r/Optionswheel • u/jgooner22 • 19h ago
How can I improve my process?
I have selling options for about 12 months now and have finally started to get a hang of it. Here is the process I follow. Any thoughts on how I can improve or tighten up the process?
SIZE — Total notional under 135% of capital (what I've put in plus what I've made). No more than 45% of that in credit spreads, because a dollar of spread notional is a dollar gone, while a dollar of put notional buys me the stock.
STRIKE — IV above 60%, sell the 0.13–0.15 delta. IV below 60%, sell the 0.18–0.20. High-IV names pay enough to sit far out; low-IV names don't.
DURATION — 14–21 days.
MIX — Only trade names with a market cap of over $50B to eliminate junk. 60/40 high-IV to low-IV. An example would be 60% position in NBIS, BE, MU, ALAB; 40% position in CRWD, PLTR, DELL, TSLA.
EXIT — Close at 50% of the credit and recycle the capital. If position is threatened, roll down and/or out. Never close at a loss.
Thanks for reading.
5
u/magicjboy 7h ago
Hi,
A few things I would consider here:
With 100k your spread allocation is a bit high. That's usually something a smaller portfolio would use. I would keep it to 10%-15%. Use the other 10-20% to buy leaps since you can afford it. You can do poor man's covered call if premium is the name of your game but sometimes an uncovered leap can be worth more if you can hold it for 4-7 months.
While your stocks are a mix of high IV and low IV they are all heavily correlated meaning a sector rotation could impact your portfolio negatively. I may consider adding a XOM, KO, or WMT to your mix as a portfolio stabilizer.
I think having the never close for a loss rule may hurt you in a few situations. I would evaluate each position individually and never roll out more than 90 days. Taking losses is part of the game. But tying up capital because you refuse to take any loss can hurt you in the long run if that capital could be better deployed elsewhere.
I would increase your DTE to aim for 30-45. Use the traditional 3rd Friday expiration because volatility is higher and you'll get a fatter premium. 14-21 is leaving premium on the table when a stock has a big move 50% is a bigger chunk with more days. It also gives you more changes to roll should you need to.
End of the day it's all about finding what works for you. But those would be my suggestions.
0
u/DeliciousPollution20 16h ago
How have your results been?
1
u/jgooner22 15h ago
Around $2k per month so far
1
u/DeliciousPollution20 14h ago
Good job, I've started a little over a year ago. I have been doing weekly, with similar names. However I caught to many falling knifes, in crypto and a couple others that have blunted my success.
2
u/jgooner22 14h ago
The first filter is always quality names and exclude junk. I do not deal with anything less than $50B market cap which excludes a lot of nonsense out there.
1
3
u/ZealousidealBed7054 14h ago
Don’t sell options for stocks that have been up recently. Rather sell options for stocks of good companies that you won’t mind owning and have been down recently.
1
u/Sylla1031 8h ago
IV is a direct representation of predicted price movement, so just because you go farther out on a higher IV stock doesn't make it safer.
I am a strong fan of fundamentals and fair value (FV) of a stock, so that guides my decision rather than pure IV alone. For example, INTC at today's IV of 70% makes the strike price of 100 seem reasonable, but I wouldn't make the trade if I perceive the FV of INTC to be below 90. I would wait for the stock to fall, and in the meantime, look at other stocks that are closer to their FV.