1.) Hold to exp 0:13 2.) Too tight spread 5:32 (debit spreads) 3.) Go naked 11:48 IMHO 2.) does has it merits. A tight spread is very binary - you win, or lose. You need only a small move for full profit (well, or loss). It's a good for directional trades, when the stock follows your idea.
Great video One thing worth noting about tighter spreads is more profit potential. 5 $2 wide credit spreads vs 1 $10 wide spread could be very big difference in actual premium collected. Of course as mentioned, it’s much riskier
Great video! Thanks Can you also please do a video on early assignment in case of a spread and what to do if you don’t have capital. Doesn’t the long put protect you against it?
Hi, Davis, I love your videos. As a beginner for options trader, in this market condition, what kind of main strategies can I use to practice for SPY or QQQ? Thanks, Steven
You can get started with these two playlists first: 1) ruclips.net/p/PLn4dMDRu5KCDeK6jw8FYO_MfIK8CW_Ycr 2) ruclips.net/p/PLn4dMDRu5KCAvNTiJI0IenB4UiU5F2a1u
What do you think of selling a put very deep in the money and then buy a put at close to the current stock price. You receive very good cash up front, and if exercise, the cash simply offsets the early assinment. I did this recently on Sketchers currently 54. I sold a put at 75 and recieved cash of roughly 2500. I also bought a long position around 54. I think the only advantage is receiving the $2500 up front. If assigned, I still have the protective put in place. Just curious of your thoughts. Thanks
I disagree about the naked options... i use this instead of buying stocks. Low margin. Also i like sell itm put and sell a call against it. Or maybe a bear call spread. Another great plan is sell a put and delta hedge against it. This is nice also because you get the extra cash available. It all depends on your style. 😊
Thanks David for sharing your wisdom. When placing a trade for 30 days, it might be difficult to close at 21TDE. Also noticed, interactive brokers doesn't allow to close in the last week. How to tackle the trade in this situation?
W.r.t. assignment risk my understanding is that as long as the extrinsic value remains high (combo of time and IV) the risk of getting assigned is low. It's true that both factors drop drastically in the last few days, but considering the extrinsic value is the risk still high if your iron condor is in making money?
If you are doing a vertical spread and the stock breaches your short, and you get assigned you lose your long put and get re imbursed for any value in the long put. I do agree, after getting my fingers burned, do not let vertical spreads expire, take any profit or loss in a controlled manner.
What do you suggest if you have an OTM $5-wide spread at 21 days, and closing the spread will result in a overall debit on the position? I thought if I was out of the money at 21 days, I could always close for an overall credit, but apparently not.
In my experience, there is no way to lose more than the spread width minus the credit (or plus the debit) that you received (paid) for the spread, even on early assignment. If you get early assigned, you just sell the shares and the long option at the same time.
Thank you for sharing your knowledge. The last few month was rough for my credit spreads since the market decided to run with minor pullbacks. April/May I absolutely killed it as the market was moving in more of a sin wave. My June/July though, I was behind on my trades from the start and had a couple trades where I made the mistake of holding last my planned exit. Definitely cost me money and messed with my stats.
Awesome video!!! Thanks for all the helpful tips for trading credit spread! Watching your videos really helped me get better at trading options. Thank you, Davis!
Don't understand getting assigned with a credit spread. Do I buy 100 shares, and I keep them, or do I lose them to the buyer of the put that I sold. Also, what if I own the stock?
one argument for tighter spreads is when price starts moving towards the short put the cost of closing the position with tighter spread is lower than with wider one as further otm put will not increase in price similarly to short put as its further away...
shouldn't the essence of a bull put credit spread be that you would not mind owning the stock at the sold strike and then if early assigned have the protection of the bought put ? I have on occasion made money on both the sold and the bought put normally when the stock is one with a lot of movement up and down. Just a comment
You can still get assigned after expiration, but they are cash settled, so you don't get long shares. However, some brokers charge you additional fees as part of the assignment process. Not a lot, but it is still extra money out of your account.
If assigned, exercise your long position. Means max loss, but you will not get a margin call. You will notice that these positions will disappear from you account
@@optionswithdavis yes, but you will have 100 shares that may exceed your account. In my example, the shorts were assigned at $400 each, thus exercised the longs to cover. If done as soon as you are advised by your broker of assignment, you will not be caught having to purchase the shares. I guess it depends on the underlying and your ability to cover the cost. Love options as you can work with high priced stocks, having high premiums, ensuring you hedge against being short a call or put. Cheers.
You can just unwind your shares as mentioned here: ruclips.net/video/QrxyIKIWU7g/видео.html. Then close your put spread. The loss will be lesser than the max loss.
Going Naked on a put is okay, if you have the funds in your account for collateral and you do not mind owning the stock at that price, else NO, NO! I do not think most traders can go naked on a call as your trading house would crap its draws do to unimited risk.
1.) Hold to exp 0:13
2.) Too tight spread 5:32 (debit spreads)
3.) Go naked 11:48
IMHO 2.) does has it merits. A tight spread is very binary - you win, or lose. You need only a small move for full profit (well, or loss). It's a good for directional trades, when the stock follows your idea.
Get Your Copy of The Options Income Blueprint For FREE:
optionswithdavis.com/blueprint/
Great video One thing worth noting about tighter spreads is more profit potential. 5 $2 wide credit spreads vs 1 $10 wide spread could be very big difference in actual premium collected. Of course as mentioned, it’s much riskier
Thanks!
