ETF STRATEGY
Paul
I've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.
CHUCK
B
Great question Chuck,
On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.
Hope that helps.
Paul
PaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
So for those of us who want to start with ETF options and don't own i.e. SPY, it looks like we need to wait a while for a big down turn before we sell Puts. Am I thinking this through correctly?
On Sep 14, 2012, at 7:52 AM, Paul Madison wrote:
Great question Chuck,On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.Hope that helps.PaulPaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
My mother always said "Patience is a virtue" and I always said "Then why didn't you bless me with it?"
Yes the prudent play would be to wait for a correction and start selling Cash Secured PUTS when you can get premiums on strikes that are at or below the bottom of the range.
Some times sitting is as important of an action as doing.
On Fri, Sep 14, 2012 at 7:35 AM, Theresa H <breezytreeshome@gmail.com> wrote:
So for those of us who want to start with ETF options and don't own i.e. SPY, it looks like we need to wait a while for a big down turn before we sell Puts. Am I thinking this through correctly?On Sep 14, 2012, at 7:52 AM, Paul Madison wrote:Great question Chuck,On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.Hope that helps.PaulPaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
Paul
I'm not quite sure I understand. Right now the SPY is above the upper band so if I sell a put chances are the market will correct and start heading down and the stock will put to me at a high price. With my funds tied up in the stock it could be difficult to sell puts on the way down and with the stock going down it's not the time to sell calls. Or do you sell ITM calls, or do you just sell the ETF outright? Thanks for your patience Paul, I just feel like I'm missing
something.
CHUCK B
From: Paul Madison <madispa@gmail.com>
To: "cool_club@bivio.com" <cool_club@bivio.com>
Sent: Friday, September 14, 2012 7:52 AM
Subject: Re: [cool_club] ETF STRATEGY
To: "cool_club@bivio.com" <cool_club@bivio.com>
Sent: Friday, September 14, 2012 7:52 AM
Subject: Re: [cool_club] ETF STRATEGY
Great question Chuck,
On both
sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.
Hope that helps.
Paul
PaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
Thanks Paul! Just wanted to make sure. I will still be playing as much as possible with the virtual trader and placing lots of trades in the mean time - don't want to forget what I've learned while I'm waiting for an opportunity!
Theresa
On Sep 14, 2012, at 8:52 AM, Paul Madison wrote:
My mother always said "Patience is a virtue" and I always said "Then why didn't you bless me with it?"Yes the prudent play would be to wait for a correction and start selling Cash Secured PUTS when you can get premiums on strikes that are at or below the bottom of the range.Some times sitting is as important of an action as doing.On Fri, Sep 14, 2012 at 7:35 AM, Theresa H <breezytreeshome@gmail.com> wrote:
So for those of us who want to start with ETF options and don't own i.e. SPY, it looks like we need to wait a while for a big down turn before we sell Puts. Am I thinking this through correctly?On Sep 14, 2012, at 7:52 AM, Paul Madison wrote:Great question Chuck,On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.Hope that helps.PaulPaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
Chuck wrote:
With my funds tied up in the stock it could be difficult to sell puts on the way down and with the stock going down it's not the time to sell calls.
Once the stock is put to you, and you own it, you then are selling calls, not puts. You could sell calls and hope for the stock to go up, but once at the upper BB it's more likely to go down (unless I own it and it does what it is not likely to do, lol)
On Sep 14, 2012, at 9:28 AM, charles brunell wrote:
PaulI'm not quite sure I understand. Right now the SPY is above the upper band so if I sell a put chances are the market will correct and start heading down and the stock will put to me at a high price. With my funds tied up in the stock it could be difficult to sell puts on the way down and with the stock going down it's not the time to sell calls. Or do you sell ITM calls, or do you just sell the ETF outright? Thanks for your patience Paul, I just feel like I'm missing something.CHUCK BFrom: Paul Madison <madispa@gmail.com>
To: "cool_club@bivio.com" <cool_club@bivio.com>
Sent: Friday, September 14, 2012 7:52 AM
Subject: Re: [cool_club] ETF STRATEGY
Great question Chuck,On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.Hope that helps.PaulPaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
Sorry Chuck I think I may have confused you with my answer.
