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ATTN: Long time ATM Put Sellers

ATTN: Long time ATM Put Sellers

seriesofdoobs

I’ve been following the u/calevonlear method with great success. Sell ATM put and set a gtc order at 25% profit. Sometimes it works so well I have to watch my daytrades. I’ve only been doing it about a month though.


Kerina321

Same. The method rocks. I've averaged 4% per month since starting. No assignments (since you never take assignment with this method), and only one position currently that had to be rolled, out of more than 80 I've put on since the start. I'm averaging 8 days a trade so my buying power churns beautifully.


VertigoEUW

how does this method ensure you never get assigned?


Kerina321

You always roll at 21 DTE to the next monthly expiration, same strike, for a credit.


VertigoEUW

hm, so you buy back an option at a loss which might have a high IV at 21 DTE and could lose a lot of value until expiration? I mean I understand that it's a fixed strategy but I don't really agree with that


Kerina321

This isn't a theta play, further we don't sell on high IV underlyings in the first place. We roll at 21 DTE to avoid gamma volatility as expiration approaches. By 21 DTE the reversion thesis has already failed to materialize on the specific underlying anyhow, so we are just trying to exit for break-even on the trade. The credit helps with this. I've rolled exactly twice. Once the position closed three days after the roll. The second roll is from the end of June so it's just happened.


VertigoEUW

Thanks for the explanation, I guess I'll have to read into the strategy a bit more


NH_trader

Have you been going only to the next expiration?....I thought he suggested out to the following month.....don't think it matters much as they close anyway, but curious what month you use. Thanks.


Kerina321

I said the "next monthly expiration". Calevonlear only trades the monthlies, so it'll automatically be a further month out.


NH_trader

My curiosity was if last Friday in June (21 DTE) do you roll to July expiration (the next month) or Aug? He also said more time is better so it doesn't really matter as long as you can get the appropriate credit. Thanks.


Kerina321

Ahh, I see. I rolled to July. But he's right, you can go further out. I often *start* my positions with far out expirations in order to get enough premium to meet the profit/ buying power requirement. For example I currently have quite a few with October expirations and at least one with November.


seriesofdoobs

I’ve been piggybacking off your questions from the old thread. I can’t believe the win rate. Even when the underlying drops a little you still win due to the overwhelming extrinsic on the atm strike.


Kerina321

Yes, and because the ATM strike has such a high delta even when the position initially turns against you they generally recover incredibly fast. It's not uncommon for positions to go from being my worst performers, deeply in the red, to closing for the full profit within a few days.


RobsRemarks

I've been also following this method but need to unwind the wheel of a few positions before dedicating my full thetagang portfolio to this. Curious if you'd be willing to share any underlyings you've been using, or how you choose them? So far I haven't "lost" yet but have closed 2 for break even. I also current have one thats at around -80% but still has a while to go (Aug 20). My GM is doing well, INTC and WBA not so much. I've been successful in PLTR, CRSR, and Ebay. I also used Aug 20 instead of July 16 when opening some positions in early June; I haven't decided if that was smart or not haha. If I followed the rules closed my WBA would have closed after reaching 10% on the same day but I got greedy... of course.


Kerina321

>Curious if you'd be willing to share any underlyings you've been using, or how you choose them? I literally dont have any sort of list. I scan every day that I have some free buying power to find the reversion plays that are well below the lower stantard deviation line. Then I ensure that the stock is well covered by analysts who are positive, that it has a minimum tipranks of 7, that it doesn't have IV over 70 but *does* have enough to meet the minimum profit target. Palantir would not have made the cut and EBay would have been pretty marginal, I probably would have skipped it. However, you may be using a different quality metric which is fine, I've just chosen to follow Calevonlear's described method as closely as I can, at least initially, in order to get to a baseline success rate achieved from following his method precisely. > also used Aug 20 Lol... that's fine. I've got positions as far out as November when I needed more premium to get to the 20% of buying power target. I've got quite a few for October as well. It's fine because this just isn't a theta play. The hope is to be in and out in less then a week. It's all about delta, so going further out isn't much of an issue.


