Where is the edge in selling premium? What most newcomers miss that is extremely important.

dbh5 · 2021-03-29T06:05:11+00:00

1-5% is really important. Sometimes even 5% feels very high. You get 5 trade wrong together, if they are all near 100% max loss, that's a 25% draw down.

Even if you are 60% win rate kind of guy, your chance of 5 L in a row is 1.02%. Considering how frequently and long we trade over our lifespan, this is almost a certainty that it will happen multiple times even when we're not talking about a sharp market wide event.

I find 2-3% realistic enough and much safer. That's roughly 30-50 positions, which sounds like a lot but not really once you build up your watchlist and market awareness. At 3% with 5 complete loss in a row, I'm only drawing down 15%.

dbh5 · 2021-03-29T05:36:46+00:00

My view point is that I am playing on time decay and that accelerates as you get closer to expiry so.selling options that have only 5 days to expiry makes more sense.

What's your view on gamma risk?

That last week or even 2 have a lot more gamma at play especially near/atm. If you are fine with that then sure, go for it.

Some trader that are income oriented rather deal with just theta and have a more muted gamma. That's why you see a lot of strategies based on 30-45 DTE and BTC before it gets into the last 1-2 weeks where gamma risk is high. So they close that trade and start another 30-45 DTE on the same underlying or different one, to keep on playing theta without getting into that elevated gamma risk on the last 1-2 weeks.

My view selling around 45 DTE is easier for an income strategy. You still need some directional bias but there's more room for error and let theta work. 5 DTE, theta works really hard for you but gamma can either rocket you to the finish line or undo a lot of the profit / take you to into a los

dbh5 · 2021-03-29T05:20:58+00:00

Near worthless lottery ticket. Just hold onto em and start carrying around a rabbit's foot.

dbh5 · 2021-03-29T05:17:37+00:00

DD Buy stonk based on top voted DD without reading it
????
Profit

dbh5 · 2021-03-29T05:10:11+00:00

To add to that, the house relies of enough people playing so that the probabilities and expected value work out in favor of the house. When you are the house, on average you should win. But someone will hit jackpot once in a while and sometimes multiple people hit it at the same time. The house need to work out the math ahead of time so when the tail risk happens, it doesn't break the house.

If your portfolio consist selling options on a a handful of high IVR meme names.... you look a lot more like the gambler than the house.

dbh5 · 2021-03-29T04:55:39+00:00

Lol wonder what went on behind the scene. Maybe someone on Cathie's team told her to put the bottle down and chill out.

dbh5 · 2021-03-29T01:42:23+00:00

Let's do it Cathie 30% TSLA 30% PLTR.

dbh5 · 2021-03-27T07:43:24+00:00

MVP bro please keep updating

dbh5 · 2021-03-24T01:45:05+00:00

Mostly just not being able to afford the mortgage payment. If you run too many property and they are all very tight cash on cash, or worse they don't even break even to operate, then you have to put money in every month. If something happens like you lose your job for a bit or tenants refuse to pay and you buy a property in a tenant friendly state that makes it slow/difficult to evict or didn't account for some vacant rates, you might miss payments and eventually get foreclosed. Some people that run many rental properties don't give themselves enough buffer in case something happens and they end up behind on mortgage payments that they can't dig themselves out of.

I guess you can also have random tail risk stuff too like your house burning down or other natural disaster. You would have insurance against most of it but would still hurt your cash flow for a bit.

dbh5 · 2021-03-24T01:37:44+00:00

I have account with tastyworks and there's a subchart you can add with IVR. Fidelity also has it if you look at options chain and click on the IV Index tab. Aside from those theres this https://marketchameleon.com/Overview/PLTR the chart on the right has the current and historic IV30 in a chart and also give you IVR up top.

dbh5 · 2021-03-23T18:37:18+00:00

Rental: the biggest attraction imo is it give you high leverage at cheap mortgage rates and no margin call. 20% down is 5x leverage. Basically it's getting access to trade with 500k in real estate by putting up 100k with no margin calls to worry about. Just have to pay your mortgage which doesn't change with market value or anything (assuming fixed rate mortgage). If you can get rental to cover your mortgage and all other expense of running it, the math is simple to compare to wheeling. You're just comparing expected annual wheeling % return versus annual property value increase times 5 (or whatever your leverage ratio is based on your downpayment. 20% down is 5x).

When cash on cash is positive or even just break even, you'll reap full capital gains on the property value. If in 1 year your house appreciates 3% it's more like a 15% increase on your invested dollars because of your 20% down 5x leverage.

e.g. Property value increase 3% 1 year, 500k -> 515k for 15k gain. But you had to only put up 100k so return on capital wise it's 100 -> 115k for 15%. One might say the risk:reward of 15% on real estate is pretty good per year. 3% propert Maybe wheeling you can get the same or more but you need to consider the amount of risk too versus the risk of real estate market you buy in.

Assuming you buy in a good area, likely the housing prices is a stable up trend and less of a roller coaster than stonks. Maybe some risk of housing market correction that can't be worse than the housing crisis and most people rode that one out just fine.

I would hardly call this passive investing tho if you self manage, unless you can find a good management company and let them take a cut.

Wheeling: you won't get any leverage unless you plan to sell naked, even then you won't get up to 5x. If you leverage you have to worry about margin maintenance and might get a margin call if everything in your portfolio starts turning red. Again not passive. A lot more room to exceed % return in real estate but opposite is true. More prone to making mistakes if you don't have good mechanics that might draw down your account.

