Great information! I've been buying 100 share lots and writing calls against them. The problem is the underlying has appreciated massively and I'm working my ass off to make a profit. The good news is the underlying has done extremely well. Time to change things up. In 2025, once the tax year resets, I'm going to sell a portion of that underlying and start to sell puts with the added capital. My cash account was too small to generate any meaningful return, but now that it has nearly tripled I can start to sell cash secured puts. You guys provide that best information out there. Thanks again.
I have a feeling you're gonna flip right as market does and be in same boat. Ha. I always think of this when I'm about to change something up. So keep that in mind.
Extremely insightful info as always gents!!! Data driven trades based on statistics is the only way I trade. I use this strategy as part my Wheel strategy in Meta. I collect nearly a thousand in premium per month from the short call without including the gains from the longer dated long call. This market measure just solidified the strikes that I was all ready using based off the deltas illustrated in this segment. Thanks Tom and Tony.
Great analysis, but I believe there's a broader perspective to consider. If the objective is only to close the long leg once the short leg expires, then yes, what you mentioned makes sense. However, there are upside potentials that haven't been factored in, particularly when going with LEAPS versus a short-term long leg. One key upside is the potential for appreciation. If your plan is to hold the long leg for a longer time because you expect the stock to appreciate and generate a capital gain, then using LEAPS can make a significant difference. During that waiting period, you can also generate income, which adds to the overall strategy. I feel this wasn’t part of the analysis since the research seemed to be focused on a different objective.
@@stevenwomack9574I like 2 year leaps. I feel more confident about a stocks trajectory over 2 years vs 60 days…and I can sell calls all the whole time.
A must absorb video for anyone considering LEAPs on SPY, Wheel Strategy, LEAPs on QQQ, PMCCs, or any strategy that involves purchasing a call with more than 60 DTE. The first time I listened it was a little over my head. Now that I get it, i really appreciate the info! Capital efficiency so important when weighing one strategy over another. Q: Would we expect significantly different data for PMCCs on higher vol tickers? -Since this research came from SPY. For example: TSLA, PLTR, NVDA
It would be interesting to perform the same backtest while HOLDING the long call for a longer period while continuously selling short calls against it (weekly, monthly, etc), then calculating a total return between the premium on the short calls as well as the appreciation on the long call.
I do something similar but I short puts. Shorting ITM puts is almost the same as owning the stock. There is unlimited risk if the shares go past the strike of the ITM Put but the benefit is you can collect the put premium as well as the Short Call. If you don't want the Put premium you can do this, or you can just buy it deep ITM. Now that I think about it, this is just an OTM Strangle.
You perhaps meant to say - "There is unlimited risk if the stock price FALLS BELOW strike price of the ITM Put - Premium Collected from Selling the Put Option". Sure! It doesn't matter what the stock price is. It is simply how much it can fall too, and become worthless aka $0. Which brings the question, what protection mechanism would you choose to negate the risk? 1. Buy a Put Option at a strike price which is equal to how much you are willing to loose. That gives you the control to exercise the put. 2. Sell a Call. And if it doesn't get exercised, then you only get to keep the premium. 3. If the stock keeps going down, keep selling call contracts.
Okay so I have a question. At the end of the video, we conclude that in terms of Capital efficiency, you could just buy the 60 DTE Long Calls, because buying a Leap it's less efficient with same P/L. But what about buying that Leap, and just keep shorting calls against it, week after week, protecting the Leap. Would'nt it be way more efficient in the long term to buy the Leap Call 1year DTE instead of a Call 60 DTE, although it's more premium risk upfront, should be way more profitable in the long run if direction correlates?
@@meiko_kaji Are you saying that 27 is the weekly avg profit? Trying to figure out what the slide at 3:00 means. Also, looks like the theta on the long call does not matter at all in the avg profit. If find that really strange
@@manishshah2346$27 is the total p/l for the trade at close. Very modest returns as expected in a lower risk trade with low capital requirements. Interestingly they just let short end expire and didn’t manage at 21 days which is unusual for tasty mechanics. I always take these research studies with a grain of salt because they don’t really reflect a trader’s actual behavior over time.
I am wondering, how PMCC would combine with 0DTE short calls; keeping a long 70 delta call at about 60 DTE, while selling 0DTE calls every day, with the mechanics you guys worked out, like taking 25% profit
@JonathanFC229 in SPY? 1.5% is a huge move...If you were selling close to the money calls on dte or 2 to 3 days out....also if you waited to buy your long option at a support zone naked...and waited to sell your call until near a resistance you could probably make pretty good money.
