Fills

[jlhooter]

I did my 1st Sell to Own Put option. Got in Affirm the other day at $18 Put for $1.5 to open expiring 5/13? Idk if I'm wording this clearly, please let me know how it should be said so I'm clearer in the future. Anyway currently its trading at just about $16.5. I'm assuming come Friday I will own the stock if its below 16.5? What if its not do I still own the stock but at $16.5?

PuppBaby, I know you don't care, but here you go: you Sold to Open (STO) a Cash Secured Put (STO-CSP), but I think we all understood you.

You may or may not get assigned even if it drops below $16.50 since that exact option could have been bought at a higher premium (you just don't know) just as Yodean mentions. The option could expire or you get shares assigned (shares Put to you); you won't know until Monday (I think if not sooner).

When you sell puts, you expect (at some point) that the price will increase, but during the period between the time I sell one and expiration, I like to monitor the option price/premium. If the price of the security rises, the value of the premium will decrease (time and volatility also have an effect on premium price; what you paid will not change which was your to keep no matter what). Unless I have no other choice (in your example as of this writing the premium for the same option is $4.00), I like to (not always) buy back (Buy to Close) the option by or on expiration, which can be a very small premium (pennies). I like to keep house, so to speak and prefer not to just let it expire. Your preference, but I like to ensure I am closing and monitoring all options that I do.

[Yodean]

... I like to (not always) buy back (Buy to Close) the option by or on expiration, which can be a very small premium (pennies). I like to keep house, so to speak and prefer not to just let it expire. Your preference, but I like to ensure I am closing and monitoring all options that I do.

@ExcelNinja: currently, I'm Buying-to-Close (BTC) my sold covered calls and sold puts around the 70%+ range or so before expiry, when possible ... do you have a range in mind when you BTC, or do you routinely BTC all sold puts and calls, and roll them forward, regardless of profit?

[jlhooter]

... I like to (not always) buy back (Buy to Close) the option by or on expiration, which can be a very small premium (pennies). I like to keep house, so to speak and prefer not to just let it expire. Your preference, but I like to ensure I am closing and monitoring all options that I do.

@ExcelNinja: currently, I'm Buying-to-Close (BTC) my sold covered calls and sold puts around the 70%+ range or so before expiry, when possible ... do you have a range in mind when you BTC, or do you routinely BTC all sold puts and calls, and roll them forward, regardless of profit?

70% is a bit aggressive but each case can be different. And it depends. I have a watch at 30% for considering rolling positions but I hear 50% is a good target. I like 60%. Dont get me wrong I like 70 but not sure how realistic it can be. I am still learning what the right level is.

[PuppBaby]

I did my 1st Sell to Own Put option. Got in Affirm the other day at $18 Put for $1.5 to open expiring 5/13? Idk if I'm wording this clearly, please let me know how it should be said so I'm clearer in the future. Anyway currently its trading at just about $16.5. I'm assuming come Friday I will own the stock if its below 16.5? What if its not do I still own the stock but at $16.5?

PuppBaby, I know you don't care, but here you go: you Sold to Open (STO) a Cash Secured Put (STO-CSP), but I think we all understood you.

You may or may not get assigned even if it drops below $16.50 since that exact option could have been bought at a higher premium (you just don't know) just as Yodean mentions. The option could expire or you get shares assigned (shares Put to you); you won't know until Monday (I think if not sooner).

When you sell puts, you expect (at some point) that the price will increase, but during the period between the time I sell one and expiration, I like to monitor the option price/premium. If the price of the security rises, the value of the premium will decrease (time and volatility also have an effect on premium price; what you paid will not change which was your to keep no matter what). Unless I have no other choice (in your example as of this writing the premium for the same option is $4.00), I like to (not always) buy back (Buy to Close) the option by or on expiration, which can be a very small premium (pennies). I like to keep house, so to speak and prefer not to just let it expire. Your preference, but I like to ensure I am closing and monitoring all options that I do.