You were right in your first question when you said "...what's required now is the patience to wait for it to drop down to the lower band."
That is exactly the next thing to do. Then once you can start selling Puts at good premiums on strikes that are at or below the bottom of the range then that is when you STO Puts, and then BTC when they bounce. Keep repeating until you are exercised (might be several cycles or more).
Then once you are in the ETF start selling calls when you can do it at good premiums that are at strikes that are above where your ETF was PUT to you. Or alternately you can practice patience on the Call side as well and wait to start selling the calls until you get strikes that are above the upper band. This approach will give you some Price appreciation as well as the option premiums.
Hope that helps.
Paul Madison
On Fri, Sep 14, 2012 at 8:28 AM, charles brunell <cbrunelll@yahoo.com> wrote:
PaulI'm not quite sure I understand. Right now the SPY is above the upper band so if I sell a put chances are the market will correct and start heading down and the stock will put to me at a high price. With my funds tied up in the stock it could be difficult to sell puts on the way down and with the stock going down it's not the time to sell calls. Or do you sell ITM calls, or do you just sell the ETF outright? Thanks for your patience Paul, I just feel like I'm missing something.CHUCK BFrom: Paul Madison <madispa@gmail.com>
To: "cool_club@bivio.com" <cool_club@bivio.com>
Sent: Friday, September 14, 2012 7:52 AM
Subject: Re: [cool_club] ETF STRATEGY
Great question Chuck,On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.Hope that helps.PaulPaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
Paul Madison
Thanks Paul
Sounds like patience is the key.
My mother always said "Patience is a virtue"
I think your mother would have great at selling
options!
CHUCK B
From: Paul Madison <TheCOOLClubDude@gmail.com>
To: cool_club@bivio.com
Sent: Friday, September 14, 2012 10:22 AM
Subject: Re: [cool_club] ETF STRATEGY
To: cool_club@bivio.com
Sent: Friday, September 14, 2012 10:22 AM
Subject: Re: [cool_club] ETF STRATEGY
Sorry Chuck I think
I may have confused you with my answer.
You were right in your first question when you said "...what's required now is the patience to wait for it to drop down to the lower band."
That is exactly the next thing to do. Then once you can start selling Puts at good premiums on strikes that are at or below the bottom of the range then that is when you STO Puts, and then BTC when they bounce. Keep repeating until you are exercised (might be several cycles or more).
Then once you are in the ETF start selling calls when you can do it at good premiums that are at strikes that are above where your ETF was PUT to you. Or alternately you can practice patience on the Call side as well and wait to start selling the calls until you get strikes that are above the upper band. This approach will give you some Price appreciation as well as the option premiums.
Hope that helps.
Paul Madison
On Fri, Sep 14, 2012 at 8:28 AM, charles brunell <cbrunelll@yahoo.com> wrote:
PaulI'm not quite sure I understand. Right now the SPY is above the upper band so if I sell a put chances are the market will correct and start heading down and the stock will put to me at a high price. With my funds tied up in the stock it could be difficult to sell puts on the way down and with the stock going down it's not the time to sell calls. Or do you sell ITM calls, or do you just sell the ETF outright? Thanks for your patience Paul, I just feel like I'm missing something.CHUCK BFrom: Paul Madison <madispa@gmail.com>
To: "cool_club@bivio.com" <cool_club@bivio.com>
Sent: Friday, September 14, 2012 7:52 AM
Subject: Re: [cool_club] ETF STRATEGY
Great question Chuck,On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.Hope that helps.PaulPaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
Paul Madison
Is there then, a strategy to follow the Simple
Moving Average down to the lower Bollinger Band using Covered
Options?
I understand using the ETF near the bottom BB to initiate the strategy and then to follow it back up to the upper BB, but don't see the strategy for following it down.
COOL Club trade status - Am I reading the SPY C correctly: with 5 days left, it would be cost prohibitive to BTC the trade so there is a probability that the position will be assigned at the 139 strike on Friday as the option is ITM by $5 already? The strategy is working and you'll be back into a cash position?