If you are closing the trade when the short call expires then of course the p/l will not change. Cause the dte of the short call is static across all comparisons
I would like to see same study but reusing the same Long Call for multiple Short Calls cycles. There has to be some capital efficiency advantage there. At the very least there are less commissions.
My thoughts exactly. This was not a very well thought out study. Does not relate to real world application. It just makes the comparison easier. Instead they should treat it like a campaign and close all positions upon assignment.
@@CanadianOptionsTrader so selling a 30 delta 45dte against a 70 delta 60dte? How do you manage this? And you only sell one call against your long call at a time?
@@mischabertrand-chetty1240 This is a bullish trade, with net positive delta, so you want the stock price to go up. To manage it, I would close for some reasonable profit, maybe 25% of what I paid for it. If the stock price hits my short strike, I've nearly maximized my profit, so I would close it immediately at that point. If the shorter duration strike gets close to expiration (21 dte is our usual Tasty Mechanics rule), I would close the whole position and re-establish out in the future (if I was still bullish). For a Covered Call, I would only sell just 1 Call against 100 shares. So it's the same thing with a PMCC: I would only sell 1 Call against my long Call.
How about Theta decay of the long call? If you keep long call (LEAP) for longer than 365 days, Theta decay is minimal. For 45-60 DTE Theta decay is much higher. The whole point of LEAPs is to keep Theta decay minimal, but of course you pay more. Weird that Tasty wouldn’t include Theta decay in this study, it doesn’t even make sense…
This wasn’t a study on leaps. This was a study on PMCC. You are free to use a leap as your long. But to answer your question your long will lose money from theta but your short call is making money from theta, making the P/L from theta negligible since your short call is always gonna expire before your long call meaning its making theta faster than your long is losing theta
My question as well, I usually use leaps because I want to do this over and over again. With their 60 days till expiration long, you’d have to sell the whole shebang and do it over again each month or so because your theta decay on the long calls would kick in within a couple weeks
You can do shorter than 45 btw too. For back testing it's easier and consistent data etc etc. but always shorter dated then the long. Matter of fact. You can't do it any other way you would just be buying and selling and paid fees to do essentially nothing. lol (for pmcc) if you own shares totally diff. Then doesn't matter. Up to your preferences but yes theta deff kicks in around 45ish
No one ever mentions a partially covered call. Like, owning 80 shares instead of 100. Or whatever you are comfortable with. No decay, 100 delta so always outpaces the short call, and maybe pays a dividend. Use a straddle to buy the shares and hopefully your cost basis is low as you paid for them with premium.
I do sort of the opposite with my modified Wheel. Rather than sell a put I credit put spread and if it falls in range I start accumulating particular shares and the put spread has a max loss but if it goes lower I get to accumulate below the put price and the spread lowers capital requirements. And I can do another put spread and continue to accumulate. So I can run the wheel strategy but rather than getting assigned I’m just manually adding and subtracting shares more fractionally and DRIPing in to accumulate. So I just do credit put spread at the price I want to accumulate and then DRIP in between and then credit call spread at the price I want to sell at, and due to the DRIP and odd lot, I may still have some shares left over afterwards.
That's not how brokerages allow you to do this. Wait... hold up. You can do....wait a minute. Nooo. Cuz when going to sell the call it says you need 100 shares. Or a large account maybe it doesn't matter since you can take the THEO hit.
The results for PMCC with 45 DTE with 60 delta with no manament are very good, but management i think could improve results. I wish they continue the research and add manament techniques and change the short delta.
My strategy combines ETFs for dividends and growth, including JEPI, DIVO, QYLD, SCHD, and JEPQ. Last year, my dividends totaled $102K. but not sure how to mitigate risk thus far for this year.
I agree with you. As an early investor in NVDA, AVGO, ANSS, and LRCX, my financial advisor's advice was incredibly helpful. Over the past 7 years, she has helped me find stocks that did 10x multiple times. With her help, I've grown my portfolio to over a million dollars.
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy’’ for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
Thank you very much for your video. How do you define win %? Do you define win as the price not exceeding the strike price of the short call? or do you calculate the total gain in long call option price and credit from short call. How do you define the P and L? Just the credit from the short calls or do you include the gain in option price from long call. As I do not understand why the profit is just same $27 - 29 for long calls with expiration 45 days, 60 days, 6 months and 1 year. Thank you. Looking forward to hearing from you.
Win% is calculated as any trade that makes at least a penny in profit. The P/L of the trades were all the same because they closed out the entire trade at 45dte ( short call duration ) instead of rolling it to the next monthly cycle which would give you a credit lowering your cost of a longer dated long call
Great! However this doesn't discuss the decay of the Long Call. Can you make another video that covers the long call decay and value at the end of the expiration?
