Selling options is easy

i mostly wheel, but not as an aggressive or as a core strategy as some. If there’s a stock i’m interested in entering if it were to drop I’ll sell CSP in the range i’d invest in. Similarly if i’m in a medium term position I sell covered calls in the range I’d want to take profit on.

what do you like wheeling lately?

again i’m not wheeling to wheel, but to enter or exit specific stocks at ranges. So it’s companies I think either might dip or hover in a range I want to enter at. For example I’d buy RIVN below $15 so I’ve been selling CSPs that’s give me a cost basis below that based on what id be willing to invest if it dropped that far. Similarly I’ve been selling CCs on AMD, I hold it as a medium term investment and if it jumped up to the level im selling CCs at I’d look to take profits. I also sold CSPs on NOW and got assigned and am now selling CCs at the level im looking to twke profit So unlike some Im not focused on IV (though some of my holdings would be volatile), but just using options to collect premium on the way to something getting to a value i’d look to enter or exit

Selling options is easy. Selling options for profit requires more skill and better judgment.

This. I used to be a diamond wholesaler and the joke was that it's extremely easy to sell diamonds, but getting payment is another story altogether.

Lots of businesses are like that. I countered with limited credit and shorter payment requirements until they showed that they took my needs in the relationship seriously as well.

It's a good strategy, but unfortunately in the diamond business there is always someone who will go one step farther in credit and terms, so you couldn't pressure the customers because they'll find another supplier.

Yes, there is that. I primarily ran a business where I didn’t have to cave to larger interests that could absorb bigger loses and damage to cash flow. Smaller was better for them so as to get more customized work with greater control. That too was a balancing act, but so is most of business in general.

yes. a short period of time can hide a lot of tail risk. how has your judgement improved over time?

Significantly as expressed in the bottom line. Risk assessment and management are key.

Yes falling out the 2nd floor window is easy but surviving it takes skill and practice.

I manage tail risk by understanding my notional exposure against my capital and keeping that ratio in check, not just looking at BP. So many people having 10x+ notional leverage, getting “only 3% per month” and blowing up during a major drawdown. Secondly I try quite hard to sell short puts on stocks I really don’t mind owning. Sometimes the IV becomes appealing and my worst losses are where I lacked conviction and things went sideways. I knew I was just gambling.

when shit hits the fan, everyone’s conviction is tested. Buffet said when the tide goes out, it’s obvious who was swimming naked, and who put on sunscreen aka manage their exposure well

I’ve got open positions on QQQ, AMZN, NFLX, BN, RDDT, ADBE, APP (which just took a massive beating but I’m holding my conviction!).

are you writing calls to improve your cost basis/profitability?

I am trying to do this with a bit less leverage and finding enough targets to avoid concentration risk is difficult.

I've been selling options for 2 years, and my biggest "lesson learned" about portfolio management/housekeeping is that you always have to manage the gamma risk of your ITM or close-to-ITM positions (and preferably catch them when they are close to ITM). So the main game for me is trying to roll out those positions with a credit, to reduce gamma risk, while still maintaining their "time value per day" (don't know how to name this one, but basically: if I sell a $300 option expiring in one month, and I have to roll it one month away, I expect to roll with a credit of at least $300 - if I can't, I just wait until I can, or just get assigned).

right, basically roll before your strike is breached hey? let time recover some loss before gamma slaps you

Yes - but they key, is to roll with a credit that preserves your theorical "daily profit" on the position. Daily profit = premium / DTE. So if I roll 1 month away (same strike), the roll transaction needs to have a credit of (30 x daily profit). The biggest error I was doing is "rolling at all costs", but it's wrong. You need to roll while at least preserving your income generation on the position.

I thought it was free money. \~5 years ago, I sorted by highest IV, then looked for the first ticker with a reasonably liquid options chain. And then I learned what it meant to hold the bag with Virgin Galactic and Tilray. Did I understand anything about the companies or their industries? Of course not, but I made a good amount of trades before it bit back. Took an account from like 40k down to about 20k before I sold everything to reassess.

thanks for sharing. theres a common “i would love to own this” and then goes to “i change my mind!”

