
Ok so honestly dumb question here. But where is this money going to and coming from? I tried an option trade a few months ago (before this thread) with Robinhood. I lost my $70.00 and didn't get the stock. Fine, not a huge deal. But like who got my $70.00, and who would have paid me $150.00 if I turned a profit?

You gave the 70 dollars to someone who had 100 shares and sold the covered call to you. If your call went up in value and you wanted to sell it, you would be selling it to someone who bought it just like you originally did, just at a higher price

Locnar · Feb 17, 2021

fidelty wont let me write puts, says they are naked puts and I am not approved for them. I don't get it, if I have the cash to execute and buy the shares if the put hits, what is their problem?

Do you have to keep a pile of money in reserve to cover your put selling?

Blazin · Feb 17, 2021

Locnar said:
Do you have to keep a pile of money in reserve to cover your put selling?

Yes, you have to have the cash to cover the put and that cash is locked up until you buy to close.

Example, 130 strike put on Apple you would need $13,000 to cover one contract.

Sanrith Descartes · Feb 17, 2021

Locnar said:
fidelty wont let me write puts, says they are naked puts and I am not approved for them. I don't get it, if I have the cash to execute and buy the shares if the put hits, what is their problem?

Do you have to keep a pile of money in reserve to cover your put selling?

If you hit the balance tab/button, it will show you available cash to trade. As you write puts this goes down by the value of of contract and you see the amount at the bottom of the balance sheet showing "cash covered puts" or something similar.

Sanrith Descartes · Feb 17, 2021

Blazin said:
Yes, you have to have the cash to cover the put and that cash is locked up until you buy to close.

Example, 130 strike put on Apple you would need $13,000 to cover one contract.

Or 1 AMZN put might lock up $310,000. Or so I hear.

Fogel · Feb 17, 2021

Locnar said:
fidelty wont let me write puts, says they are naked puts and I am not approved for them. I don't get it, if I have the cash to execute and buy the shares if the put hits, what is their problem?

Do you have to keep a pile of money in reserve to cover your put selling?

Technically someone could execute the put early, which is why you need to have the cash for the full duration of the option till expiry or you buy to close.

Blazin · Feb 17, 2021

Fogel said:
Technically someone could execute the put early, which is why you need to have the cash for the full duration of the option till expiry or you buy to close.

It's an unfunded liability exercised early (which would never never happen) or otherwise. I'd rather hear how anyone would think letting people sell naked puts would work.

Selling puts collateralized by IOUs

Locnar · Feb 17, 2021

Sanrith Descartes said:
If you hit the balance tab/button, it will show you available cash to trade. As you write puts this goes down by the value of of contract and you see the amount at the bottom of the balance sheet showing "cash covered puts" or something similar.

Yeah i don't let cash sit around in my accounts, its always working. But I "do" (or did) have margin. So maybe the question is, you can't use your margin to sell puts? I suppose that makes sense since they can yank the margin away at will.

So now it dawns on me that you (and others) let cash sit around so you can sell your puts? I'll have to mull that.

Is it me or is selling covered calls just a overall better deal then selling puts? With CCs you hold the stock, so you garner the dividends and you are holding (hopefully) long enough for it to become long term gains instead of short. With puts you dont have those two advantages.

Blazin · Feb 17, 2021

The cash is not sitting around it’s working with the put that is the point. You will at times see me mention my yield on cash from the put.

Making 10% on that cash is hardly sitting around.

the upside to covered calls is offset by increased losses in decline . I do both after a pullback I flip from puts to holding and selling calls. After easy money is made I switch back again to puts.

Sanrith Descartes · Feb 17, 2021

Blazin said:
It's an unfunded liability exercised early (which would never never happen) or otherwise. I'd rather hear how anyone would think letting people sell naked puts would work.

Selling puts collateralized by IOUs

Ttrpg What Could Go Wrong GIF by zoefannet

Sanrith Descartes · Feb 17, 2021

Locnar said:
Yeah i don't let cash sit around in my accounts, its always working. But I "do" (or did) have margin. So maybe the question is, you can't use your margin to sell puts? I suppose that makes sense since they can yank the margin away at will.

So now it dawns on me that you (and others) let cash sit around so you can sell your puts? I'll have to mull that.

Is it me or is selling covered calls just a overall better deal then selling puts? With CCs you hold the stock, so you garner the dividends and you are holding (hopefully) long enough for it to become long term gains instead of short. With puts you dont have those two advantages.

Some of us discuss the rate of return you get on the cash covering the puts. Some SPAC puts I am making 7-10% return for 2 or 3 weeks cash collateral.

Of course this goes way down with low beta value stocks. High vol SPACs though are money.. Example. I wrote $35 strike puts on CCIV today at a $7.20 premium. Stock was over $50 at the time. That's $720 profit to tie up $3500 cash. That is a 20% return for a month. That ain't sitting around. That's working like a cheap whore on payday Friday night.

Blazin · Feb 18, 2021

Selling monthly puts day!
All 3/19 Exp.
AAPL $120
ABBV $95
C $ 60
CRM $220
DLR $130
JNJ $150
KO $47.50
LMT $310
LOW $160
PFE $33
PG $120
T $28
VZ $52.50
ZTS $160
SPY $360
IWM $200
QQQ $290

Total monthly premium collected ~$8,668.00 (not all trades closed yet)

Sanrith Descartes · Feb 18, 2021

Blazin said:
Selling monthly puts day!
All 3/19 Exp.
AAPL $120
ABBV $95
C $ 60
CRM $220
DLR $130
JNJ $150
KO $47.50
LMT $310
LOW $160
PFE $33
PG $120
T $28
VZ $52.50
ZTS $160
SPY $360
IWM $200
QQQ $290

Total monthly premium collected ~$8,668.00 (not all trades closed yet)

Whats scary is how many of those stocks I own.

edit: wait a fucking minute. T? T?

Blazin · Feb 18, 2021

Sanrith Descartes said:
Whats scary is how many of those stocks I own.

edit: wait a fucking minute. T? T?

Yup, I had a few thousand left over, it's only 2 contracts on T

Look at those juicy strikes, I'll be happy to actually get assigned on any of them at those levels and if I don't I'm content with my $8k for very measured risk.

Fogel · Feb 18, 2021

Blazin said:
Selling monthly puts day!
All 3/19 Exp.
AAPL $120
ABBV $95
C $ 60
CRM $220
DLR $130
JNJ $150
KO $47.50
LMT $310
LOW $160
PFE $33
PG $120
T $28
VZ $52.50
ZTS $160
SPY $360
IWM $200
QQQ $290

Total monthly premium collected ~$8,668.00 (not all trades closed yet)

Even if it's only 1 contract each that's a quarter mil, totes jelly

Sanrith Descartes · Feb 18, 2021

Sanrith Descartes said:
Options available for the Goldman Sachs SPAC GSAH

Blazin · Feb 18, 2021

Blazin said:
Selling monthly puts day!
All 3/19 Exp.
AAPL $120
ABBV $95
C $ 60
CRM $220
DLR $130
JNJ $150
KO $47.50
LMT $310
LOW $160
PFE $33
PG $120
T $28
VZ $52.50
ZTS $160
SPY $360
IWM $200
QQQ $290

Total monthly premium collected ~$8,668.00 (not all trades closed yet)

Up almost $1,700 on these puts already. Quite a nice bounce.

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