The daily theta of the long LEAP should be less than a 60 DTE. I would also consider the ability to use that same Long LEAP Call for multiple trades saving commissions.
No different then buying a 100 shares of stock. Buying shares cost much more. Selling the put is for a credit. Better use of capital. Of course you have to be bullish on the underlying.
Depends on the stock of course but then you introduce earnings reports drama, unexpected company news releases. Individual stock leaps are whole different risk level imo.
I'll need help if I'm going to make it through this. The ETF and stock markets are still pretty volatile. What's left of my $170,000 portfolio now isn't looking good; how can I capitalize on the market?
Although the market is currently volatile, aren't the current valuations a result of the Federal Reserve's monetary policy and low interest rates? Therefore, my recommendation is that you consult a financial advisor who can give you entry and exit points for the shares that you are interested in.
People dismiss the importance of advisors until they are burned by their own emotions. I remember a couple of summers ago, following my lengthy divorce, I needed a good boost to assist my business stay alive, so I looked for qualified consultants and came across someone with the highest qualifications. She has helped me raise my reserve from $275k to $850k, despite inflation.
My CFA Vivian Jean Wilhelm, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
How can the length of the expiration of the long call have no effect on win ratio .as the market crashes in the short term with a shorter long call you're going to get crushed
But, even if you buy the Leap or 60 day long if the underlying goes down the value of the long call will become worth less until 21 days where its lost most per day and then you lose money on the long call for when you sell it just like if you bought the shares instead of the long.
Theta is the same whether you're doing Rich Man's or Poor Man's. If you instead compared to holding just naked shares (not selling a Call against them), you would then see the extra profit due to Theta decay in the case with the short Call.
@@CanadianOptionsTrader what I mean is that the theta decay of the long call must be accounted for. The higher the delta and the farther out in time, will mean less theta decay of the long call during the life of the trade (closed when the short call reaches 21 DTE). If you use the long call in the same expiration, the underlying must move higher to see any profit. Take a look at the graph and the negative theta number. Theta will decay slower in a higher DTE on the long call.
@@samwalker3441 Ok, yes that makes sense. The results they showed were nearly identical for the different versions, so this suggests that the Theta decay on the longs probably doesn't matter that much (in the time frame of this particular trade, anyway).
Why does the theta of the long option even matter? you are profiting off theta from your short call hedging most losses suffered from losing theta on the long
@@xslinkyxd4894 because the short theta has to overcome the long theta and if they expire in the same timeframe, the underlying has to go up in order for the trade to be profitable.
Am I doing the math right? If I make an average of $27 every 45 days over the past 15 years on an average of $488, I would have done this 8.1 times per year with a 5.5% return on each PMCC set and 44% annualized. This is not a bad strategy to keep five hundred bucks cranking on.
It’s the same thing. If you buy a 60 DTE long and when it expires, you need to get another LEAP for another 60DTE to keep collecting short calls. You could have just bought the 1 year LEAP in the first place.
Don’t do this on your kind of portfolio. You can easily do deep ITM Long call SPY and QQQ at 1 year DTE and do weekly short calls on it. I prefer QQQ coz premium is juicier but just do both. About 7-10% gains monthly. Use 50% of your portfolio and the other 50% for the wheel strategy.
@marksoberay2318 ya except the spreads get pretty wide that far out. I think realisticly finding something around 45 to 65 days with huge open interest and as tight as a spread would be best...then selling 2 to 3 days short option pretty close to the money and expecting that fairly often you will need to close trade and rinse and repeat pretty often
Why not trade the 60delta if you’re getting so much higher % return on your money? It’s 1% less successful yet it’s nearly double the return on investment?
Buy the long leap with the least amount of extrinsic value. Dont pay over 1/2 of what it would cost to buy 100 shares. With that said I would rather sell the put, I look for the one with an equal amount of intrinsic and extrinsic value typically about 45 delta. Right now I'm trading 2027. IMHO Hi Tom Las Vegas Ed
I would think that dividends are already priced into the options, so I don't think you'd be losing them with the PMCC. Maybe an even deeper study could take dividends into account.
Be careful with short duration long calls! If there is a stiff market correction that leveraged will destroy your capital and those expiration dates will make you lose sleep at night! Cost more, but buy yourself some time in case things go south for a few weeks!