Hmm so to understand this clearly you would buy back the option so $4.00 - $1.5 = you'd pay $2.50 per share. I don't see how this is beneficial unfortunately? I thought the point of STO was to own the shares if they dip low enough, I am interested in having the shares put to me so as I understand the above is not helpful to me. However from what you mention I actually won't know if the shares are put to me until after close Friday. In your scenario I could just buy it back and then buy the shares myself. Thanks for clarifying btw I appreciate it.

[Yodean]

I thought the point of STO was to own the shares if they dip low enough, I am interested in having the shares put to me so as I understand the above is not helpful to me. However from what you mention I actually won't know if the shares are put to me until after close Friday. In your scenario I could just buy it back and then buy the shares myself. Thanks for clarifying btw I appreciate it.

That's the beauty of the SCSP (Sell Cash-Secured Puts) tactic - let's use SCSP as the acronym since it's what the TIT is using in its publications - you can use SCSP purely to generate premium income, or to buy a stock at a lower cost basis.

If you are using SCSP because you want to buy the actual stock, you sell the put at a strike that is close to being in the money, since you actually want to be assigned.

Both ExcelNinja and I are really talking about using the SCSP as part of the Wheel Strategy, which is using SCSP to generate income from the premiums, while avoiding being assigned the shares, if possible. However, there's an added "safety margin" built in, in the sense that we don't _mind_ being assigned the shares.

The idea of BTC (buying to close) the sold calls and sold puts and rolling them forward in the Wheel Strategy is that you lock in the profits (premiums) without being assigned the shares or having your shares called away, so you keep on generating profits, over and over again, through premiums. Theoretically this can be done for many cycles.

If you don't get assigned the shares you want, you just SCSP at a slightly higher (or even in the money) strike price on the same stock.

[LoriPrecisely]

I did my 1st Sell to Own Put option. Got in Affirm the other day at $18 Put for $1.5 to open expiring 5/13? Idk if I'm wording this clearly, please let me know how it should be said so I'm clearer in the future. Anyway currently its trading at just about $16.5. I'm assuming come Friday I will own the stock if its below 16.5? What if its not do I still own the stock but at $16.5?

It is my understanding that you will be assigned the shares if the market price falls at or below your strike price of $18 by expiry day. The idea of 'buy to close' is, if you can work the numbers in your favor, you will 'pay to close' your current contract in order to buy a farther out-of-the-money contract for a future expiry. The only reason you would want to do this is to get the shares at a lower price because the market has fallen below your strike price.
I have found this girl helpful, she has a lot of videos.
https://www.youtube.com/watch?v=TyZsemV_0YA

[PuppBaby]

I thought the point of STO was to own the shares if they dip low enough, I am interested in having the shares put to me so as I understand the above is not helpful to me. However from what you mention I actually won't know if the shares are put to me until after close Friday. In your scenario I could just buy it back and then buy the shares myself. Thanks for clarifying btw I appreciate it.

That's the beauty of the SCSP (Sell Cash-Secured Puts) tactic - let's use SCSP as the acronym since it's what the TIT is using in its publications - you can use SCSP purely to generate premium income, or to buy a stock at a lower cost basis.

If you are using SCSP because you want to buy the actual stock, you sell the put at a strike that is close to being in the money, since you actually want to be assigned.

Both ExcelNinja and I are really talking about using the SCSP as part of the Wheel Strategy, which is using SCSP to generate income from the premiums, while avoiding being assigned the shares, if possible. However, there's an added "safety margin" built in, in the sense that we don't _mind_ being assigned the shares.

The idea of BTC (buying to close) the sold calls and sold puts and rolling them forward in the Wheel Strategy is that you lock in the profits (premiums) without being assigned the shares or having your shares called away, so you keep on generating profits, over and over again, through premiums. Theoretically this can be done for many cycles.

If you don't get assigned the shares you want, you just SCSP at a slightly higher (or even in the money) strike price on the same stock.

Ahh this clears it up nicely thanks for the info everyone! AFRM probably not the best stock to run my first SCSP haha, glad I sold only 1 as it continues to be beaten down but it has proven to be a valuable learning lesson.

[Eric]

If you are using SCSP because you want to buy the actual stock, you sell the put at a strike that is close to being in the money, since you actually want to be assigned.