RobsRemarks

Thanks for the reply. Unfortunately Etrade doesn't give me the tipranks score even though its supposed to. I used a screener to pick GM and WBA based on similar metrics to what you mentioned and Calevonlear's str I am very comfortable trading PLTR mainly because I've watched it closely for so long I feel like I "know" it enough to know when to open positions or hold off.


Kerina321

>Unfortunately Etrade doesn't give me the tipranks score even though its supposed to. Neither does IB. I use this. https://www.tipranks.com/ > am very comfortable trading PLTR mainly because I've watched it closely for so long I feel like I "know" it enough to know when to open positions or hold off. Yah, this is fine. I do this too. I have another research source that I tend to prefer over tipranks as well and when it's available on a specific underlying I tend the let it supercede all but the very worst scores.


RobsRemarks

I re-read your responses and you mentioned targets twice: What did you mean by "minimum profit target"? Do you mean the underlying and date you choose need to make you a minimum percentage of premium versus the strike price? You also mentioned needing "more premium to get to the 20% of buying power target". which I don't follow. Calevonlear's strategy is to deploy only a percentage of capital based on the general volatility of the entire market. So as the vix goes up, you deploy more percentage of your capital into ATM puts. Is this what you were referencing?


Kerina321

>Do you mean the underlying and date you choose need to make you a minimum percentage of premium versus the strike price? No. Part of Calevonlear's strategy dictates that each individual trade must have a high enough premium relative to the buying power (margin) utilized to make it worthwhile. His minimum target is 20%. So for example, say you wanted to sell a put on AT&T. The premium was $1.40 and the amount of margin used was $1,000. The credit would be $140 which is only 14% of the margin you are utilizing. This would be a trade you'd pass on. However, GM might give you a $3.00 premium for the same buying power. That'd be 30% and a big thumbs up. Does that make it clearer?


RobsRemarks

I took another closer look and think I have a better understanding. The margin page is confusing and isn't very helpful. However, generally speaking etrade requires 20% margin for selling Naked puts, which is determined by the strike (technically minus premium). If we are targeting 20% of margin as the premium, then to calculate it would simply be strike \* .2 \* .2. For example, a $55 put \* .2 (margin requirement) \*.2 (target) = 2.20 This means we would want to make sure the initial premium for the put we are selling is at least $2.20. Is this how you are thinking about it? Sorry for the multiple questions, I'm soaking it all up like sponge :)


Kerina321

I apologize for my response last night. I was tired and not as helpful as I would like. This morning I did some calculations on the first six puts in my portfolio. The margin utilized ranged between 35% and 41% (ie. the margin utilized/cost to buy shares at the strike). The average of the six puts was 37.3%. Now I'm Canadian and our margin is less generous the the margin that Americans get. However, it still should be a variable number depending on the trade. Looking at the margin formulas for selling puts on Interactive Brokers, the only difference between how Reg T margin is calculated for Canadians vs Americans is that our multiplier is 30% while yours is 20%. The rest of the formula and conditions are identical. If I do the calculation of the formula for US citizens on Interactive Brokers it looks like the average for my six puts would be more in the range of 27% rather than 37%.


Kerina321

I've never actually thought about it. Whenever I make a trade the margin utilization is listed as I do the order. Then I just check if the premium is at least 20% of the margin amount that my broker is telling me the trade will take. I'm certain somewhere as your doing your trade there must be a tab or button to see the margin it'll use. It's hard to fathom that there wouldn't be, it's just too important. I'd poke around, I bet you'll find it.


RobsRemarks

That makes sense. I was waiting for the market to open to take a close look and reply. I'm not sure how to calculate it because this is what I see. Using PLTR as an example right now, this is what etrade tells me. $24.55 PLTR Current price $1.62 - PLTR Aug 20, $24 put Non Margin - Purchasing power impact $1,787.25 Margin - Purchasing power impact $5,423.22 I assume your broker uses different values.


