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Message
re: NVDA ER today...what are you thoughts?
Posted on 9/1/22 at 8:49 pm to Jag_Warrior
Posted on 9/1/22 at 8:49 pm to Jag_Warrior
quote:
Thankfully my short 155 puts expired worthless last Friday. Nice to see people making money on the same underlying with opposite strategies.
This is likely a good spot to sell puts again
2
Posted on 9/1/22 at 10:20 pm to LSUtoOmaha
I agree. I was looking at the options table and some charts earlier today and deciding on strikes and days to expiration. I need to get a trade on before the IV tails off.
Probably ladder into a position beginning tomorrow, before the long weekend.
Probably ladder into a position beginning tomorrow, before the long weekend.
Posted on 9/2/22 at 9:20 am to Jag_Warrior
I sold put credit spreads in AMD this AM. $80/$60 9/30 expiration
Posted on 9/2/22 at 10:39 am to LSUtoOmaha
Watch out, I bought 100 NVDA shares yesterday.
Posted on 9/2/22 at 1:48 pm to LSUtoOmaha
quote:
I sold put credit spreads in AMD this AM. $80/$60 9/30 expiration
IV on NVDA is still elevated, so I picked the 15 delta (+/-) Sep23 short 115 puts. Expected range is +/- 16 and change. I’m giving it -22 as a safety margin. But at 115 (minus my collected premium), I’ll take it!
That’s a wide spread. Are you content to take the AMD at 80 (in case you get assigned early) and use the long 60 puts for protection in case a black swan flies over? Interesting trade structure. I think you’ll have some options (no pun intended), no matter what happens.
Posted on 9/2/22 at 4:25 pm to Jag_Warrior
If AMD really tanks I'll buy back the 60 for a profit, sit tight, and get assigned the 80s for a lower cost basis.
Posted on 9/2/22 at 4:36 pm to LSUtoOmaha
You mean sell the long 60, right? But I don’t think you’ll be in bad shape with AMD in the 80 range longer term. I’m in it quite a bit higher than that and I have it as a longer term hold. I may add some down here, depending on how things look macro wise.
Posted on 9/2/22 at 4:40 pm to Jag_Warrior
Yeah sell the 60 sorry! That's why I was willing, happy to hold shares down there
Posted on 9/2/22 at 5:03 pm to LSUtoOmaha
AMD has elevated IV too. So if you get assigned, you could also sell covered calls and chip away at your cost basis even more. I just happened to go with NVDA, since I already have a long AMD position. But I see either as a good play investment or trading wise.
Posted on 9/2/22 at 6:20 pm to Jag_Warrior
Good idea. Will consider cc
Posted on 9/7/22 at 11:10 am to Jag_Warrior
JAG, what site do you use to track IV? Are you in any other short premium plays besides NVDA?
Posted on 9/7/22 at 1:07 pm to LSUtoOmaha
I use Think or Swim with Level 2 to structure all my trades. I track IV and IV percentile on their options table screen.
Yes, most of what I do involves some type of (net) short option position, even if it’s a delta neutral strangle or iron condor. I don’t do straddles just because I’m not comfortable with having to manage potential inversions. I usually have a couple dozen positions open at any given time. I admit to being overweight in tech, mainly because that’s where I tend to find higher IV and also IV percentiles above 50 - and I follow many of those companies with technical and fundamental analysis. The same would be true of biotech, but I don’t feel that I have enough knowledge in that area to be competent - though I have used ITCI and others as underlyings a number of times when IV percentile is high. Relatively high IV (shown by the percentile rank) gives you something of a “house edge” because it’s more likely that IV will revert to the mean.
Maybe this will help some. Some of the parameters that I use are roughly 45 days to expiration (unless I’m doing earnings trades), 15 delta max upon opening and IV percentile above 50. There’s much more as far as choosing a a ticker and pricing, but that’s it in a nutshell. Pretty much what Tom Sosnoff of TastyTrade does. Hope that helps. And if I’m assigned on naked short puts, I usually sell calls as soon as I see that assignment is imminent - which may mean a naked short call for a short period of time. But once I’m assigned, it’s covered.
Yes, most of what I do involves some type of (net) short option position, even if it’s a delta neutral strangle or iron condor. I don’t do straddles just because I’m not comfortable with having to manage potential inversions. I usually have a couple dozen positions open at any given time. I admit to being overweight in tech, mainly because that’s where I tend to find higher IV and also IV percentiles above 50 - and I follow many of those companies with technical and fundamental analysis. The same would be true of biotech, but I don’t feel that I have enough knowledge in that area to be competent - though I have used ITCI and others as underlyings a number of times when IV percentile is high. Relatively high IV (shown by the percentile rank) gives you something of a “house edge” because it’s more likely that IV will revert to the mean.
Maybe this will help some. Some of the parameters that I use are roughly 45 days to expiration (unless I’m doing earnings trades), 15 delta max upon opening and IV percentile above 50. There’s much more as far as choosing a a ticker and pricing, but that’s it in a nutshell. Pretty much what Tom Sosnoff of TastyTrade does. Hope that helps. And if I’m assigned on naked short puts, I usually sell calls as soon as I see that assignment is imminent - which may mean a naked short call for a short period of time. But once I’m assigned, it’s covered.