Malcolm
I understand using the ETF near the bottom BB to initiate the strategy and then to follow it back up to the upper BB, but don't see the strategy for following it down.
COOL Club trade status - Am I reading the SPY C correctly: with 5 days left, it would be cost prohibitive to BTC the trade so there is a probability that the position will be assigned at the 139 strike on Friday as the option is ITM by $5 already? The strategy is working and you'll be back into a cash position?
Malcolm
On 9/14/2012 7:38 AM, charles brunell
wrote:
Thanks PaulSounds like patience is the key.My mother always said "Patience is a virtue"I think your mother would have great at selling options!CHUCK B
From: Paul Madison <TheCOOLClubDude@gmail.com>
To: cool_club@bivio.com
Sent: Friday, September 14, 2012 10:22 AM
Subject: Re: [cool_club] ETF STRATEGY
Sorry Chuck I think I may have confused you with my answer.
You were right in your first question when you said "...what's required now is the patience to wait for it to drop down to the lower band."
That is exactly the next thing to do. Then once you can start selling Puts at good premiums on strikes that are at or below the bottom of the range then that is when you STO Puts, and then BTC when they bounce. Keep repeating until you are exercised (might be several cycles or more).
Then once you are in the ETF start selling calls when you can do it at good premiums that are at strikes that are above where your ETF was PUT to you. Or alternately you can practice patience on the Call side as well and wait to start selling the calls until you get strikes that are above the upper band. This approach will give you some Price appreciation as well as the option premiums.
Hope that helps.
Paul Madison
On Fri, Sep 14, 2012 at 8:28 AM, charles brunell <cbrunelll@yahoo.com> wrote:
PaulI'm not quite sure I understand. Right now the SPY is above the upper band so if I sell a put chances are the market will correct and start heading down and the stock will put to me at a high price. With my funds tied up in the stock it could be difficult to sell puts on the way down and with the stock going down it's not the time to sell calls. Or do you sell ITM calls, or do you just sell the ETF outright? Thanks for your patience Paul, I just feel like I'm missing something.CHUCK B
From: Paul Madison <madispa@gmail.com>
To: "cool_club@bivio.com" <cool_club@bivio.com>
Sent: Friday, September 14, 2012 7:52 AM
Subject: Re: [cool_club] ETF STRATEGY
Great question Chuck,
On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.
Hope that helps.
Paul
PaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
--
Paul Madison
Dear Malcolm,
I will let Paul answer you about what he does when he is in cash and the market looks like it might have more chance of going down than of going up. In that case, selling PUTs on SPY's is probably not a good plan.
However, to answer this question about the status of the trades on the COOL Club homepage:
When the status is red, it does mean the SPY is in the money and will be called away. When the option was sold, the decision was made that having this happen was an acceptable outcome. Don't forget that since there was a $4.20 premium received when the option was sold. So it will be as if the SPY is sold at $139+$4.20=$143.20 per share. A little lower than the current value but not much. And, of course, in the stock market, a lot can happen between now and Friday!
Laurie Frederiksen
Invest with your friends!
www.bivio.com
Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
I will let Paul answer you about what he does when he is in cash and the market looks like it might have more chance of going down than of going up. In that case, selling PUTs on SPY's is probably not a good plan.
However, to answer this question about the status of the trades on the COOL Club homepage:
COOL Club trade status - Am I reading the SPY C correctly: with 5 days left, it would be cost prohibitive to BTC the trade so there is a probability that the position will be assigned at the 139 strike on Friday as the option is ITM by $5 already? The strategy is working and you'll be back into a cash position?
When the status is red, it does mean the SPY is in the money and will be called away. When the option was sold, the decision was made that having this happen was an acceptable outcome. Don't forget that since there was a $4.20 premium received when the option was sold. So it will be as if the SPY is sold at $139+$4.20=$143.20 per share. A little lower than the current value but not much. And, of course, in the stock market, a lot can happen between now and Friday!
Laurie Frederiksen
Invest with your friends!
www.bivio.com
Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
COOL Club trade status - Am I reading the SPY C correctly: with 5 days left, it would be cost prohibitive to BTC the trade so there is a probability that the position will be assigned at the 139 strike on Friday as the option is ITM by $5 already? The strategy is working and you'll be back into a cash position?
