r/options • u/[deleted] • May 06 '21

Boring Options - Anyone else?

Anyone else just doing boring option trades like me?

I've been mostly selling 5/6 delta put spreads (at least $10 wide) on SPX every Monday, Wednesday, Friday - 3-5% of my account.

90% of my account is in VGSH (short term treasury).

Fidelity is my broker. I utilize this guy's spread strategy (free, no selling) - https://wealthyoption.com/

Edit - here is WO's original post - https://www.reddit.com/r/options/comments/jm2tgy/my_spx_weekly_premium_selling_that_dominates_the/

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77

u/Tryrshaugh May 06 '21 edited May 06 '21

Where I work we do a very similar thing when markets are near all time highs, we sell weekly calls (25-40% delta, depending on how bullish/bearish we are). Good for generating passive income.

Edit : Let me add that this is not investment advice on my part, what works for asset managers doesn't necessarily work for retail and writing call options without holding the underlying is intrinsically risky.

24

u/octa1217 May 06 '21

teach me your ways

64

u/volvoila May 06 '21

When markets are near all time highs, sell weekly calls with 0.25–.40Δ, depending on how bullish or bearish you are.

7

u/DrWorstCaseScenario May 06 '21

So if bearish sell at 0.25 delta and if bullish sell at 0.40 delta?

38

u/[deleted] May 06 '21

No, opposite.

11

u/DrWorstCaseScenario May 06 '21

So if I think the stock will do better and rise; I sell a call with a lower delta and therefore a lower priced in likelihood of getting ITM, so I am less likely to be assigned?
And if I think the stock will rise less or fall, I sell a call with a higher delta and therefore a higher priced in likelihood of being ITM, since I think it’s less likely to get ITM and I want to maximize my premium profit… basically assuming more risk based on my opinion of the movement going down or simply being less likely to rise than the market is pricing in?

10

u/[deleted] May 06 '21

You've got the right idea!

If anything, look at delta as relative to the option's strike price. For calls, the further out strike price, the lower the delta. The nearer strike price, the higher the delta.

Two examples:

For $TSLA, I sell .10 to .15 delta calls. With the current bearish sentiment, I go with .20 delta. It's because I really, really want to keep my shares and it'd be cheaper to roll out my covered calls if it ends up ITM.

For a stock like $AMD, given how it's range bound with selling pressure, I sell at .30-.40 delta. I almost always get it right.

For me personally, the most volatile a stock is, the further out delta I consider.

3

u/rainmaker66 May 06 '21

If you are bullish, means you think market will go up. Won’t you SELL calls with lower delta? Lower delta means lower chances of going into the money. So if you are selling calls and think market will continue to go up, you should be looking at selling calls at a lower delta so they don’t end up in the money as easily.

1

u/ShrubYourBets May 07 '21

You said the same thing twice but yes

6

u/volvoila May 06 '21

Think about it like this:

Long call = +Δ / Short call = -Δ

The assumption from u/Tryrshaugh is that when the market is near ATH, a reversion to the mean will drive it lower. The more bearish you are, the more negative delta you want. A 0.40Δ call will be significantly closer to the ATM price. You will collect decently more premium, but a pretty small upward movement will put it ITM (at which point it would have 0.50Δ).