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Well done again. I also always leave room to build out a larger position if necessary and I know you do as well. I have had success selling options on low OI too. XLY is an example. I don’t take realized losses on my options selling b/c they are wheel positions. I view my wheel positions similar to my long term dividend portfolio…meaning my dividend stocks might be down like MCD is right now but i still receive my dividends just like my wheel stocks that may move against me i still receive my options premium. I take mine off at 50% profit for my short puts and 50-70% for my wheel covered calls. For covered calls on my long term dividend portfolio usually 90% .
Thank you for that Richard 😊 and thank you for sharing. I look at my covered call stocks similar to you, I look at them like a rental property. They generate cash flow until one day when they get sold and are no longer there. Until then, I like to collect those dividends and the covered call premium.
Please explain as I am still learning. Why are you tying up 25k for 60 days for only 430? that less than one percent a month. Isn't there better uses with your capital that is still rewarding with minimal risk? What am I missing here? I do like your content.
Thank you for that. If your main focus was on tying up less capital, and you were comfortable with the possible risk, you could simply turn a cash secured put option into a credit spread (ua-cam.com/play/PL3j38I2YtGw272tus6umU_zxFdwnJ8E0c.html). That would possibly require less capital (depending on your type of margin), but, if you add additional contracts because of the lower possible margin requirement, you would be using leverage, which you'd want to be very careful with. Here's a couple videos on margin usage: ua-cam.com/video/XU9LF5KmtJ8/v-deo.html and ua-cam.com/video/WxWZUboRJ60/v-deo.html
Your margin allows you to leverage your cash balance so your really only tying up 15% to 50% of your cash which is a much better return. Depends if you have reg T or portfolio margin set up
@@brianbombei9376 It may not use up $25,000 in buying power, but you’re still accepting the downside risk associated with $25,000 worth of stock for under 10% annualized return. And on a stock that was trading under $240 the prior month. If you think the stock is undervalued and are happy to own it at $250, fantastic. But it does seem like a low return to me as well. I target 30% annualized when selling covered calls and cash secured puts. When the VIX is high, it’s like shooting fish in a barrel. There’s premium everywhere. When it’s low, it becomes more difficult and you have to accept strikes that are closer to the money to get such returns. Or I’ll accept 25% annualized if I’m really confident about the trade or it’s about to go ex-dividend.
If the bid ask spread isn't unreasonably wide, then low OI shouldn't have a significant impact on the trade. The most inconvenient thing it will likely do is cause weird quotes on your trading platform. I have a June '25 90 NKE call that was valued at $14.4 by Fidelity while the bid/ask was $16.6/19 😔
Yeah, I have found the quotes can look really out of line sometimes. But if you’re very patient and use limit orders, typically you can get filled for somewhere around the mid point of the bid/ask shown during market hours.
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INTC at 30.50 has fit most of these criteria for me lately.
I have taken away a lot of tips over the years from your videos. Greatly appreciated.
Thank you for that Mike. ☺ And thank you for sharing.
Thank you for the sharing! Invaluable!
I’m glad it was helpful!
Well done again. I also always leave room to build out a larger position if necessary and I know you do as well. I have had success selling options on low OI too. XLY is an example. I don’t take realized losses on my options selling b/c they are wheel positions. I view my wheel positions similar to my long term dividend portfolio…meaning my dividend stocks might be down like MCD is right now but i still receive my dividends just like my wheel stocks that may move against me i still receive my options premium. I take mine off at 50% profit for my short puts and 50-70% for my wheel covered calls. For covered calls on my long term dividend portfolio usually 90% .
Thank you for that Richard 😊 and thank you for sharing. I look at my covered call stocks similar to you, I look at them like a rental property. They generate cash flow until one day when they get sold and are no longer there. Until then, I like to collect those dividends and the covered call premium.
Please explain as I am still learning. Why are you tying up 25k for 60 days for only 430? that less than one percent a month. Isn't there better uses with your capital that is still rewarding with minimal risk? What am I missing here? I do like your content.
shush now, we don't discuss such things here
Thank you for that. If your main focus was on tying up less capital, and you were comfortable with the possible risk, you could simply turn a cash secured put option into a credit spread (ua-cam.com/play/PL3j38I2YtGw272tus6umU_zxFdwnJ8E0c.html). That would possibly require less capital (depending on your type of margin), but, if you add additional contracts because of the lower possible margin requirement, you would be using leverage, which you'd want to be very careful with.
Here's a couple videos on margin usage: ua-cam.com/video/XU9LF5KmtJ8/v-deo.html and ua-cam.com/video/WxWZUboRJ60/v-deo.html
Your margin allows you to leverage your cash balance so your really only tying up 15% to 50% of your cash which is a much better return. Depends if you have reg T or portfolio margin set up
@@brianbombei9376 It may not use up $25,000 in buying power, but you’re still accepting the downside risk associated with $25,000 worth of stock for under 10% annualized return. And on a stock that was trading under $240 the prior month.
If you think the stock is undervalued and are happy to own it at $250, fantastic. But it does seem like a low return to me as well.
I target 30% annualized when selling covered calls and cash secured puts. When the VIX is high, it’s like shooting fish in a barrel. There’s premium everywhere. When it’s low, it becomes more difficult and you have to accept strikes that are closer to the money to get such returns. Or I’ll accept 25% annualized if I’m really confident about the trade or it’s about to go ex-dividend.
If the bid ask spread isn't unreasonably wide, then low OI shouldn't have a significant impact on the trade. The most inconvenient thing it will likely do is cause weird quotes on your trading platform. I have a June '25 90 NKE call that was valued at $14.4 by Fidelity while the bid/ask was $16.6/19 😔
Yeah, I have found the quotes can look really out of line sometimes. But if you’re very patient and use limit orders, typically you can get filled for somewhere around the mid point of the bid/ask shown during market hours.
i sell puts expiring within 3 weeks at a time for compounding effect 🤣🤣
Thank you for sharing