Posted on 9/7/22 at 2:00 pm to Jag_Warrior
That is helpful! And that's a ton of trades. Do you do this full time? Id imagine so to keep track of all those positions.
Also why do you go that far out on deltas? IV Percentile if I'm not mistaken is calculated based on ATM strikes. I guess it is easier to manage dozens when most expire worthless.
I already had a TD Ameritrade account and the Think or Swim mobile app. I was using BarChart for IV % but after finding the ToS web app, I like it better. Thanks
Speaking of biotech, BIIB and ILMN both have very high IV% right now.
Also why do you go that far out on deltas? IV Percentile if I'm not mistaken is calculated based on ATM strikes. I guess it is easier to manage dozens when most expire worthless.
I already had a TD Ameritrade account and the Think or Swim mobile app. I was using BarChart for IV % but after finding the ToS web app, I like it better. Thanks
Speaking of biotech, BIIB and ILMN both have very high IV% right now. This post was edited on 9/7/22 at 3:37 pm
Posted on 9/7/22 at 5:42 pm to LSUtoOmaha
As I’ve gotten more serious, my trading frequency has gradually increased over the past few years. My aim has been to make this my “full time” job (that I can do from anywhere in the world) once I retire early next year. Right now 20-25 open positions is about all I can manage, combined with working and other activities. By this time next year, I should be able to handle 40 or so open positions at a time without over-stressing my available capital. Whereas now I typically let quite a few positions run to expiration, next year I’ll be closing more at 60-70% max profit (especially on strangles, short call verticals and more exotic multi-leg trades) and then opening new positions. The hardest thing for me right now is trade management.
15 delta *roughly* translates to 85% probability of a strike being out of the money at expiration. In a more actively managed account, some traders might look to stop loss once they pass 30-35 delta on an open trade. Back testing by traders way smarter than me has shown that 45 days to expiration seems to be the sweet spot for short option trades, with many looking to close trades around the 20+/- day mark to avoid gamma risk. For earnings trades, I usually look to get in a day or so prior to the release (sometimes the day of). That’s when IV (premiums) tends to spike. After earnings, there’s typically an IV and premium collapse and I can exit… or let it ride to expiration if I’m feeling froggy and greedy.
IV percentile (some people use IV rank - but ToS displays percentile in the table) is just the percentage of time that implied volatility on an underlying has traded below its current reading over the past 52 weeks. For option sellers, the higher the better - and why being above 50 gives you something of a “house edge”. For option buyers, usually the opposite is true (as the probability of IV expansion is statistically greater).
I became a “disciple” of TastyTrade and Tom Sosnoff (original Think or Swim founder) through Kirk Duplessis of OptionAlpha. Both offer an absolute wealth of free information and guidance. I’ve gotten to know Kirk somewhat and met several of Tom’s folks at the Vegas investor conference earlier this year. Really has changed my financial life. No emotion - just have to be as mechanical as possible and be data driven (which fits my personality pretty well). In short, my goal is to manage this as one would an insurance business. Knowing that I’ll have some safe drivers… and a few SR-22s.
Let me know if I can ever help.
15 delta *roughly* translates to 85% probability of a strike being out of the money at expiration. In a more actively managed account, some traders might look to stop loss once they pass 30-35 delta on an open trade. Back testing by traders way smarter than me has shown that 45 days to expiration seems to be the sweet spot for short option trades, with many looking to close trades around the 20+/- day mark to avoid gamma risk. For earnings trades, I usually look to get in a day or so prior to the release (sometimes the day of). That’s when IV (premiums) tends to spike. After earnings, there’s typically an IV and premium collapse and I can exit… or let it ride to expiration if I’m feeling froggy and greedy.
IV percentile (some people use IV rank - but ToS displays percentile in the table) is just the percentage of time that implied volatility on an underlying has traded below its current reading over the past 52 weeks. For option sellers, the higher the better - and why being above 50 gives you something of a “house edge”. For option buyers, usually the opposite is true (as the probability of IV expansion is statistically greater).
I became a “disciple” of TastyTrade and Tom Sosnoff (original Think or Swim founder) through Kirk Duplessis of OptionAlpha. Both offer an absolute wealth of free information and guidance. I’ve gotten to know Kirk somewhat and met several of Tom’s folks at the Vegas investor conference earlier this year. Really has changed my financial life. No emotion - just have to be as mechanical as possible and be data driven (which fits my personality pretty well). In short, my goal is to manage this as one would an insurance business. Knowing that I’ll have some safe drivers… and a few SR-22s.
Let me know if I can ever help.
Posted on 9/8/22 at 8:22 am to Jag_Warrior
I know Kirk's podcast well and have listened to several of them. He does seem to focus on the ETFs a lot which can make money but are also not "fun." I definitely enjoy his explanations around why selling premium works in an efficient market. Also his emphasis on staying direction-neutral works in most environments and is the long term answer.