Oh I never had the “I would love to own this” mindset. I thought that I could roll down and out forever. Turns out, that’s not always the case. Especially when dealing in high IV garbage memes. When IV is through the roof, there’s usually a reason for it. I should have spent far more time figuring out why it was high instead of blindly being someone else’s insurance.

i can relate to high IV garbage. burned enough on it to stop touching that stuff. most times not a free lunch. I like that the key lesson is asking why it is high like you said, not just blindly selling it.

That chasing high IV is sort of a right of passage for new options traders. It’s akin to gambling and selling bullshit investing advice to gamblers is a very profitable business.

Sold a put on SHOP. It went through the strike, then through my break-even, and sat there for three weeks. The real lesson from those weeks: the mark is useless for decisions — every exit looks terrible through a fat red number. What worked was campaign math: entry credit − buyback + next leg's credit = where the whole thing ends if the next leg holds. Priced that way, the roll, the step down and the assignment all ranked calmly — and none of them were catastrophic, mostly because it was sized as one position, not as conviction. Then SHOP ripped back and the put died on its own. That's why the rescue is the dangerous ending: it pays you for patience you can't distinguish from luck. The red weeks taught me a framework; the green ending is quietly teaching me "holding works." Only one of those lessons survives the next Krispy Kreme.

Holding isn’t always easy but I am trying to learn to take profits sooner rather than trying to get the last few points.

Learned a lot during last months tech wipeout. Ate a soxl trade at a 1k loss due to panic. Didnt close a short put at 75% profit that instead went deep ITM suddenly and I had to roll down and out. Also sold a 157 strike on spcx for what I thought was a fat premium (1k), and got assigned when stock was 110 dollars. But overall most of my tickers recovered (Cohr, wdc, iren, aaoi, mrvl, crdo, cls) and I’m still ahead of S&P. I’m more careful with my strike deltas now and more disciplined, not chasing green days. That’s key. Changing my mindset to be excited instead of fearful when there’s a dip. This is year 1 , so still much to learn.

more disciplined delta selection is a good outcome. are you leaning .2 delta now vs .3 that kinda thing?

i was selling mostly between .18-.28 deltas, to me fairly conservative, but as you know, that was not enough buffer when the stock dips like 30-40% like aaoi, iren, etc. i'm being way more careful now, only opening positions when there's a dip (not related to fundamentals). my last two positions were under 0.1 delta. i want to get assigned honestly, if it hits my strike. i learned also not to chase pure IV, and make sure you actually want to own the stock. i wheeled ntvs for fun and i learned i didn't want to own it, lol. 30% underwater now on a small position. can't even sell CCs cause my cb is too far out. no more speculative penny stocks for me.

yeah. selling cc below cost basis would be rough. underlying selection is key. some .30 deltas are not priced enough premium for the risk and end up bad bets

I know going by delta is popular opinion but I prefer to go by support/resistance this way I know where stock is going to bounce or drop

Learned to trade only quality stocks. Avoid assignment as much as possible by rolling. Sell CSP near support level.

This is the way for me. I ignore the big money options on the more volatile, high IV stocks and go for more stable, established companies with some kind of moat. Smaller profits, but they accumulate faster without those larger losses.

Occasionally I buy a far OTM put on a stock or index that has a potential negative in the short term. If the negative materializes Vega and Gamma can really inflate the put for a short period of time. If it doesn’t materialize the put just bleeds slowly and I close it out for a small loss. But it needs to be something with very tight bid/ask like an index. SPY is a good example - when the market takes a hit I have had those puts double and triple, driven by the pricing algorithms, but then fall back the Ned day as the MM’s realize what’s happening.

Easy fix- sell cash secured and covered on high-quality underlying shares, & keep extra shares for the FOMO and the dividends. Compared to the market, I boost my gains or reduce my losses by several percentage points every year this way, and it all compounds. I can sleep at night because I am not gambling. It turns out that trading like a grandma is not a bad thing.

