What's your cushion for selling csp on a low volatile stock like INTC?

low volatile stock like INTC

lol

I meant to say lower

lol

I had to check. I currently have 11 open positions. INTC has a higher IV than all of them. Man, and these people wonder why they blow up their accounts.

New to theta gang, don’t you kinda want to sell CSPs on high IV stocks? Makes it more dangerous yeah but juices up the premiums

There is no free lunch. High premiums tend to track with higher risk. You should consider the probability of success factored with the payout amount as well. You must find some balance. People who often and regularly trade high IV stocks will eventually get bit. You could take something 0.05 delta, super far otm, maybe make $10 while risking $50,000. You’re 99.9999% gonna win, and even if you don’t you probably won’t achieve max loss on something like that. But is it worth it? You could sell an ATM put on some tech stock, pick any lately. SPCX was offering like 13% of spot for some I did last week. If you’re correct, great, but say it tanks -30%, that premium will be nothing relative to your loss. Also in my personal circumstance I opened only 2 SPCX which are not gonna kill my account if it goes poorly, which for me is going alright so far. So in addition to probability of the trade, outcome of the trade given probability, also what does it mean to your account. I would not do a -125P on SPCX if my whole account was $12,500. You could do a CSP like that, but then you’re back to risk management. That’s then “a sizable” portion of your acct (e.g whole acct). It depends on your risk appetite. As long as you know what can happen, by all means do what you want, but people get in deep on risky trades and then basically wipe out or are super down in a hole that’s virtually unrecoverable. I usually like to sell a put if I am willing to buy the stock at that price. And I size the number of contracts accordingly. Otherwise speculatively I may consider a spread, sized for max loss, but they need to be more otm or stars must align and it’s easier to get burned. So I like “medium IV” I guess, increase probability of success at some expense of premium but the expected result is good.

You say capital is low, but also say you only risk 2.5% on 3 INTC CSPs, meaning your account is at least 1.2M.

say what, no

“Lower volatility”?? 😂😂😂😂😂

About to say, that's as lo vol as the casino

Fixed-percent cushions are the wrong unit. 2.5-5% is a completely different trade at 25 IV than at 75 IV, and right now INTC is very much the second one - the Aug 21 ATM puts closed Friday around 77% IV, which prices a move of roughly $15 either way on a $101.65 stock in two weeks. Call it about $5 a day. Thursday alone traded a \~$95.6-103.4 range. So a 2.5-5% cushion here is inside one daily standard deviation - that's not "low vol stock with a safety gap," that's selling near-the-money movement on a name the options market expects to travel. It's also why you got assigned. "Next to ITM" is a 45-50 delta short put, which is a coin flip by construction. Nothing wrong with that if you actually want the shares (it worked out for you), but it's a different trade than a cushioned CSP, and it feels very different the first time the gap goes the other way. If you want a rule that survives regimes: pick a delta, not a percent, and let the market translate it into distance. Sell the \~20 delta and the cushion widens automatically when vol is high and tightens when it's quiet. At Friday's close that's the Aug 21 $91 put, about 10% below spot for \~$1.75 mid. In a sleepy 25-IV name the same 20 delta two weeks out sits only \~4% below spot. Same odds, very different distance - the delta does the "strategize the gap" work for you. On the "haven't met a crash yet" part: the cushion protects you from noise, only sizing protects you from the tail. Size so that assignment on everything at once is survivable, because in a real break correlations go to 1 and that's exactly what you'll get.

Since you sound knowledgeable, have you found there gang to be profitable? I’m trying to decide if the wheel is a good long term strategy for me. I’m towards the beginning of my investing journey. I was planning to wheel with an aim of generating 1% per trade- but if you do monthlies then (assuming all goes well which can be a big ask) that’s 12% per year minus taxes, when spy averaged around 9-10% per year anyway. Seems like a lot of risk for not tons of gain. Thoughts?

Just buy and hold VOO. Wheel is not more profitable, especially if you’re new, stay away from any options.

Theta outperforms on flat volatile times. The last couple of months have been good thera territory on indexes, but there has been some rotation. 

Your instinct to benchmark against just holding SPY is the right one, and most people selling options never run that comparison, so you are already ahead. The honest answer: the wheel is not extra yield on top of stock returns, it is a different way of taking stock risk. A cash secured put is stock exposure below your strike with the upside swapped for a fixed premium. So in sideways or gently rising markets you beat buy and hold, in strong rallies you underperform because your upside keeps getting capped, and in a crash you eat roughly the same loss as a stockholder minus the premium. The 1% a month is not fake, but it carries an equity-sized left tail with the right tail chopped off, which is why "12% vs SPY's 10%" overstates the edge. Add that premium is taxed as short term gains and the gap narrows further. Where it earns its keep: names you already want to own at a limit price anyway. If you would happily buy the stock 10% lower and hold it, selling that put is getting paid for a limit order you would have placed for free. Where it hurts beginners: selling puts on things they do not want to own because the premium looks juicy - juicy premium means the market thinks the thing can fall hard, see this entire thread. If I were starting today: keep the core in the index like your gut says, wheel a small sleeve on one or two names you would hold regardless, log every trade, and after a year compare the sleeve against what just holding those shares would have done. That comparison is the whole answer, personalized to you. Most people never run it because they are afraid of what it will say.

It can work but it's not free money on top of stocks, it's the same risk in a different shape. You keep the downside, cap the upside, and get paid premium for it. Good in sideways markets, lags bad in big rallies, still hurts in a crash. And premium is short term gains so taxes eat a chunk of that 12%. Your math instinct is right though. I'd keep the core in VOO, wheel 1 or 2 stocks you'd happily own anyway, and track it for a year against just holding. That'll answer it better than anyone here can.

I don’t consider INTC to be low volatility. What criteria are you using for that decision? My current INTC position is ITM shorts at 105 kept about a month away from expiration by rolling. It’s the volatility and overall bullish behavior (after the drawdown) that have made the position very profitable. Where the volatility sends the share price determines the roll viability, not any particular day of the week.

The dangerous part probably is thinking the 2.5–5% cushion is what makes the trade safe. INTC can gap straight through any reasonable cushion. The real protection is selling a size you can comfortably own and choosing a strike where you’d still want the shares after a bad day

125 c 35 dte

The number that actually governs your cushion is the strike delta, not a percent of spot. Delta is a decent proxy for probability of finishing in the money, so a strike next to ATM is roughly a coin flip on assignment. On a name whose two week expected move is around 15 dollars, that coin flip is baked in, so a 2.5 to 5 percent gap is inside the noise like others said. The bigger thing is what you actually did. You got assigned and sold the shares green the next morning. That is not really a cushion trade, it is a short term bet that INTC holds, and you paid the bid ask spread twice plus assignment to express it. If you never wanted to hold the shares, a put credit spread says the same thing (I think INTC does not crater by expiry) with a defined floor, so a gap through your strike costs you the width, not the whole position. Same view, capped tail, no round tripping stock you did not want.

INTC is a low volatility stock and SNDK is a boomer blue chip stock /s

I aim for 10 delta on weeklies, with premium at 50% of strike price / 100. So 0.50 for $100 strike. Preferably a with a nice layer of support levels and moving averages between price and strike

It’s suck a mind fuck to sell CSP on Intel When a year ago I was selling them at 20 strike lol