Brokerage options for selling naked puts?

[Jackwhitfield]

Hi All,

I am new to the scene and looking to sell naked puts. Can anyone recommend a good broker with a good platform that will allow me to sell puts on US stocks even tho I am an Aussie? I know Interactive is one but I am curious to find out if there are any options?

Thanks for your time guys!

 

[pixel]

I've heard of selling naked Calls, a dangerous practice that could leave you vulnerable; but if you sell a Put, isn't that an invitation to "put" some stock to you at a certain price? In that case, it doesn't matter whether you hold any or none.

 

[OmegaTrader]

I've heard of selling naked Calls, a dangerous practice that could leave you vulnerable; but if you sell a Put, isn't that an invitation to "put" some stock to you at a certain price? In that case, it doesn't matter whether you hold any or none.

Hi All,

I am new to the scene and looking to sell naked puts. Can anyone recommend a good broker with a good platform that will allow me to sell puts on US stocks even tho I am an Aussie? I know Interactive is one but I am curious to find out if there are any options?

Thanks for your time guys!

writing puts would gives one downside risk less premium.

To protect a put one would have to go short. But this adds the upside risk less premium less interest. which kind of doesn't make any sense. Unless one thinks it is going to go up a small amount or stay the same.

Or

maybe one thinks the options are overvalued and therefore the premium will cover any downward movement.

The stock price falling eats into the premium too much and stock price rising means that buying becomes a better strategy.


If one thought the stock was going up enough it would be easier to just buy and catch the move.
If one thought the options were overvalued, then maybe one would write both put and call , but that is risky because asymmetry is against the writer.


Maybe one would protect the put with another OTM put or
short and then buy a OTM call to protect the up side risk.

So one has understand the direction and or magnitude of the move.

It seem a bit tricky to do.

Especially for a beginner, which I am as well

 

[hamli]

Tastyworks appears to have very good brokerage rates and might be available from end of January onwards. Initially contains stocks & options, and futures to be added in March. Note that it is a newer platform though so there may be glitches, but at least the software appears slim and easy to use.

 

[Virge666]

cannot frigging wait for tastyworks... A single dollar a contract and no closing commission.

Plus some decent software for a change

 

[Virge666]

And selling naked puts is fine. it's the only way I buy stock.

But remember that size kills... Don't sell three puts if you can't afford not wish to own 300 shares of the stock.

Keep it small. Making one percent is 12% a year... Twice what the index makes on average... Learn the math

 

[minwa]

Keep it small. Making one percent is 12% a year... Twice what the index makes on average... Learn the math

The S&P500 index averages are a bit higher than 6%.

1928-2016 11.42%
1967-2016 11.45%
2007-2016 8.65%

Nevertheless 12% will be a good return for a cash covered put seller.

 

[OmegaTrader]

And selling naked puts is fine. it's the only way I buy stock.


But remember that size kills... Don't sell three puts if you can't afford not wish to own 300 shares of the stock.

Keep it small. Making one percent is 12% a year... Twice what the index makes on average... Learn the math

This is not advice
DO YOUR OWN RESEARCH

You buy stock by writing puts??

Are you sure??

Do you mean that is your strategy???

or you want to buy the stock anyway??

so if it goes down you don't mind??

Exercise will not occur at expiry if the stock has gone up.....

Therefore no stock.

so that is a bit confusing because gain is asymmetrical

You missed out on all the gains to get 1% and took all of the losses for 1%.

Also what do you do with the stock after that? You have bought the stock at a higher price than the market price.

Do you sell it for a loss or write another put at the lower price and hold it and then by more stock if it falls again??


Please explain Ms Hanson haha


yes risk management is super important, but posting sizing will not turn a unprofitable strategy into a profitable strategy.

The 1% you are referring too I will assume is the premium.
Remember that losses can be incurred when the asset falls.
Assets do not go up in perpetuity every month...
Although I would like that very much


Plus the writer is taking on additional risk which can show up painfully in a sharp decline, which could take a year or years to come to fruition. If actual volatility is greater than the implied volatility at the time of writing. The writer wears the loss. Think GFC 20+% and that is without gearing.

Additionally returns have to be risk adjusted to account for differences in market returns and the risk free rate, ie calculating alpha or similar analysis.


Not to mention any possible taxation disadvantage of an options strategy

1% net will not be guaranteed every month.