I can tell you right now, you fell into the reach for yield trap that most beginners run into after they realize that you can make for than 6% a year. #1 concern should be am I getting paid for the risk I'm taking on. If the answer is no then walk away. In the long term you will avoid almost all of the steamrollers. If it's trending on WSB, walk away. If earnings is crossing your expiry date walk away, If you are required to put up more capital than regular margin requires, walk away. If you are being sold a story or use the Phrase, I believe in the company. don't walk, RUN away. I'll give an example of Why not to trade NVDA with any size. NVDA Put 24 delta 10 DTE for 8-19 avoiding earnings risk. Naked Puts comparison NVDA Margin require 27% vs 20% Reg T on QQQ approx. delta and DTE NVDA IV 43 IV Rank 32 QQQ IV 22 IV Rank 27 NVDA ROC 3.47% QQQ ROC 3.01% I would want at least 30% more preferable 40% over market QQQ ROC due to the elevated single stock risk , IV, and Higher margin requirements. 4% to 4.25% ROC Since it is so popular to trade, it's the risk being discounted by demand. You are not getting paid for the risk you are taking on. Your capital is limited, there are plenty of trades where you can get paid for the risk your taking on. You don't have to learn by losing money, you learn how to manage the risk. with QQQ right now 3% every 10 days is an annualize 90% without compounding. If your risking only 1/5 aka 20% of your total capital at a time that is an 18% return a year.

you’re saying nvda isn’t paying enough risk adjusted return relative to what you can get on qqq right now? pretty interesting. Single stock risk needs to be compensated enough to be considered?

I pretty much sell puts as a way to engage in a limit buy at a rate I want I sold puts on INFQ while it was at $15 and the premium was about $4.50 That’s a nearly 33% discount I could’ve bought at had I been exercised

I manage tail risk by: - selling spreads (defined risk) - diversifying across sectors and tenors (although still end up heavy in tech) - Taking profit immediately when it presents itself.

Made the rookie mistake of selling out of my call debit spread last Friday I figured the market wouldn’t rally and I figured I’d save $283 from the trade but in the process locked in a $1500 loss that by the end of the day would have been a full winner for like $1900 but it was so far out of the money… I knew I should have just left it alone and that was a rookie mistake I knew better but tried to save a couple bucks when I could have won my trade

we make the best decisions we can under pressure. as long as you follow your rules, thats what matters

Steamrolled this past month on COHR, then sold CC around cost basis. It popped the past week, should’ve rolled but the got called away. I was kicking myself on the downturn and the run back up. Basically leveled my month of June. Hard to learn lessons with the IV in the semis rn with these swing but Im moving to lower IV stocks and better management skills.

While I occasionally sell CC’s I’ve largely quit after a one year where my $100k in gains was screwed by $70k in drops of underlying tickers. Too many examples of events that were impossible to foresee pulling the rug out from under good quality, undervalued stocks. I now do calendar and diagonal spreads - lower risk. If you can harvest theta while being delta neutral why not? However, my best returns are from deep research to find undervalued or overvalued stocks and identify the spark that will set it off, I used to run ATM CC’s on a particular stock. Round tripped that guy a dozen or more times. Alway avoiding earnings, literally trying to get exercised every time. 3%, 4% sometimes even 6% in <45 days. Now I take positions with catalysts and when they work out it is often 300% or more. Yes fewer and farther between and lots of research to find them but a lot of fun when you do. They are also easier to unwind when the spark fails to catch fire. Downside risk on CC’s is more constraining, You think if it trades against me I buy it back and close the position, but in Reality that event that hit your underlying just made the IV jump and the MM increase the spread. Even avoiding earnings isn’t enough because the black swans don’t come out in earnings they come out mid cycle or from a competitor or an analyst report that is designed to churn client portfolios.

how do you approach underlying selection now?

I look for catalysts among beaten down names and overvalued ones. Then develop a thesis and develop a Bull/bear case for that thesis. Then set up a set of milestones that get reevaluated and a timeline to compare against. Then monitor a set of indicators such as put/call ratio, IV trend, whale activity, Anchored VWAP, etc. Also industry specific stuff - currently have positions in several firms with sub prime exposure so monitor ABS pre sales reports from S&P and Fitch, industry tracking firms, etc. If there is litigation I follow the court filings. And of course the Edgar filings and earnings calls. AI agents are helpful for running those scans and data collection. I look hard at turn arounds but they take loads of research and only a small % are investable. Seen too many ‘turn arounds’ that are really just bad management meets market deterioration and deteriorating capital and cash flows.

My best lesson is that no matter how bullish I am on a stock I'm not a fortune teller, so eg when stock drops near my strike I roll very wide to capture the maximum premium since it is at the optimum premium window.