Centeron631 wrote: ↑Wed Jun 22, 2022 5:13 pm
The ultimate dilema for myself is just how closely i have to watch these and the increadible amount of bookkeeping for in my case CRA canada revenue agency
The bookkeeping isn't that bad if you stay on top of it. I calculate my net profits or expenses with SCC'ing and SCP'ing on a daily or weekly basis. I just started doing my version of "Wheeling" in late April, and so far it hasn't been too onerous keeping track of premium income (SCC'ing, SCP'ing) and expenses (buying to close, margin interest).
I make a lot of these trades daily, so I don't track them using those fancy Excel spreadsheets - would take too much time for my liking. I simply track net premium income.
My RBC brokerage doesn't even give me any official year-end tax documents on the gains from writing options - leaving some room for me to fudge on my taxes, if I wish - while the brokerage gives me tax documents on every other type of trade I make. I am not sure why this is the case.
The 1st video you posted was pretty good for beginners - the only point of disagreement for me is that the YTuber SCP'd on a day when his stock rose. Generally, as has been stated previously, it's better to SCP on a stock on a "down" day, for better premiums, all other conditions being equal. I know he was prolly trying to be a badass on YT and SCP perfectly on a clear reversal candle to the upside on a stock that had been trending downwards, but it's somewhat misleading to imply that one needs to do this to be profitable using SCP.
The 2nd video you posted is quite good for intermediate Wheelers - it might be confusing for beginners. He makes several nuanced points worthy of consideration, e.g. premiums are often higher for SCP vs. SCC under similar conditions, and his thinking is that this is because traders fear loss more than they want gain, which is prolly true.
He also makes the point that around 45 days is his preferred options expiry duration ("sweet spot") for these type of trades, vs. shorter time periods, like weekly. From my experience thus far, I tend to agree - I like the 4 to 6 week expiry duration, whenever possible, for Wheeling, to take advantage of exponential theta decay while also securing decent premiums. Now I suppose if you Wheel using weekly expiry, the cumulative amount may be greater vs. monthly, but in Canada at least, the increased amount of trading fees may render the shorter duration expiration periods a net negative (plus all the extra work tracking the trades).
SCC'ing is also a very useful, and profitable tactic, regardless if you are spinning a particular Wheel or not. A lot of us have accumulated shares in stocks that are just kind of sitting around, waiting for that upward spike that would compel us to take profits.
The beauty of SCC is that you generate income on these stocks, almost as a bonus. If you're afraid of your shares getting called away, just set your strike higher than what is realistically likely, within a particular time frame. You'll generate less premium, but it's still better than nothing. And if your shares get called away, you can usually buy them back directly at the strike at which they were called away, or you can SCP them back over time.
If you never have your shares called away during SCC, you're prolly setting your strike too high, and are not optimizing your premium income. If your shares are getting called away a lot, you're setting your strike too low.
Everyone seems to like to use a delta of 0.3 or so to assess this, but my current thinking is that delta is overrated. For me, I ask myself: what price do I not mind my shares being called away for a particular stock I am SCC'ing? Then I look at the technical charts of the stock in question and decide how realistic that a certain price point will be reached during a particular options duration period, and generally set my strike a little higher above that, while keeping the first question in mind, and of course taking a took at the premium prices.
I apply a similar process for SCP'ing a stock.
I am working on Excel sheets to keep track of my trades. My two lots of ASAN stock purchases, 35.48 and 25.00 gives me a cost basis of 30.24 per share. With all the option trades I have done in the last 3 weeks, I have lowered my cost basis to 17.33. I almost always Buy to Close whether it is a Put or a Call. I have 6 contracts open right now, 4 Puts and 2 Calls, so my cost basis will change if I get assigned, and when I Buy to Close these positions.