Both ExcelNinja and I are really talking about using the SCSP as part of the Wheel Strategy, which is using SCSP to generate income from the premiums, while avoiding being assigned the shares, if possible.

If you're trying to avoid assignment you're really just selling puts for income.

If you're wheeling you're allowing assignment of your sold put and then selling covered calls until the assigned shares get called away... Rinse and repeat over and over. Round and round it goes.

[froggo]

froggo fills:
9/5/22, buy, WTW @ 218.29
11/5/22, buy TTD @ 41.98
11/5/22, buy GBTC @ 21.25
11/5/22, buy ETHE @ 16.445

10/5/222, sold, K @ 73

[LoriPrecisely]

@PuppBaby "Ahh this clears it up nicely thanks for the info everyone! AFRM probably not the best stock to run my first SCSP haha, glad I sold only 1 as it continues to be beaten down but it has proven to be a valuable learning lesson."

You chose a perfectly fine stock to run your first Option trade. You wanted to own it and you got it at a good price. The market is just crazy right now. We have to hold on until we hit bottom. Makes me think of THIS:
https://www.youtube.com/watch?v=l9m4cW2yxy0

[Yodean]

If you're trying to avoid assignment you're really just selling puts for income.

If you're wheeling you're allowing assignment of your sold put and then selling covered calls until the assigned shares get called away... Rinse and repeat over and over. Round and round it goes.

Yeh, many different versions of the Wheel, which is nice, as one may customize it for one's purpose.
Assuming one is doing the Wheel (both SCC and SCSP, at different times) for pure income through premiums, another way I conceptualize the strategy is that you are getting an extra yield on collateral you already own (for SCC - stocks, for SCSP - cash, or margin, or "buying power").

If you set your SCC strike above your cost basis, you are getting extra yield on your collateral at no downside risk, while potentially capping your upside a bit. For the SCSP, you are getting extra yield on cash (or margin, or "buying power"), and if you apply the strategy to stocks you want to own anyway, the only "downside" is assignment of shares of a stock at a price you set.

[Yodean]

Ahh this clears it up nicely thanks for the info everyone! AFRM probably not the best stock to run my first SCSP haha, glad I sold only 1 as it continues to be beaten down but it has proven to be a valuable learning lesson.

NFA. A very good stock to trial the SCC and SCSP strategies, or any version of the Wheel, is INTC. Also there's that dividend. IBM as well. INTC much cheaper.

[Eric]

If you're trying to avoid assignment you're really just selling puts for income.

If you're wheeling you're allowing assignment of your sold put and then selling covered calls until the assigned shares get called away... Rinse and repeat over and over. Round and round it goes.

It's called a wheel because it's a circular strategy.

[Triplethought]

5/10/22 Bought 1/6 lot BWXT at $47

This was before SOL issued the suspension of buys this morning.
For the record I left buy orders only on RGLD, PUI, SGOl, SAND and cancelled everything else until SOL issues his update.

I Bought APPL on my own. Sure looks like a good buy but it's hard to know where the fall will stop

[phsmith1616]

If you're trying to avoid assignment you're really just selling puts for income.

If you're wheeling you're allowing assignment of your sold put and then selling covered calls until the assigned shares get called away... Rinse and repeat over and over. Round and round it goes.

Yeh, many different versions of the Wheel, which is nice, as one may customize it for one's purpose.
Assuming one is doing the Wheel (both SCC and SCSP, at different times) for pure income through premiums, another way I conceptualize the strategy is that you are getting an extra yield on collateral you already own (for SCC - stocks, for SCSP - cash, or margin, or "buying power").

If you set your SCC strike above your cost basis, you are getting extra yield on your collateral at no downside risk, while potentially capping your upside a bit. For the SCSP, you are getting extra yield on cash (or margin, or "buying power"), and if you apply the strategy to stocks you want to own anyway, the only "downside" is assignment of shares of a stock at a price you set.

Would this strategy be best to use now, while volatility is high? I would think this strategy is best suited for stocks that are moving slowly in either direction?