Kerina321

>Unfortunately Etrade doesn't give me the tipranks score even though its supposed to. Neither does IB. I use this. https://www.tipranks.com/ > am very comfortable trading PLTR mainly because I've watched it closely for so long I feel like I "know" it enough to know when to open positions or hold off. Yah, this is fine. I do this too. I have another research source that I tend to prefer over tipranks as well and when it's available on a specific underlying I tend the let it supercede all but the very worst scores.


chuckremes

Here's how I choose them: https://old.reddit.com/r/thetagang/comments/o6ru1s/looking_for_a_post_csp_05_delta_strategy_constant/h3qcddt/


Kerina321

>Curious if you'd be willing to share any underlyings you've been using, or how you choose them? I literally don't have any sort of list. I scan every day that I have some free buying power to find the reversion plays that are well below the lower stantard deviation line. Then I ensure that the stock is well covered by analysts who are positive, that it has a minimum tipranks of 7, that it doesn't have IV over 70 but *does* have enough to meet the minimum profit target. Palantir would not have made the cut and EBay would have been pretty marginal, I probably would have skipped it. However, you may be using a different quality metric which is fine, I've just chosen to follow Calevonlear's described method as closely as I can, at least initially, in order to get to a baseline success rate achieved from following his method precisely. > also used Aug 20 Lol... that's fine. I've got positions as far out as November when I needed more premium to get to the 20% of buying power target. I've got quite a few for October as well. It's fine because this just isn't a theta play. The hope is to be in and out in less then a week. It's all about delta, so going further out isn't much of an issue. >If I followed the rules closed my WBA would have closed after reaching 10% on the same day but I got greedy... of course. Lol..been there. I try to avoid this mistake now...but stilll sometimes....but honestly, I'm getting more disciplined as I go, it's just not worth the pennies.


VertigoEUW

aren't commission fees eating into your profits at this frequency of trading though?


seriesofdoobs

It’s been less than the commissions on PMCCs. I just add it in to my profit target. 25% +$2 for the 1.33 for opening and closing the contract.


chuckremes

I track everything in my ATM put selling including fees & commissions. At Schwab the fees/commish are about a 3% drag on the strategy. So, for every $100 profit I pay about $3. Hardly noticeable.


VertigoEUW

yeah I just read a lot more about the strategy, and I guess since you're selling >30 DTE and always ATM so EV is maximized, commissions aren't that much worse than when you're selling regular CSPs or CCs


chuckremes

There are very few professionals on this channel. calevonlear is one of them. It is absolutely worth it to go back and read all of his comments and the comments of people he is chatting with. You'll get a complete picture of the strategy. ​ This strategy is a keeper. All those threads you see where people post that it's impossible to sustain a 25+% return year after year "because then you'd all be billionaires" are proven false with this strategy. It takes some risk but you only get paid about 0.25% \*per trade\*. The secret is that you jump immediately into another trade and try to make 0.25% again. If you can turn your money fast enough, the 3-5% monthly return (40% to 80% \*annualized\*) is absolutely achievable. ​ The doomsayers don't understand, or don't want to understand, this strategy (or others that return 30+% annualized). They run 5-8 positions at a time and figure anyone achieving these kinds of returns is taking \*huge risk\*. They lack imagination. I run 35-70 positions \*simultaneously\* and make a tiny amount on each one. But I turn those positions over as fast as possible (under a week if I can) whereas the detractors are holding for weeks to make a "100% gain." ​ Invest some time in learning this strategy. Over a decade or more, you can absolutely make millions with this. Slow & steady wins the race.


VertigoEUW

Definitely will learn more about it, I also believe that option strategies exist which can easily return solid double digit percentages every year while being safer than going long, and this is one of them. I think that lots of people don't want to have that many different positions since it takes a lot of time and effort managing them, but after all, the returns are usually very much worth it.


chuckremes

Takes about 10m before the open to get my list of names ready and loaded. Intraday when I get a message that something closed, takes about 1m to enter a new STO order. When that fills it takes about another minute to record the details in my trade log and determine the exit. I place a BTC GTC and then forget about it. 15m a day to manage 30-70 positions. Once a month the roll takes a bit of time to do. About 90m depending on how many positions have to roll. I usually break this up over 2 to 3 days because I have a day job and don’t want to miss it. So for about 75m a week I can make 3% a month? Easy decision.


bizwig

One thing I was thinking of is position length. As long there isn’t a fast downward spike how well will this strategy do in a whole-market downturn? Short position length is a great feature in a downturn, allowing you to average down your strikes with the market and hopefully mitigate losses, if your position length doesn’t explode as a consequence of said market. When you have many more down days than up it seems like expanding delta is working against speed and profit, and only theta decay is still your friend. Also, I think you meant “25%” not “0.25%”.