I've heard about that 6-week sweet spot and backtests do seem to prove it. Stop lossing at a certain delta I suppose makes sense but I don't think I would do it personally. Too many potential transactions.
For earnings, do you look for specific things other than IV jumps/high IV percentiles? DOCU for instance seems to have fit the mold but has also turned into a piece of garbage so I was curious if that matters to you.
I definitely enjoy his explanations around why selling premium works in an efficient market. Also his emphasis on staying direction-neutral works in most environments and is the long term answer. I've heard about that 6-week sweet spot and backtests do seem to prove it. Stop lossing at a certain delta I suppose makes sense but I don't think I would do it personally. Too many potential transactions.
For earnings, do you look for specific things other than IV jumps/high IV percentiles? DOCU for instance seems to have fit the mold but has also turned into a piece of garbage so I was curious if that matters to you.
Posted on 9/8/22 at 1:03 pm to LSUtoOmaha
Kirk places a lot of emphasis on diversification of tickers and sectors. You’re right, he does focus on ETFs a lot. The best answer I’ve gotten from him is that he goes with ETFs to avoid single stock black swan risk. I understand what he means. But while an ETF might have an IV percentile above 50, it’s not often that the base IV is high enough to make the premium worthwhile for a trade IMO. UNG, USO and some biotech and crypto related ETFs have been notable exceptions, but I agree with what you’re saying. So on that issue, I tend to look more toward Sosnoff/TastyTrade.
No, I don’t use stops on short options either. I tend to use rolls and adjustments as a means of managing trades that are going sour - unless it’s dramatic, in which case I just eat the loss in real time. One concept I initially struggled to understand was adjusting the untested side of a multi-leg trade. Leave the tested/challenged side alone and roll up or down the untested side to gain additional premium, without taking on additional risk. My brain said to deal with the challenged leg. It took me quite awhile to wrap my head around that.
Earnings… Great question! Especially in these post meme stock and tech wreck times, I now pay much closer attention to the fundamentals. If I get assigned, I’d rather it not be something that’s taken a 40% dive and the price is mostly based on hopes & dreams for the future.
Selling premium really is a very sound way to generate “yield’, even in tax advantaged accounts. I never mind holding cash in my IRA, just because I can conservatively sell premium and beat any MM account (though the free cash also continues to earn interest unless I get assigned). In my actual trading account I’m much less conservative, but I try to measure my risk vs. reward with all trades.
Great discussion! Sounds like you’re well on your way. I wish more people here were into this and would chime in with us.
No, I don’t use stops on short options either. I tend to use rolls and adjustments as a means of managing trades that are going sour - unless it’s dramatic, in which case I just eat the loss in real time. One concept I initially struggled to understand was adjusting the untested side of a multi-leg trade. Leave the tested/challenged side alone and roll up or down the untested side to gain additional premium, without taking on additional risk. My brain said to deal with the challenged leg. It took me quite awhile to wrap my head around that.
Earnings… Great question! Especially in these post meme stock and tech wreck times, I now pay much closer attention to the fundamentals. If I get assigned, I’d rather it not be something that’s taken a 40% dive and the price is mostly based on hopes & dreams for the future.
Selling premium really is a very sound way to generate “yield’, even in tax advantaged accounts. I never mind holding cash in my IRA, just because I can conservatively sell premium and beat any MM account (though the free cash also continues to earn interest unless I get assigned). In my actual trading account I’m much less conservative, but I try to measure my risk vs. reward with all trades.
Great discussion! Sounds like you’re well on your way. I wish more people here were into this and would chime in with us.
Posted on 9/8/22 at 3:51 pm to Jag_Warrior
quote:
One concept I initially struggled to understand was adjusting the untested side of a multi-leg trade. Leave the tested/challenged side alone and roll up or down the untested side to gain additional premium, without taking on additional risk. My brain said to deal with the challenged leg. It took me quite awhile to wrap my head around that.
Great point and a good thing to do think about.
Posted on 9/12/22 at 4:02 pm to Jag_Warrior
Jag I sold 10/21 puts in APRN and PRTY. Just purely an IV Percentile play. May sell some call spreads on them too but for now I'm fine with the long bias.
Posted on 9/12/22 at 10:07 pm to LSUtoOmaha
I’m not familiar with either of them. Just did a quick look and saw that they’re lower priced shares… and very volatile. Certainly high IV and high IV percentiles. The premium earned could certainly make those profitable plays depending on what delta you went with.
I’ll be pulling for you.
I’ll be pulling for you.
Posted on 9/13/22 at 12:27 am to LSUtoOmaha
quote:
May sell some call spreads on them too but for now I'm fine with the long bias.
Just an FYI that came to mind. With that, you’d be constructing what’s commonly known as a “jade lizard”. Ideally you’d want the total credit received (naked short put + short call spread premiums) to be greater than the width of the spread on the long and short calls. That way, if the underlyings do spike upward, it won’t result in a loss. Your only risk is on the downside.
And remember, if the short put gets tested, you could roll down the call spread (but only if there’s an additional credit) - and not increase your risk profile. Or if you’re OK taking the stock, no need to worry about it.
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