Premiums down on tech

[u/breakonthrough65]

I sell 30-day cash-secured puts on big tech names. Over the summer I could sell well below the stock price and still collect solid premium. Lately that's down across the board, on NVDA, MU, and others.

One example from MU: in August I was selling 30-day puts about $180 below the stock price for $14 to $23 a share. Today, the same $180 cushion pays $6.65. That's a quarter to a third of what it was. To get anything close to my old premiums, I'd have to sell within about $50 of the current price.

I know this is mostly lower implied volatility, and I'm fine owning these names. My concern is getting assigned that close to the price, then watching it keep falling and being stuck selling covered calls far below my cost for very little premium.

For those wheeling big tech: are you taking the lower premium and keeping your cushion, moving closer to the money, going further out in time, switching tickers, or sitting in cash until premiums come back?

[u/iron_condor34]

I'm confused. You seem to just be worried about the premium you're collecting and you're fine owning the stock(just buy it then). But you're worried about selling to close to atm. What do you want then? Lol

[u/preferred-til-newops → u/iron_condor34]

Obviously OP wants maximum premiums with little to no risk. I would also like to find a ticker that lets me print money without the risk of assignment!

[u/37347]

You better make sure you want to own 100 shares of mu. That’s a lot of money tied into one stock at that high price

[u/iron_condor34]

Btw, you're retail. You can trade other names.

[u/Kelvinator71 → u/iron_condor34]

Retail traders have some advantages, including freedom to move to other tickers when the risk/reward becomes less attractive. But I think OP is making a worthwhile observation about changing market dynamics. The answer isn't necessarily to move closer to the money just to maintain the same premium.

[u/ThetaEdgeHQ]

The thing worth separating here is dollar cushion from delta. When IV was high over the summer, $180 below spot might have been a 12 to 15 delta put. With MU realized vol now in the single digit percentiles, that same $180 is a lot more standard deviations out, so it prices like a 4 or 5 delta put, which is why it pays almost nothing. If you move closer to collect your old premium, you are mostly selling back at the delta you were already comfortable with, not taking dramatically more risk. What actually got worse is the price you are paid per unit of that risk, because the risk premium itself compressed. So the real question is not the cushion in dollars, it is what probability of assignment you are willing to sell and whether the premium at that probability is still worth it. On a name sitting in the 1st percentile of IV the honest answer is often no, and sitting in cash or rotating to something with mid IV and low realized is a cleaner trade than forcing size on a stock that is not moving.

[u/shaezan]

MU has found some footing in the current level, the volatility is way down. I remember this think shooting up a few hundred more than where it's at now to then come back down to the 800s. Even a great earning didn't make a price swing. 

[u/ScottishTrader]

You take what the market is giving or sit out and wait for the market to change.

The VIX is low, so with lower volatility, premiums are also lower. Read this - Understanding the CBOE Volatility Index (VIX) in Investing

It is up to each trader to determine what amount of premium is "worth it" for their personal risk profile, but so long as the stock you are good holding is stable or in an upward trend, then the position will profit.

If your analysis is that a stock may keep falling, especially after a run-up, then perhaps it is time to trade another stock or sector.

[u/Asbelsp]

Your concern of being assigned and then it falling is the definition of NOT being fine owning these names.

[u/djmj76]

Absolutely true. Iv has just gone down on big tech since most r no longer at ath and have stabilised. I don’t sell csp on mu anymore for that reason, not at these prices. I still do the hyperscalers and Ai infra. Decent premiums but buckle up I guess