Update (12/31/2022):
It seems that new users have trouble registering for the forum. The confirmation email never shows up. I’ve decided to phase out this forum and transition over to a new forum plugin. The new location is here:
https://earlyretirementnow.com/forum-3/
Policies – please read!
- Everyone can read posts, but to start a new topic or add a reply you’d need to register. To create an ID, please verify your email address. You will get a link at that email address and you can then pick a password.
- Be courteous to others. Treat others like you like to be treated. Discuss the issues. No ad-hominem attacks!
- It’s OK to include external links if they are relevant. But please avoid spamming! Please no affiliate links.
- Before starting a new topic, please check if that question/topic has been discussed before already and add to that discussion instead of starting a new topic.
- If you’ve written a cool blog post that you want to share with others please post this in the “Self-Promo” category only!
- Please read the usual Disclaimers and the Privacy Policy!
- The forum policies may be amended in the future!
I'm starting a topic: Q1 2022 trades, just a little bit early.
Just a reminder: Dec 24 is a trading holiday, so we have to roll our CBOE put options on Dec 23 with the Dec 27 expiration. Despite the 4-day gap, I'm still targeting my regular weekend premium of around 0.95-1.00 premium, i.e., $95-$100 premium per $187,500 in portfolio equity.
Thanks for the heads up. Have you considered whether it is worth it to trade via an LLC, and potentially make an S-Corp election? Looking at making these changes for the new year. For a recently formed LLC, S-Corp election needs to be made by March 15th to apply for 2022 tax year.
Interactive Brokers has a process to convert an individual account to an LLC - https://ibkr.info/article/3322
Converting From an Individual to Limited Liability Company Account
@setspreads If you have clear and convincing reasons for the LLC (asset protection, estate planning, some potential tax advantages, etc.) you could go that route. But it's also more record-keeping: you'll have to file taxes separately for that new entity and then file a K-1 on your personal return.
But check with your tax planner/attorney because I do the finance stuff, not the legal and tax issues! 🙂
@earlyretirementnowcom Thanks Karsten! Good things to consider. The motivation for me is being able to deduct health insurance premiums and solo 401k contributions while keeping 60/40 tax treatment using a pass through entity. Have to weigh those benefits against the cost of tax preparation and record keeping. Here’s some of the resources I’ve found from Greens Trader Tax and IBKR
I set my holiday strikes even a bit lower than a usual weekend given the low short term vol and big up moves on the market the last two days. I’m down in the $0.7-$0.8 range instead of my typical $1-$1.1.
I just saw your latest article (Nov) on the put selling strategy and a backtest by Spintwig.
Are you familiar with his S1 signal service? Seems like that backtest would have been a goo place for a plug for him and potentially higher returns based on only taking trades (or shorting higher delta puts) when his signal shows the environment is providing higher probabilities.
@e-trader I don't have enough details on what this signal is.
As I wrote in Part 9 of the series, after Spintwig's simulations: my actual track record of a (non-fixed-Delta) put selling strategy outperforms the 5D strategy.
I also slightly outperform the 5D plus S1, when measured by the Sharpe.
So, my suspicion is that the S1 is likely something like my approach: scale down exposure when vol is too low. But I can't be certain without knowing how this S1 is constructed.
Since jan 1st, I lost 6 months of premium. I am shaken.
Last year I had multiple small loses and I was ok with them.
Is it a sign I am doing something very wrong? I remember you keep about 50% of the premium / year (on average) but is there rime or reason to the magnitude and frequency of hits?
I find it difficult to be in the catch up position, to sell my puts for the next 6 months just to be at 0.
@norciom 6 months of premia collected seems like a lot considering the market movements over the past week, which are actually quite mild compared to historical volatility events. I use higher delta/leverage than Karsten recommends as part of my pre-FIRE portfolio to hedge against flat markets and my max draw-down was 1 month of premium.
Are you using real-time quotes for price/delta? Also are you splitting up your positions over time? Some of these sudden movements this year were ameliorated by opening up some positions on W and some on Th for Friday expirations.
@schmeljones The reason I have (major) loses is NDX. SPX was better behaved.
My questions is if there is pattern to the loss that occur over the year. Taken at extreme, for clarity, it it more like 6 losses worth 1 month of premium or 1 loss worth 6 months of premium?
@norciom ah I see. Yes our tech stocks are certainly swooning right now. The pattern is definitely more like 1 loss worth a lot of premium rather than 6 losses. Going back over the past year in my trade log there are 7 positions that closed ITM out of 500+ opened but each ITM close wiped out roughly 2 weeks of premium on average. The worst single position though was only about 1.5 months of premium and that was last week for a position expiring 1/5.