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September 2021 Trades

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JSand
Posts: 5
(@jsand)
Active Member
Joined: 3 months ago
Posted by: @fi4wanderlust

I've been testing selling a call as well with the same delta to hedge my delta but the put vs call skew is more favorable with puts when selling premium on SPY. 

This is something I'm very interested as well. One big advantage is that buying calls doesn't require additional margin. Other than increasing your risk, is there any disadvantage going with calls (in addition to puts)? 

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fi4wanderlust
Posts: 39
(@fi4wanderlust)
Eminent Member
Joined: 9 months ago

Yes, it doesn't require additional margin and you earn premium on both sides when it trades sideways. The negative is that with put-call skew towards puts, call premiums with the same delta is a lot lower. For example, I sold Weds expire today for a put and call:

Underlying strike: 4445

Put strike: 4320  2.8 delta $110 premium

Call strike: 4515 2.8 delta  $60 premium

 As you can see, deltas are the same but the premium is lower for the call strike and its closer to the atm strike. 

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2 Replies
earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 250

@fi4wanderlust Yeah, not much money to be made with the short calls. I usually stay away from that.

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JSand
(@jsand)
Joined: 3 months ago

Active Member
Posts: 5

@earlyretirementnowcom What do you think about holding short calls along with the puts? No additional leverage / margin required. But overall risk goes up. 

 

Thanks for all your writing BTW. I feel like my understanding of investing has leveled up.   

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JSand
Posts: 5
(@jsand)
Active Member
Joined: 3 months ago

I wonder if this is a way to get an overall 5 delta but reduce margin by splitting it two 2.8 delta puts and call. Don't know if delta can be split and added up that way. 

 

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earlyretirementnow.com
Posts: 250
Admin
Topic starter
(@earlyretirementnowcom)
Member
Joined: 6 years ago

Rough day today. My Wedesday strikes are between 4290 and 4325. Oh my!

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9 Replies
mpaziran
(@mpaziran)
Joined: 7 months ago

Active Member
Posts: 13

@earlyretirementnowcom I’m at 4300. Silver lining is that I won’t be needing coffee today or tomorrow

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earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 250

@mpaziran But maybe single-malt before bedtime...

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fi4wanderlust
(@fi4wanderlust)
Joined: 9 months ago

Eminent Member
Posts: 39

@earlyretirementnowcom Yea. Lets hope it stays flat for the rest of the day and tomorrow. Another silver lining is that the premiums are juicy again!

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earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 250

@fi4wanderlust Well, I rely on the experience over the last few weeks. The market can't stay down for long. We normally snap back after a drubbing like that.

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NavyPack
(@navypack)
Joined: 1 year ago

Estimable Member
Posts: 161

@earlyretirementnowcom yes, rough one.  I sold the Wednesday 4340 on Monday 10 minutes before close for $1.30.

The added a 4180 on Tuesday 40 minutes after open for $1.50

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earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 250

@navypack Wow, that's tight. Might make a "point landing" there. 🙂

At least the futures point to a small recovery. Crossing my fingers.

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mpaziran
(@mpaziran)
Joined: 7 months ago

Active Member
Posts: 13
NavyPack
(@navypack)
Joined: 1 year ago

Estimable Member
Posts: 161

@mpaziran yeah!!!!  Sold some for Thursday and Friday late in the day.

Strange feeling when year has been good (low loss %), so want to push more and not take loss.

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earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 250

@navypack Nice! Worked out well. Sold the Thu options at strikes 4100 to 4175.

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nobatmanjokes
Posts: 91
(@nobatmanjokes)
Trusted Member
Joined: 1 year ago

Is anyone systematically reducing the number of contracts they sell when vol is low? I’m less likely to add another put or sell in the morning with low vol but I haven’t really set any rules. Curious if others have, as this week is a good time to think about vol spikes!

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2 Replies
NavyPack
(@navypack)
Joined: 1 year ago

Estimable Member
Posts: 161

@nobatmanjokes certainly have been selling lower delta and wait until first put goes moderately well before selling a second put.

Feel something is coming, but do like a few big moves (that stay above strikes) to keep VIX higher.

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earlyretirementnow.com
(@earlyretirementnowcom)
Joined: 6 years ago

Member
Posts: 250

@nobatmanjokes If I don't like the strikes of the options with the premium I usually target because the strikes are too high, I would usually sell further OTM with about 20-25% less premium.

To make up for the lost revenue I'd occasionally sell more options and also trade same-day or during the off-days (Tue/Thu).

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