How long were you and your buddies following me since 2008? I really loved the "Rocky" Training montage commercial you had goind on Think or Swim. I remember posting that song after taking a big loss in Dan Fitz Patrick's forum. It was fun for you guiys.....Wasn't it. Do you think Schwabb can take you to court for harassing's customers? Not sure but maybe. I really liked the forum you set up to seek people out in the TOS platform and misled people to believe it was a help center for traders. How many people did you troll? Was there a lot of people you were after alpha? Could you and JJ elaborate for us? I know there is more than one of you tracking us.....How many? Are you guys breaching other people's computers too?
High-level tricky trollery a goof. Or bro you think people are messing with you on other end. Do this. Chart on one computer. One platform. Execute on another and watch across all. How bout dat. I actually do this but not for paranoia haha. Just like my phone. But don't chart from it. Just orders.
It seems certain stocks are undervalued, flying under the radar despite their potential. You can't help but wonder when the market will recognize their true worth. How can I invest $600K wisely to ensure our future security?
It's frustrating when market inefficiencies persist, particularly with undervalued stocks. Consider consulting an advisor for smarter investing decisions.
My financial advisor has been a game-changer, providing clarity and boosting my confidence in navigating finance. With their help, I've achieved my goals faster than I imagined. Highly recommend!
My CFA *Layan Talia Chokr* a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
I took a glance at your advisor online, she seems proficient having passed the exams and all. still conducting my due diligence, I'll hold my horses till i hear back from her. I need insight on how to make the best of my predicament.
I just cant see why complicate options with all these strategies when you can just trade naked CALLs & PUTs on high probability trades and risk having to own the shares without having any capital to buy them, NO thank you! I will stick to Futures or Naked Options, the idea is to setup your charts to an almost NO FAILURE approach, high probability trades only, even if you have to sit on your hands for a week or a month.
Why not just do an out of the money calander spread instead for even lower capital requirements and more capital efficiency? Or what are you giving up or risking by doing that? More sensitive to some second order derivative like vomma or something weird?
![Lp. Сердце Вселенной #60 РОЖДЕНИЕ ЛОЛОЛОШКИ [Финал] • Майнкрафт](http://i.ytimg.com/vi/YoR0pAV9FVQ/mqdefault.jpg)
Great information!
I've been buying 100 share lots and writing calls against them. The problem is the underlying has appreciated massively and I'm working my ass
off to make a profit. The good news is the underlying has done extremely well. Time to change things up.
In 2025, once the tax year resets, I'm going to sell a portion of that underlying and start to sell puts with the added capital. My cash account was
too small to generate any meaningful return, but now that it has nearly tripled I can start to sell cash secured puts.
You guys provide that best information out there. Thanks again.
I have a feeling you're gonna flip right as market does and be in same boat. Ha. I always think of this when I'm about to change something up. So keep that in mind.
Extremely insightful info as always gents!!! Data driven trades based on statistics is the only way I trade. I use this strategy as part my Wheel strategy in Meta. I collect nearly a thousand in premium per month from the short call without including the gains from the longer dated long call. This market measure just solidified the strikes that I was all ready using based off the deltas illustrated in this segment. Thanks Tom and Tony.
Do you use IVR for this? To select stocks
Great analysis, but I believe there's a broader perspective to consider. If the objective is only to close the long leg once the short leg expires, then yes, what you mentioned makes sense. However, there are upside potentials that haven't been factored in, particularly when going with LEAPS versus a short-term long leg. One key upside is the potential for appreciation. If your plan is to hold the long leg for a longer time because you expect the stock to appreciate and generate a capital gain, then using LEAPS can make a significant difference. During that waiting period, you can also generate income, which adds to the overall strategy. I feel this wasn’t part of the analysis since the research seemed to be focused on a different objective.
Exactly! Furthermore, there's less Theta (time decay with LEAPS). So you're at a structural advantage.
I once bought a LEAP almost a year out. I think I sold 14 or 15 covered calls against it before I closed the whole position...
@@stevenwomack9574I like 2 year leaps. I feel more confident about a stocks trajectory over 2 years vs 60 days…and I can sell calls all the whole time.
A must absorb video for anyone considering LEAPs on SPY, Wheel Strategy, LEAPs on QQQ, PMCCs, or any strategy that involves purchasing a call with more than 60 DTE. The first time I listened it was a little over my head. Now that I get it, i really appreciate the info! Capital efficiency so important when weighing one strategy over another.
Q: Would we expect significantly different data for PMCCs on higher vol tickers? -Since this research came from SPY. For example: TSLA, PLTR, NVDA
It would be interesting to perform the same backtest while HOLDING the long call for a longer period while continuously selling short calls against it (weekly, monthly, etc), then calculating a total return between the premium on the short calls as well as the appreciation on the long call.
