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!
Not selling Wednesday Puts yet, but currently, the 2800 strike is 500 points (down 15%) and is a 2 delta this morning for ~1.75.
I am interested to see how high the IV stays over the day.
I have been selling credit spreads last week expiring last Friday and today and results are pretty amazing. I will wait towards the end of the day to sell more, otherwise wait until tomorrow.
I am so glad that i learned this strategy from Karsten, it is wonderful way to have pretty solid (not perfect) almost annutized income.
@krak I only trade credit spreads when the IV is low. As such recently I haven't traded any credit spreads. Basically I find the volatility smile working against me: after I selected the upper put, the lower put I bought sometimes is way too expensive (as much as 70% in a few instances in March). So I had to raise my strikes in order to get back some reasonable premium as compared to just a naked put. But that's precise what you don't want to do in a high-IV environment.
@twentysomething I always thought that high IV equates in many ways to hire premium? Am I correct? May be I am being naïve but wouldn't you want to collect a lot of premium for the risk taken? In many ways the risk is relative and in this selling strategy, the window is ultra short. As if I don't particularly care what happens in 10 days. I only care what happens basically in two days. After the two days, I will care only for the next two days.
Also, isn't it true that with low IV you want to be closer to like 60% of success knowing very well that's where the money is at?
High IV and I can be a world away from strike price and still make a relatively good return in couple of days. Your Thoughts?
At the time of writing this reply I have done probably 200 transactions with about 20 - 80 contracts at a time. So, I am still fairly knew. However, this methodology is a relatively good strategy for juicing returns. I am ultra conservative with risk myself.
@krak I tried trading credit spreads for quite a while for several months. I tend to select the upper strike as if I'm doing a naked put, and then subtract 50 (or sometimes 100) for the lower put. When the IV is high, this often results in very little premium left after buying the put. For today, for some of the strikes that I sold a naked put at, the lower strike would actually cost more than the premium I get in the first place.
When the IV is lower this tends not to be the case.
Furthermore when the IV is high, it is precisely at this time that I'd lower my strikes just so that I don't end up ITM. Credit spreads force me to make my strikes higher.
I personally aim for a delta for 2-3 but perhaps with credit spreads there's a different sweet spot.
@twentysomething are you trading XSP? It has quite a bit wider of a spread than SPY at low delta which I’m guessing is what gets you. Anyone doing the vertical put strategy rather than naked puts at the SPY/XSP level probably should use SPY.
Sold at 2900 for $2.35, which is 400 pts (12.4%) below market and 2.6 delta. Hard to select right place between greedy (high premium) and safe (low delta).
IV being 80 certainly helps when VIX is 37....so we will see what happens with election.
My strikes for Wednesday are 2650, 2675, 2700. Should prevail this week.
But expect more vol going forward if the election is close or contested or going to lawsuits, etc.
What was the delta for those strikes at the time of entering the position?
I went from 3 delta which was a really big premium then I got scared looking at your strikes so I closed the trade for a profit that was a bit more than I would normally get.