Malcolm
Malcolm
I'm not Paul, he will be the one to give you the definative answer. But I think this is is where the patience comes in, waiting for the price to come down to the lower band. Any way that's what I'm doing now.
CHUCK B
From: Malcolm Myles <malcolm@mmyles.com>
To: cool_club@bivio.com
Sent: Monday, September 17, 2012 3:39 PM
Subject: Re: [cool_club] ETF STRATEGY
To: cool_club@bivio.com
Sent: Monday, September 17, 2012 3:39 PM
Subject: Re: [cool_club] ETF STRATEGY
Is there then, a strategy to follow the Simple
Moving Average down to the lower Bollinger Band using Covered
Options?
I understand using the ETF near the bottom BB to initiate the strategy and then to follow it back up to the upper BB, but don't see the strategy for following it down.
COOL Club trade status - Am I reading the SPY C correctly: with 5 days left, it would be cost prohibitive to BTC the trade so there is a probability that the position will be assigned at the 139 strike on Friday as the option is ITM by $5 already? The strategy is working and you'll be back into a cash position?
Malcolm
I understand using the ETF near the bottom BB to initiate the strategy and then to follow it back up to the upper BB, but don't see the strategy for following it down.
COOL Club trade status - Am I reading the SPY C correctly: with 5 days left, it would be cost prohibitive to BTC the trade so there is a probability that the position will be assigned at the 139 strike on Friday as the option is ITM by $5 already? The strategy is working and you'll be back into a cash position?
Malcolm
On 9/14/2012 7:38 AM, charles brunell
wrote:
Thanks PaulSounds like patience is the key.My mother always said "Patience is a virtue"I think your mother would have great at selling options!CHUCK B
From: Paul Madison mailto:TheCOOLClubDude@gmail.com
To: cool_club@bivio.com
Sent: Friday, September 14, 2012 10:22 AM
Subject: Re: [cool_club] ETF STRATEGY
Sorry Chuck I think I may have confused you with my answer.
You were right in your first question when you said "...what's required now is the patience to wait for it to drop down to the lower band."
That is exactly the next thing to do. Then once you can start selling Puts at good premiums on strikes that are at or below the bottom of the range then that is when you STO Puts, and then BTC when they bounce. Keep repeating until you are exercised (might be several cycles or more).
Then once you are in the ETF start selling calls when you can do it at good premiums that are at strikes that are above where your ETF was PUT to you. Or alternately you can practice patience on the Call side as well and wait to start selling the calls until you get strikes that are above the upper band. This approach will give you some Price appreciation as well as the option premiums.
Hope that helps.
Paul Madison
On Fri, Sep 14, 2012 at 8:28 AM, charles brunell <cbrunelll@yahoo.com> wrote:
PaulI'm not quite sure I understand. Right now the SPY is above the upper band so if I sell a put chances are the market will correct and start heading down and the stock will put to me at a high price. With my funds tied up in the stock it could be difficult to sell puts on the way down and with the stock going down it's not the time to sell calls. Or do you sell ITM calls, or do you just sell the ETF outright? Thanks for your patience Paul, I just feel like I'm missing something.CHUCK B
From: Paul Madison <madispa@gmail.com>
To: "cool_club@bivio.com" <cool_club@bivio.com>
Sent: Friday, September 14, 2012 7:52 AM
Subject: Re: [cool_club] ETF STRATEGY
Great question Chuck,
On both sides you keep selling the same type (so Puts) until you finally get exercised and then sell the other (so Calls) above your basis price until you get called away. By having patience (something I don't always have) and waiting for the bottom signal, you are more than likely guaranteeing yourself some price appreciation on the ride up.
Hope that helps.
Paul
PaulI've been thinking a lot about the ETF session, with the SPY breaking the top band what's required now is the patience to wait for it to drop down to the lower band. When it does you start selling puts. Do you have guidelines as to when you stop selling puts? Maybe when it crosses the MA line? The more I think about it, it's just as important to know when to stop selling options as it is when to start.CHUCK B
--
Paul Madison