I do something similar but I short puts. Shorting ITM puts is almost the same as owning the stock. There is unlimited risk if the shares go past the strike of the ITM Put but the benefit is you can collect the put premium as well as the Short Call. If you don't want the Put premium you can do this, or you can just buy it deep ITM. Now that I think about it, this is just an OTM Strangle.
You perhaps meant to say -
"There is unlimited risk if the stock price FALLS BELOW strike price of the ITM Put - Premium Collected from Selling the Put Option".
Sure! It doesn't matter what the stock price is. It is simply how much it can fall too, and become worthless aka $0.
Which brings the question, what protection mechanism would you choose to negate the risk?
1. Buy a Put Option at a strike price which is equal to how much you are willing to loose. That gives you the control to exercise the put.
2. Sell a Call. And if it doesn't get exercised, then you only get to keep the premium.
3. If the stock keeps going down, keep selling call contracts.
Okay so I have a question. At the end of the video, we conclude that in terms of Capital efficiency, you could just buy the 60 DTE Long Calls, because buying a Leap it's less efficient with same P/L. But what about buying that Leap, and just keep shorting calls against it, week after week, protecting the Leap. Would'nt it be way more efficient in the long term to buy the Leap Call 1year DTE instead of a Call 60 DTE, although it's more premium risk upfront, should be way more profitable in the long run if direction correlates?
Point was less capital required when you avoid the leap and actual SPY - use it for something else.
@@meiko_kaji Are you saying that 27 is the weekly avg profit? Trying to figure out what the slide at 3:00 means. Also, looks like the theta on the long call does not matter at all in the avg profit. If find that really strange
@@pragmatica1032 I also didn’t understand what the $27 meant!?
@@manishshah2346 i think it is the profit per contract if held to expiration. Remember, they did the SPY, not the SPX.
@@manishshah2346$27 is the total p/l for the trade at close. Very modest returns as expected in a lower risk trade with low capital requirements.
Interestingly they just let short end expire and didn’t manage at 21 days which is unusual for tasty mechanics. I always take these research studies with a grain of salt because they don’t really reflect a trader’s actual behavior over time.
did this assume the short call is held to expiration, or managed early / at 21DTE?
I am wondering, how PMCC would combine with 0DTE short calls; keeping a long 70 delta call at about 60 DTE, while selling 0DTE calls every day, with the mechanics you guys worked out, like taking 25% profit
Me too
Same
Or even weekly’s with the right IVR
Seems like Near term short options would need high delta’s to pick up more than nickels and still have a good chance to get steam rolled
@JonathanFC229 in SPY? 1.5% is a huge move...If you were selling close to the money calls on dte or 2 to 3 days out....also if you waited to buy your long option at a support zone naked...and waited to sell your call until near a resistance you could probably make pretty good money.
Excellent video, very timely. Looking to open up an account with you guys and give this a go.
I love these comparisons you guys do. Thank you for the constant education.
If you are closing the trade when the short call expires then of course the p/l will not change. Cause the dte of the short call is static across all comparisons
I would like to see same study but reusing the same Long Call for multiple Short Calls cycles. There has to be some capital efficiency advantage there. At the very least there are less commissions.
The caveat here is that they closed the whole position on their study at the expiry… that will keep the p/l the same all over the course
Came to say the same thing!
I kind of wanted to just say “duh “to this whole video. It’s totally static the whole way nothing ever changes between the underlying derivative etc..
My thoughts exactly. This was not a very well thought out study. Does not relate to real world application. It just makes the comparison easier. Instead they should treat it like a campaign and close all positions upon assignment.
What would be the optimum duration for the short call at delta 30 against the 60DTE long call?
It's always most optimal to sell options at 45 dte, so that's why they kept short Call at 45 dte for the whole study.
@@CanadianOptionsTrader so selling a 30 delta 45dte against a 70 delta 60dte? How do you manage this? And you only sell one call against your long call at a time?
@@mischabertrand-chetty1240 This is a bullish trade, with net positive delta, so you want the stock price to go up. To manage it, I would close for some reasonable profit, maybe 25% of what I paid for it. If the stock price hits my short strike, I've nearly maximized my profit, so I would close it immediately at that point. If the shorter duration strike gets close to expiration (21 dte is our usual Tasty Mechanics rule), I would close the whole position and re-establish out in the future (if I was still bullish). For a Covered Call, I would only sell just 1 Call against 100 shares. So it's the same thing with a PMCC: I would only sell 1 Call against my long Call.