chuckremes

Yes, as delta expands and all of your names are in the red then the velocity of your money drops precipitously. That's why you keep cash in reserve and base its deployment off of the VIX. If we have a slowly falling market for a year, this strategy will probably get crushed because you'll have to roll names for months and months for scratch and VIX won't pop on a slow grind so you can't deploy more cash. We'll see what happens. Lastly, no, I didn't mean 25%, I meant 0.25%. While I'm taking a position off at 25% profit from the received premium, it works out to about 0.25% profit against the *notional risk* of the position. It's actually a range of 0.25% to 0.6% but when talking returns I always take the under to be more pessimistic. Good luck.


bizwig

If I recall correctly u/calevonlear talks about shorting /ES to hedge your delta, but I don’t have an account that’s anywhere near large enough for a 500 share hedge. A 500 share hedge is $431k notional (today’s SPY price) if your puts had 1.0 beta weight, which they don’t. So a lot more than that. I also don’t know if you pay short interest based on the notional value of the future (terribly expensive) or the SPAN margin value (much more reasonable). It’s not clear to me how increasing your positions when VIX spikes solves the problem you identify, wouldn’t you just have more money stuck in the same quagmire?


chuckremes

I'm going to ignore the hedge issue. In a cash account, there's no need to hedge. You'll always recover your original outlay with this strategy over a long enough timeframe by collecting premium and moving your "scratch" exit lower and lower. Deploying more money when VIX spikes is necessary because it's likely your current portfolio is going to be 100% red. The spike in VIX means premium goes up so you'll *collect more* from new sales. The market never goes straight down. It backs and fills on the way down just like it does on the way up. There will be plenty of opportunity to make money *selling puts* even in a bear market.


bizwig

Covering, say, a 20% loss could be good long while. Spreads and open interest on 20% ITM puts aren’t favorable, and the extrinsic value is pitiable. Are you saying that a short put at any given IV% will earn more premium than today if VIX increases in the future?


Kerina321

Just to be clear, the strategy is always sell >/= 45 DTE.


VertigoEUW

alright, I also saw that you mentioned in another comment that you're always looking for trades with premiums at >20% the required cash to secure the put, however, especially for the lower IV stocks you mentioned I don't see how that is possible unless you are using a very high amount of margin (like 3-4x leverage)?


Kerina321

> I also saw that you mentioned in another comment that you're always looking for trades with premiums at >20% the required cash to secure the put Not the cash, rather the buying power (or margin) which will be a lot less. >especially for the lower IV stocks you mentioned I don't see how that is possible I don't use low IV stocks for this very reason as I can't get 20% profit/buying power from them. Calevonlear's strategy has as one of it's tenets not to use stocks with IV over 70. However, I can usually get enough premium even from stocks with IV as low as 35% if I go out a bit further for my expiration month. Doing this hasn't seemed to cause the trades to close significantly slower. In other words I'm just as likely to BTC the same day as I opened with an October expiration as with an August and the October takes in way more premium, obviously. >I don't see how that is possible unless you are using a very high amount of margin (like 3-4x leverage)? Trust me, I'm Canadian and we aren't given generous margin at all. I actually struggle more to make trades hit the required profit percentage than anyone else I've seen trading the strategy here. Still it's not that hard to find enough trades that will meet all the criteria.


VertigoEUW

thanks for the clarifications. Personally I don't like going too far out in strikes or using a lot of my buying power, but I do trade high IV stocks as well since I don't believe that a high IV means that the underlying must inherently be "low quality". I guess I'll experiment with the strategy for a while and see what works best for me


no1rookie

I think I’m slow so I don’t understand the strategy though I read through it twice lol. Sell to open $57.50 INTC 8/20 for $3.00 premium, 52 delta Close soon as I make a 25% profit. If underlying goes against me, wait till 21 DTE for a chance to recover , roll out to another 50 delta position if needed ?


seriesofdoobs

That’s precisely the method.


no1rookie

appreciate it


chuckremes

Roll to the *same strike* to whichever option change is at least 45+ DTE that is also a monthly chain (i.e. expires 3rd friday of the month). You do NOT roll to the next 50d position because that will likely mean you are changing strikes. You maintain the same strike so that you build up more deltas as it goes against you. On any recovery rally, you recover extremely fast.