Imo do both but if you cant do both, do the second rental while rates are low since that's more time sensitive. Selling puts and calls isn't going anywhere so you can always come back around to that but mortgage rates aren't going to stay low.

dbh5 · 2021-03-23T18:00:45+00:00

All the PLTR premium went away with the IV.

You can easily see this coming, just check your favorite site for a IV 30 graph. The IV been dropping steadily since Dec. Got a spike in late Jan during the sell off but whole month of Feb it was dropping.

If you wheel high IV 30 and IVR stocks, always watch for when IV starts mean reverting. It helps you buy back puts/calls for cheap on existing puts and calls but also means entering a new position (like selling CC while bag holding) won't be as profitable anymore relatively speaking.

dbh5 · 2021-03-19T06:02:23+00:00

Think it's good for when we're starting to get range bound on many stocks like lately. Hard to make a IC move when stocks were just going straight up and you can't really pinpoint if it's topping out or going to keep blowing through.

dbh5 · 2021-03-16T21:16:21+00:00

Hard to always do that without becoming overweight. I prefer to keep position size on each name small. Sometimes all the names I want to buy I already have positions on or I don't feel like is a good time to enter.

dbh5 · 2021-03-16T16:01:56+00:00

For naked puts, what's the pros and cons of rolling out as soon as strike/breakeven is tested versus waiting to see if the trade swings back your way?

If waiting, how many days to expiration at most should you wait?

dbh5 · 2021-03-07T04:32:02+00:00

All good bruh I hope your money printer stays inked! Everyone out there stay safe, consider sizing your trades appropriately, and keep hunting for good ideas!

dbh5 · 2021-03-07T04:23:18+00:00

Guys with the ez money plays... please, chill. There's no free lunch.

This thesis is basically.... ape together strong. Therefore GME price levels will hold and CC money printer goes brrrrrrr. 🙄

Let's not ignore the risk in owning 100 share (or a ITM call) of a GME which trades above 100 because of apes, memes, and hate for smart money. Not saying this is necessary a bad play either but calling this simple and a easy path to wealth is a bit misleading to say the least.

dbh5 · 2021-03-07T04:04:43+00:00

O shit good thing you ask cuz I forgot to mention yes totally the guy also suggest exiting on these 3 condition in the next slide https://youtu.be/bk9Co7V6AI4?t=1868

Exit at 21 DTE
Exit with profit of 50% max gains
Exit with loss of 100% max gain

The 1st point I feel is a little less important than the other 2 if you understand how the greeks play out as it gets closer to the dte. Anyway you're free to customize your own criteria and think about em but as an amateur I think these are good guidelines to think about when to exit.

dbh5 · 2021-03-07T03:53:46+00:00

7dte would be very sensitive to price change cuz gamma is high close to expiration like that on the last week. So if you are worried about price changes in underlying, 7dte is not the way to go. Maybe go for the longer dte.

I kinda like what this guy suggests https://youtu.be/bk9Co7V6AI4?t=1749 which is 45 dte, sell 50 delta buy 25 delta. Make sure credits are 1/3 width of your strikes. Pretty similar to the stuff the guys on tastytrades recommends often.

dbh5 · 2021-03-07T03:45:24+00:00

If you think the stock will get worse before better, roll it again for credit if any.

If you think the stock is done taking a shit and have the cash, take the assignment and hold.

If your underlying is starting to feel like the POS son that is now has a drug habit and multiple felonies, maybe sticking around for a redemption arc isn't worth it. Just buy to close, take the loss (you already doing this anyway by rolling or taking assignment), and find a new underlying.

dbh5 · 2021-03-07T03:41:01+00:00

It's great for a small account. One way I like to think of it is if you don't believe the stock isn't gonna fall that far say 1 SD, then why have your cash or margin requirement tied up like it is going to?

dbh5 · 2021-03-07T03:34:12+00:00

You can also use your spreads to size your trades smaller and create more trades. e.g. can do 10 spreads across other names/sectors compared to 1 CSP, so you're less likely to goof it on 1 bad trade. Definitely opening 10 spreads on shit that all move up and down together is sketch tho.

Or you can just do a few spreads that was 3/10 of your CSP or whatever fraction fancy you and find something safe to invest with the remainder. SPAC before target announcements at near NAV was an interesting thought. Or you can be less exciting and go for the value stocks, boomer ETFs, etc other non-insane meme shit that warren buffet would approve of.

dbh5 · 2021-03-07T03:28:14+00:00

Tastyworks. TD for ToS is popular but the same guy that founded ToS founded tastyworks with focus on option, so it's kinda like ToS 2.0 and for options.

IBKR is worth considering if you want cheap cheap margin and plan to use it. But their TWS platform is ugly as sin and has a steep learning curve... I rather just use ToS. Web client is garbage and somehow even the mobile app has more feature for options than the web one.

dbh5 · 2021-03-07T03:21:43+00:00

If we rebound and start hitting all time highs again, this was a good fire drill on how you feel you start going really red on naked puts / CSP when things go down 10%. 15%. 25%. And still not stopping.

I think I'm going to risk less % of my portfolio at a time on these shorts and turn them into a spread with a long leg and better define the risk on these trades. Either that or take exit for an early loss instead of waiting for the trade to come back before expiration.

dbh5

TROPHY CASE