How about Theta decay of the long call? If you keep long call (LEAP) for longer than 365 days, Theta decay is minimal. For 45-60 DTE Theta decay is much higher. The whole point of LEAPs is to keep Theta decay minimal, but of course you pay more. Weird that Tasty wouldn’t include Theta decay in this study, it doesn’t even make sense…
This wasn’t a study on leaps. This was a study on PMCC. You are free to use a leap as your long. But to answer your question your long will lose money from theta but your short call is making money from theta, making the P/L from theta negligible since your short call is always gonna expire before your long call meaning its making theta faster than your long is losing theta
@@xslinkyxd4894 Not that it matters but look at the video: "LEAP TRADE?" in red background. LEAP usually means DTE greater than one year...
@@xslinkyxd4894sure but how much faster and when do you sell the long call?
@@xslinkyxd4894the first slide they were both 45 days and it was just a vertical spread.
They arnt holding the long call long enough to matter either.
At what DTE do you roll or close the "LEAPS?" What DTE for the short calls? Thanks for another great video!
Excellent explanation. Thanks🙂.
Great video! Thank you
But what about selling new calls after you close winners and holding the long call?
My question as well, I usually use leaps because I want to do this over and over again. With their 60 days till expiration long, you’d have to sell the whole shebang and do it over again each month or so because your theta decay on the long calls would kick in within a couple weeks
Great study. Thank you!
This answered so many questions. Even with purchasing at 50% under margin, this still beats the cost basis. ❤
If the long call is at 60 DTE, then is the short 30 delta call also on the same 60 DTE or shorter dte?
@@meiko_kajiIt's always most optimal to sell options at 45 dte, so that's why they kept the short Call at 45 dte for the whole study.
The short call has always less duration than the long
45 DTE short is where the theta decay starts to kick in
Always shorter.
You can do shorter than 45 btw too. For back testing it's easier and consistent data etc etc. but always shorter dated then the long. Matter of fact. You can't do it any other way you would just be buying and selling and paid fees to do essentially nothing. lol (for pmcc) if you own shares totally diff. Then doesn't matter. Up to your preferences but yes theta deff kicks in around 45ish
Great Video- it would be cool if you added ROI to each of the outcomes
No one ever mentions a partially covered call. Like, owning 80 shares instead of 100. Or whatever you are comfortable with. No decay, 100 delta so always outpaces the short call, and maybe pays a dividend. Use a straddle to buy the shares and hopefully your cost basis is low as you paid for them with premium.
I do sort of the opposite with my modified Wheel.
Rather than sell a put I credit put spread and if it falls in range I start accumulating particular shares and the put spread has a max loss but if it goes lower I get to accumulate below the put price and the spread lowers capital requirements. And I can do another put spread and continue to accumulate.
So I can run the wheel strategy but rather than getting assigned I’m just manually adding and subtracting shares more fractionally and DRIPing in to accumulate.
So I just do credit put spread at the price I want to accumulate and then DRIP in between and then credit call spread at the price I want to sell at, and due to the DRIP and odd lot, I may still have some shares left over afterwards.
That’s what I do most of the time. Usually its 50 shares
That's not how brokerages allow you to do this. Wait... hold up. You can do....wait a minute. Nooo. Cuz when going to sell the call it says you need 100 shares. Or a large account maybe it doesn't matter since you can take the THEO hit.
Thank you for this highly practical and informative study!
The results for PMCC with 45 DTE with 60 delta with no manament are very good, but management i think could improve results.
I wish they continue the research and add manament techniques and change the short delta.
4:01 so if you have $18K to invest you might as well buy 35 PMCC and make $1K of profit instead of $27.
More like Smart Man's Covered Call
My strategy combines ETFs for dividends and growth, including JEPI, DIVO, QYLD, SCHD, and JEPQ. Last year, my dividends totaled $102K. but not sure how to mitigate risk thus far for this year.
investors like you should be cautious of the bull run, its best you connect with a well-qualified adviser to meet your growth goals and avoid blunder.
I agree with you. As an early investor in NVDA, AVGO, ANSS, and LRCX, my financial advisor's advice was incredibly helpful. Over the past 7 years, she has helped me find stocks that did 10x multiple times. With her help, I've grown my portfolio to over a million dollars.
Well it seems like a lot of your interest is riding on your source, I could really get well accustomed to your viewpoint, get me involved.
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy’’ for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
So we buy 60day 70delta , and then? Sell which?
This is all interesting. How does one calculate the delta?
Great data as always.
Good video. Thank you!
Thank you very much for your video.