However over the long term I have read some studies which suggest that implied volatility is greater than actual volatility. Meaning that market participants may pay extra for the hedge a put provides.

However the gain is minimal and certainly not 12% per annum,
once volatility is taken off (losses when then the asset falls),
then transaction and taxation differences

and then this is compared to the market and risk free rate.


I doubt over-performance would be twice the index risk adjusted.

Just by writing a put option each month.



The market 6% return per year, where did you get that figure from??

If you have proof of your claims including 12% net return per year please provide them.


In summary:

Learn the math

Unfortunately lunch is not that free.


Cheers






This is not advice
DO YOUR OWN RESEARCH

 

[Virge666]

Happy to, before i write it up - are you with me when i use options terms like Delta / Vega and Theta. I know i will sound like a bit of a dick, but at least we will both be on the same page.

 

[OmegaTrader]

Happy to, before i write it up - are you with me when i use options terms like Delta / Vega and Theta. I know i will sound like a bit of a dick, but at least we will both be on the same page.

I don't want theory....

I want proof.

Prove you can make double the market per year on a risk adjusted basis including transaction costs and taxation disadvantages.

You don't need to go into the valuation that can be read in textbooks or for free online.

Just show that your claims can be verified.

Equity graph, list of trades etc

 

[Virge666]

This is not advice

I doubt over-performance would be twice the index risk adjusted.

Just by writing a put option each month.

The market 6% return per year, where did you get that figure from??

If you have proof of your claims including 12% net return per year please provide them.

DO YOUR OWN RESEARCH

Sorry mate - just cutting down your posts a bit - lots of paragraphs.

OK - i want to get long CBA... say about 500 shares worth. Looking at today. CBA is $84.75

30 delta calls in Feb have a midprice around 70 cents. So i am going to sell 5 CBA 87 Call contracts @ .70 and I will collect $350 for that. Job done.

If the stock goes up - i get the stock at a discount - if it goes down - i get to keep the $350, if the stock stays where it is and doesn't go past $87 - i get to keep the $350. If the stock goes ballistic... I lose out.

As for proof of my returns... umm... no idea how, and even if there was a way - i am not sharing my personal finance records with a public forum. You asked for how i make my trades and i gave you a rough outline - what you do with that is up to you.

My trading methodology works well in stable and down markets as i carry short delta on my positions. In fact - if the market tanked here, i would be very happy.

Where my methodology doesn't work is in a quick upward moving market. The latest move in the SPY post election hurt me, but the plummet in GOLD didn't.

The other bit that i have to mention is that the bar is VERY low. You can get 2% in a cash account presently. So to make 1% a month - that is $1 for every $100 invested. or $10 for every $1000 invested. I only have to make $200 a month on a $20K account to hit 12% a year. I don't find that a difficult proposition at all. I am up double that already in January, though in saying that, this market is doing nothing...

So there it is - i just get lots of trades on, collect the premium and keep the trade sizes small. I have 29 different positions on as we speak and hope to get some more on once we get some volatility in the market.

Enjoy

 

[Virge666]

I don't want theory....
I want proof.

Prove you can make double the market per year on a risk adjusted basis including transaction costs and taxation disadvantages.

Sorry squire, if you are in Sydney - you are welcome in my trading den and I can show you the last 12 months, but i am not posting my records on here.

As i said above - it is only $200 for every $20K you have in the market - it really isn't that hard.

 

[OmegaTrader]

Sorry mate - just cutting down your posts a bit - lots of paragraphs.

OK - i want to get long CBA... say about 500 shares worth. Looking at today. CBA is $84.75

30 delta calls in Feb have a midprice around 70 cents. So i am going to sell 5 CBA 87 Call contracts @ .70 and I will collect $350 for that. Job done.

If the stock goes up - i get the stock at a discount - if it goes down - i get to keep the $350, if the stock stays where it is and doesn't go past $87 - i get to keep the $350. If the stock goes ballistic... I lose out.

As for proof of my returns... umm... no idea how, and even if there was a way - i am not sharing my personal finance records with a public forum. You asked for how i make my trades and i gave you a rough outline - what you do with that is up to you.

My trading methodology works well in stable and down markets as i carry short delta on my positions. In fact - if the market tanked here, i would be very happy.

Where my methodology doesn't work is in a quick upward moving market. The latest move in the SPY post election hurt me, but the plummet in GOLD didn't.

