Hi
I am new to your forum, but not to doing options. I have been investing since the mid 1970’s. I started in 1973 just before the market fell almost 50% in less than a year. Somewhat similar to last year’s plunge.
I have done cash secured puts, which I label as naked puts simply because I do not own any stock. I have a website at www.fullyinformed.
http://fullyinforme
http://fullyinforme
http://fullyinforme
http://fullyinforme
http://fullyinforme
http://fullyinforme
http://fullyinforme
http://fullyinforme
http://fullyinforme
As this has been an up market since March, all of the positions have not been assigned to me for many months. I normally leg into the positions in what I refer to as a reverse ladder, basically selling puts at various strike points lower and further out in time. Some of the puts I have sold are out 6 months and most are out 2 to 5 months. As a put comes due, I then roll it out further as long as there is adequate premium to make the risk worthwhile. It’s a trade no unlike rolling Guaranteed Investment Certificates from 1 to 5 year periods. As put premiums have reduced due to the decline in volatility, it is sometimes more difficult to achieve more than 1% in a month primarily as I am selling the puts at strike positions where I would be comfortable owning the stock. I only select large cap companies that pay dividends. I have used this strategy since 1973 with very good results. When interest rates were higher, my cash could sit in a savings account earning anywhere between 3 and 8 percent depending on the year. Back in the 1980’s there were some years where cash was earning almost 10% in a savings account. That coupled with the earnings from puts and calls, easily generated better than 20% annual gains. Today though my cash is earning just 1% in a savings account making the annual return from many of my put positions, below 15%.
I think naked puts have a very strong role in any option traders portfolio.
Teddi Knight
www.fullyinformed.
From: ConservativeOptionS
Sent: December 1, 2009 10:20 PM
To: ConservativeOptionS
Subject: [ConservativeOption
i don't want to sit down and write a detailed paper so people can try to follow to the letter. so, instead, let's all discuss short puts.
let's start with a discussion of what equity do you trade and how do you determine which one to trade? what expiration do you pick? and what strike do you pick?
after a discussion of the above we can discuss management up until expiration, then management at expiration, and if assigned, what to do next?
first, i only trade index etf's almost all my short puts have been iwm, qqqq, spy, eem but mostly iwm. i currently have iwm and qqqq short puts.
second, i decide how many contracts do i want to have outstanding. for example lets say i chose 15 contracts for iwm.
third, i use 90 days to expiration and i leg into the position.
lets say it is november expiration. i will sell 5 contracts with feb expiration. at december expiration i will sell 5 contracts with march expiration and at january expiration i will sell the last 5 contracts for april expiration. each successive month will have 5 contracts therefore coming to expiration.
fourth, i choose the first strike out of the money.
fifth, i do not do naked puts. i have 50% secured in a fixed income etf and 50% in cash in the margin account. i do not and do not recommend anyone using margin especially someone new to options and short puts.
sixth, i do look at charts...i like to look at 1 month and 3 month linear regression channels, macd, sto, and ma's ....i have no hard fast rules but i like to get an idea that it is definitely in an intermediate term uptrend and more in the oversold than overbought situation.
so let's here from the rest of you and after a few days of discussion we can move onto management after the trade is executed.
drjoe
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