How do you define win %? Do you define win as the price not exceeding the strike price of the short call? or do you calculate the total gain in long call option price and credit from short call.
How do you define the P and L? Just the credit from the short calls or do you include the gain in option price from long call. As I do not understand why the profit is just same $27 - 29 for long calls with expiration 45 days, 60 days, 6 months and 1 year.
Thank you. Looking forward to hearing from you.
Win% is calculated as any trade that makes at least a penny in profit. The P/L of the trades were all the same because they closed out the entire trade at 45dte ( short call duration ) instead of rolling it to the next monthly cycle which would give you a credit lowering your cost of a longer dated long call
@@xslinkyxd4894 Thanks. So they close the long call as well?
What’s the manage early strategy on this PMCC? Is there one?
Great! However this doesn't discuss the decay of the Long Call. Can you make another video that covers the long call decay and value at the end of the expiration?
Have always been curious on your thoughts about LEAPS and PMCC
Very helpful and useful!
The daily theta of the long LEAP should be less than a 60 DTE. I would also consider the ability to use that same Long LEAP Call for multiple trades saving commissions.
I likeSelling the leap deep in the money put for a credit then sell the 30 day call each month.😊😮
keep in mind early assigment risk of deep itm put. You need some margin to handle it and recreate position of deep itm put again.
No different then buying a 100 shares of stock. Buying shares cost much more. Selling the put is for a credit. Better use of capital. Of course you have to be bullish on the underlying.
@edmalin9485 This is interesting... have you been assigned so far? Which underlying please.
As a rookie, I would be interested to know how these unwind. I am pretty sure I could open these, but not sure how to close them.
What if you traded weeklies on the spy PMCC. Would the profits be higher?
What is the management technique?
Nice research. Wonder how the results will change if you change the spy to individual stocks ? 😊
Depends on the stock of course but then you introduce earnings reports drama, unexpected
company news releases.
Individual stock leaps are whole different risk level imo.
I'll need help if I'm going to make it through this. The ETF and stock markets are still pretty volatile. What's left of my $170,000 portfolio now isn't looking good; how can I capitalize on the market?
Although the market is currently volatile, aren't the current valuations a result of the Federal Reserve's monetary policy and low interest rates? Therefore, my recommendation is that you consult a financial advisor who can give you entry and exit points for the shares that you are interested in.
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I didn’t get what is the time frame for the short call? Daily or weekly?
How about theta on long calls
How can the length of the expiration of the long call have no effect on win ratio .as the market crashes in the short term with a shorter long call you're going to get crushed
Was the average $29 p&l how much was collected after closing closing the position for a win?
But, even if you buy the Leap or 60 day long if the underlying goes down the value of the long call will become worth less until 21 days where its lost most per day and then you lose money on the long call for when you sell it just like if you bought the shares instead of the long.
So what happens if the stock goes run away? Do you buy back the call, and just reset or sell your long call and start over?
Your long call covers it. If the short gets exercised the long does as well to cover it.
Please make more videos on this
Long Call DTE 60.
On the Short Call are we also going DTE 60?
yes, they considered same expiry for both legs of the trade.
@@continuousimprovement4528 No. The slide at 2:07 says that all short calls are 45 DTE. Only one of long call positions they have tried was 45 DTE.
@@pragmatica1032you are right, I stand corrected.
Think for second. How would that work silly goose? You buy then just sell. Usually these are same strikes. Always shorter dte on short call
What is a small amount for leaps
How large of a position would you take with these, the entire account max BP?
Shouldn't Theta be a apart of this discussion? Especially with both legs being 45 DTE?
Theta is the same whether you're doing Rich Man's or Poor Man's. If you instead compared to holding just naked shares (not selling a Call against them), you would then see the extra profit due to Theta decay in the case with the short Call.
@@CanadianOptionsTrader what I mean is that the theta decay of the long call must be accounted for. The higher the delta and the farther out in time, will mean less theta decay of the long call during the life of the trade (closed when the short call reaches 21 DTE). If you use the long call in the same expiration, the underlying must move higher to see any profit. Take a look at the graph and the negative theta number. Theta will decay slower in a higher DTE on the long call.
@@samwalker3441 Ok, yes that makes sense. The results they showed were nearly identical for the different versions, so this suggests that the Theta decay on the longs probably doesn't matter that much (in the time frame of this particular trade, anyway).
Why does the theta of the long option even matter? you are profiting off theta from your short call hedging most losses suffered from losing theta on the long
@@xslinkyxd4894 because the short theta has to overcome the long theta and if they expire in the same timeframe, the underlying has to go up in order for the trade to be profitable.