The other bit that i have to mention is that the bar is VERY low. You can get 2% in a cash account presently. So to make 1% a month - that is $1 for every $100 invested. or $10 for every $1000 invested. I only have to make $200 a month on a $20K account to hit 12% a year. I don't find that a difficult proposition at all. I am up double that already in January, though in saying that, this market is doing nothing...

So there it is - i just get lots of trades on, collect the premium and keep the trade sizes small. I have 29 different positions on as we speak and hope to get some more on once we get some volatility in the market.

Enjoy

The post referred to writing naked puts, not calls...
12% without risk is only half the story.
easy to post returns without monetary value.

Monetary value can be changed on a chart also.

etc etc

 

[Virge666]

The post referred to writing naked puts, not calls...
12% without risk is only half the story.
easy to post returns without monetary value.

Monetary value can be changed on a chart also.

etc etc

Do the same with puts

Sell the Feb 80 Put for also about 70 cents...

if the stock goes up - keep the cash, if it goes down below 80 - get the stock at a discount, if it doesn't move - keep the cash. if you get assigned - sell the 30 delta calls against it for as long as you like each time lowering the cost basis of the original purchase.

Just did this with BHP - sold puts all the way up to $25.25. then got assigned 300 shares. I now am selling a straddle around it. Short both the 25.50 puts and the 26.50 calls. Been a good one that one.

 

[OmegaTrader]

Do the same with puts

Sell the Feb 80 Put for also about 70 cents...

if the stock goes up - keep the cash, if it goes down below 80 - get the stock at a discount, if it doesn't move - keep the cash. if you get assigned - sell the 30 delta calls against it for as long as you like each time lowering the cost basis of the original purchase.

Just did this with BHP - sold puts all the way up to $25.25. then got assigned 300 shares. I now am selling a straddle around it. Short both the 25.50 puts and the 26.50 calls. Been a good one that one.

If you write a put and the stock falls , then you get exercised then you have to buy the stock or hedge it etc

Correct??

So you are buying at a higher price than the market not a discount because the stock has fallen??

It depends on the magnitude of the fall and if the premium covers this.

Is that right??

I hope so...

 

[Virge666]

If you write a put and the stock falls , then you get exercised then you have to buy the stock or hedge it etc

Correct??

So you are buying at a higher price than the market not a discount because the stock has fallen??

It depends on the magnitude of the fall and if the premium covers this.

Is that right??

I hope so...

Yeah pretty much - but it is still a better price than buying it today for full price... if the stock price drops a lot - then you are in a world of hurt . . . but so are you if you own the stock

Look up Synthetic Straddle to see how the trade works...

 

[OmegaTrader]

Yeah pretty much - but it is still a better price than buying it today for full price... if the stock price drops a lot - then you are in a world of hurt . . . but so are you if you own the stock

Look up Synthetic Straddle to see how the trade works...

But you miss out on the opportunity to gain. the loss is only minimised by the premium.

 

[Virge666]

But you miss out on the opportunity to gain. the loss is only minimised by the premium.

Again,

It is all about expectations. I only need to make 1%. Sure you will not make as much if the stock goes ballistic, but by definition there is only a 30% chance of it doing that and then is has to go past that by the amount you sold the option for as well and then you have to account for the Delta values being different and it has to do all that inside 21 days.

So yeah - you might miss out on some cash sometimes... but you will have income ALL the time.

BTW - Great test for your broker, ask him what you want the stock do when you have a covered call on. If he says "to not go any higher than the strike price plus your premium" - RUN AWAY. Aussie brokers are salesmen - not traders. Been around them all my life.

 

[JJ10]

Again,

It is all about expectations. I only need to make 1%. Sure you will not make as much if the stock goes ballistic, but by definition there is only a 30% chance of it doing that and then is has to go past that by the amount you sold the option for as well and then you have to account for the Delta values being different and it has to do all that inside 21 days.

So yeah - you might miss out on some cash sometimes... but you will have income ALL the time.

BTW - Great test for your broker, ask him what you want the stock do when you have a covered call on. If he says "to not go any higher than the strike price plus your premium" - RUN AWAY. Aussie brokers are salesmen - not traders. Been around them all my life.

Which brokers do you use for options specially for multi leg trades?

 

[Virge666]

Which brokers do you use for options specially for multi leg trades?

I use interactive brokers

But soon will be using tastyworks