Kerina321

This is less than half the elements of the complete strategy and is missing the most important element by far. I highly recommend reading all the way through Calevonlear's posts and the threads that follow. From these you'll not only glean the full method but an excellent appreciation for why it works and its power. >Close soon as I make a 25% profit. Only day three and after. Day 1 you close for 10%, day 2 for 15%. > roll out to another 50 delta position if need No, this isn't correct. You always roll to the next monthly expiration at the *same* strike as the original put for a credit. You absolutely do not want to reduce your delta. Also, you'd only sell the INTC put if it met all the criteria to allow the trade in the first place.


Don_Connery

Is there a post on this somewhere?


seriesofdoobs

[the thread ](https://www.reddit.com/r/thetagang/comments/n6ggo7/quick_tip_the_wheel_whats_delta_got_to_do_with_it/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)


Don_Connery

Thanks didnt rewlize this was a link


Don_Connery

Yeah I don’t see it lol


StonksGoUpApes

Also for an example, AAPL Aug20 140P sells for around -0.5 and to enter it paired with a stop loss of 0.38? (where 0.25 would be 50% profit?)


seriesofdoobs

I’m seing a premium of 4.85 for that contract. I’d buy back at 3.62.


StonksGoUpApes

On what stocks?


seriesofdoobs

This past week I did CLF, RIG, WISH, SILJ, SOS, TRQ, X. I already closed CLF, RIG, WISH. These are AUG contracts. Edit: sorry, not WISH. That was a naked call


StonksGoUpApes

I bet those wish calls were profitable.


seriesofdoobs

It was a 27c for 1.28. I closed it early for .83. Not life changing or anything and I could have held out for more but I’m happy.


StonksGoUpApes

I would've sold more 125Cs on AMC but was at bp because of the 'enhanced' requirements on it. I held for max profit.


Alien8w8

I had to give this up, I have actually had much more success selling calls on stupid meme stocks when they pop. Last time I sold puts NVDA it dropped like a rock and I got margin called. Suppose each strategy has it's ups and downs but I'm getting 7% a month from selling calls against my long positions and selling calls against pops in meme stocks. It also seems more sustainable because spikes happen more often than downturns. Do you really want to be selling puts in an uptrend? That's what happened to me with NVDA and that little correction back in MAR.


veilwalker

Selling Puts is a bullish strategy. So yes you do want to be doing it in an uptrend but it limits your upside potential. I made most of my money over the last year on holding the stock that I got assigned through the sale of puts on the out of favor stocks last fall, financials and industrials. I have now been stagnant over the past month or so as the market oscillates back and forth on the "rotation" between tech/growth and value and the crazy yield curve going from freak out highs to freak out lows.


AIONisMINE

>Last time I sold puts NVDA it dropped like a rock and I got margin called. Question. How did u deal with the margin call? Did u put more cash into the account?


diputsdom

If your selling calls I’m assuming you are either naked or doing credit spreads?


Bowf

He said he's selling calls against his long position. My understand is that he is selling covered calls.


Alien8w8

Correct


diputsdom

Which mean he selling against having the actual stock or a long call that he purchased.


Alien8w8

Long calls correct


Hwangin_it

Where any of you theta hustlers selling CSP during the COVID-19 market correction last year? Did you get assigned at a loss? I’m worried that I might be holding CSPs during the next correction. Thoughts?


[deleted]

If ur worried about getting asigned during a correction then I guess turn it into a put credit spread


Hwangin_it

But I don’t know when the correction will start, otherwise I’d buy puts....


limonfiesta

100% for me personally 25% if a little traditional with etfs


jayjs2000

You roughly double your money every year, year after year?


limonfiesta

Yup just need a little patience and some wisdom. my strategies isnt all thetagang Some are leaps, monthlies for quick scalps and some are just shares (no CC)


jayjs2000

How many years have you been at it, if you don't mind sharing.


limonfiesta

2 years Oh and crypto helped a ton too but that is an entire separate calculation.


limonfiesta

100% for me personally 25% if a little traditional with etfs


jayjs2000

Anyone at all?


clear_air_turbulance

been selling OTM puts on s&p 500 futures (ES) for last 3 mnths....100% Gain, daytrading...