I think 60 days to expiration is too short. The market can turn on you in a heartbeat. What do you guys think about pushing it to 90 days?
They deff said that. 60-70-90.
Am I doing the math right? If I make an average of $27 every 45 days over the past 15 years on an average of $488, I would have done this 8.1 times per year with a 5.5% return on each PMCC set and 44% annualized. This is not a bad strategy to keep five hundred bucks cranking on.
Question: Am I able to do this in a Roth IRA account?
It’s the same thing. If you buy a 60 DTE long and when it expires, you need to get another LEAP for another 60DTE to keep collecting short calls. You could have just bought the 1 year LEAP in the first place.
What is the best strategy for large accounts, say 400k capital.
Don’t do this on your kind of portfolio. You can easily do deep ITM Long call SPY and QQQ at 1 year DTE and do weekly short calls on it. I prefer QQQ coz premium is juicier but just do both.
About 7-10% gains monthly. Use 50% of your portfolio and the other 50% for the wheel strategy.
I got to admit....You are funny Tom....hilarious.
I thought at 60dte you get punishment w theata, how bout 365dte and just hold 60 days?
@marksoberay2318 ya except the spreads get pretty wide that far out. I think realisticly finding something around 45 to 65 days with huge open interest and as tight as a spread would be best...then selling 2 to 3 days short option pretty close to the money and expecting that fairly often you will need to close trade and rinse and repeat pretty often
They literally answred that.
Why not trade the 60delta if you’re getting so much higher % return on your money? It’s 1% less successful yet it’s nearly double the return on investment?
Buy the long leap with the least amount of extrinsic value. Dont pay over 1/2 of what it would cost to buy 100 shares. With that said I would rather sell the put, I look for the one with an equal amount of intrinsic and extrinsic value typically about 45 delta. Right now I'm trading 2027. IMHO Hi Tom Las Vegas Ed
Wait a minute that's way too short of a video on such an important topic so 60 dre on the long and 45 dte on the short????
PMCC with 60DTE is nothing but selling vertical debit spread. Go with credit spread with 45 DTE instead
Yes sir
Long 60dte, short 45dte it’s a diagnol.
Of course P/L doesn't change because this strategy always closes all positions at expiration of the short call.
What you're losing is the dividends collected.
I would think that dividends are already priced into the options, so I don't think you'd be losing them with the PMCC. Maybe an even deeper study could take dividends into account.
45 DTE is king.
Be careful with short duration long calls! If there is a stiff market correction that leveraged will destroy your capital and those expiration dates will make you lose sleep at night! Cost more, but buy yourself some time in case things go south for a few weeks!
Exactly this is kinda wierd why not buy leap and dump after 60
Yep one year minimum IMO and if you’re up nicely at 6 months just sell to close if you’d like
Agreed
It’s a defined risk trade ultimately.
Fuck same guys this was amazing
thank you!
How long were you and your buddies following me since 2008? I really loved the "Rocky" Training montage commercial you had goind on Think or Swim. I remember posting that song after taking a big loss in Dan Fitz Patrick's forum. It was fun for you guiys.....Wasn't it. Do you think Schwabb can take you to court for harassing's customers? Not sure but maybe. I really liked the forum you set up to seek people out in the TOS platform and misled people to believe it was a help center for traders. How many people did you troll? Was there a lot of people you were after alpha? Could you and JJ elaborate for us? I know there is more than one of you tracking us.....How many? Are you guys breaching other people's computers too?
High-level tricky trollery a goof. Or bro you think people are messing with you on other end.
Do this. Chart on one computer. One platform. Execute on another and watch across all. How bout dat. I actually do this but not for paranoia haha. Just like my phone. But don't chart from it. Just orders.
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This research is inconclusive, other parameters were not included or even considered.
ahh the classic pickin up pennies in front of a steam roller.
I just cant see why complicate options with all these strategies when you can just trade naked CALLs & PUTs on high probability trades and risk having to own the shares without having any capital to buy them, NO thank you! I will stick to Futures or Naked Options, the idea is to setup your charts to an almost NO FAILURE approach, high probability trades only, even if you have to sit on your hands for a week or a month.
The longs arent long enough. When i think of a LEAPS i think of getting to long term capital gains (>1year)
I think its just easier for the short to be 45 DTE and the long at 75 DTE
? Confused
Why not just do an out of the money calander spread instead for even lower capital requirements and more capital efficiency?
Or what are you giving up or risking by doing that? More sensitive to some second order derivative like vomma or something weird?
Awesome study. Thanks!
I didn’t get what is the time frame for the short call? Daily or weekly?