Thanks for the support, appreciate it ☺️
Davis, very smart commentary! Excellent advice! I always appreciate your videos!!
👍👍
Great video Davis!!! When will you release your trading service?
Thanks ☺️ Many are asking as well so will consider it in the future!
Great video! Thanks
Can you also please do a video on early assignment in case of a spread and what to do if you don’t have capital. Doesn’t the long put protect you against it?
You're welcome ☺️ And yes will create a video on credit spread assignment soon 👍
Great video. Do you have a video on managing credit put spreads that go in the money a little or all the way?
Here you go:
ruclips.net/video/ZTpbOGdzubU/видео.html
ruclips.net/video/-VsSeotg-nQ/видео.html
Hi, Davis, I love your videos. As a beginner for options trader, in this market condition, what kind of main strategies can I use to practice for SPY or QQQ? Thanks, Steven
You can get started with these two playlists first:
1) ruclips.net/p/PLn4dMDRu5KCDeK6jw8FYO_MfIK8CW_Ycr
2) ruclips.net/p/PLn4dMDRu5KCAvNTiJI0IenB4UiU5F2a1u
Thanks.
What do you think of selling a put very deep in the money and then buy a put at close to the current stock price. You receive very good cash up front, and if exercise, the cash simply offsets the early assinment. I did this recently on Sketchers currently 54. I sold a put at 75 and recieved cash of roughly 2500. I also bought a long position around 54. I think the only advantage is receiving the $2500 up front. If assigned, I still have the protective put in place. Just curious of your thoughts. Thanks
It's pretty much just an ITM bull put spread which is synthetically an ATM/OTM bull call spread.
Good video. This has happened to me, not fun
I disagree about the naked options... i use this instead of buying stocks. Low margin. Also i like sell itm put and sell a call against it. Or maybe a bear call spread. Another great plan is sell a put and delta hedge against it. This is nice also because you get the extra cash available. It all depends on your style. 😊
Thanks David for sharing your wisdom. When placing a trade for 30 days, it might be difficult to close at 21TDE. Also noticed, interactive brokers doesn't allow to close in the last week. How to tackle the trade in this situation?
W.r.t. assignment risk my understanding is that as long as the extrinsic value remains high (combo of time and IV) the risk of getting assigned is low. It's true that both factors drop drastically in the last few days, but considering the extrinsic value is the risk still high if your iron condor is in making money?
If you are doing a vertical spread and the stock breaches your short, and you get assigned you lose your long put and get re imbursed for any value in the long put. I do agree, after getting my fingers burned, do not let vertical spreads expire, take any profit or loss in a controlled manner.
What software do you use for testing strategy?
What do you suggest if you have an OTM $5-wide spread at 21 days, and closing the spread will result in a overall debit on the position? I thought if I was out of the money at 21 days, I could always close for an overall credit, but apparently not.
Great info, thanks!
You're welcome 👍
In my experience, there is no way to lose more than the spread width minus the credit (or plus the debit) that you received (paid) for the spread, even on early assignment. If you get early assigned, you just sell the shares and the long option at the same time.
Thanks
You're welcome!
Thank you for sharing your knowledge. The last few month was rough for my credit spreads since the market decided to run with minor pullbacks. April/May I absolutely killed it as the market was moving in more of a sin wave. My June/July though, I was behind on my trades from the start and had a couple trades where I made the mistake of holding last my planned exit. Definitely cost me money and messed with my stats.
You're welcome 👍
Awesome video!!! Thanks for all the helpful tips for trading credit spread! Watching your videos really helped me get better at trading options. Thank you, Davis!
You're welcome 👍
We need to consider pattern trading if trading daily.
Don't understand getting assigned with a credit spread. Do I buy 100 shares, and I keep them, or do I lose them to the buyer of the put that I sold. Also, what if I own the stock?
one argument for tighter spreads is when price starts moving towards the short put the cost of closing the position with tighter spread is lower than with wider one as further otm put will not increase in price similarly to short put as its further away...
shouldn't the essence of a bull put credit spread be that you would not mind owning the stock at the sold strike and then if early assigned have the protection of the bought put ? I have on occasion made money on both the sold and the bought put normally when the stock is one with a lot of movement up and down. Just a comment
I assume since you use Think Or Swim that you have a Schwab account. Can you show step by step how to close out the put spread at 21 DTE?
So if you do a credit spread with a 30 DTE you should close it in 9 days (21 days before expiration)?
Naked put is okay as long as they are intended to be cash secured put ... ?
Why not rolli,no a loosing position?
Risk of assignment is 0 on SPX options...
You can still get assigned after expiration, but they are cash settled, so you don't get long shares. However, some brokers charge you additional fees as part of the assignment process. Not a lot, but it is still extra money out of your account.
Hmm... What if I sell my protective put and buy a cheaper one instead of going naked?
The only time you have to really about early assignment is when the underlying asset has a dividend
"Always be closing your positions" - Maverick of Wallstreet.
If assigned, exercise your long position. Means max loss, but you will not get a margin call. You will notice that these positions will disappear from you account
You can do that but by exercising you give up your extrinsic value that helps cushion the loss.
@@optionswithdavis yes, but you will have 100 shares that may exceed your account. In my example, the shorts were assigned at $400 each, thus exercised the longs to cover. If done as soon as you are advised by your broker of assignment, you will not be caught having to purchase the shares. I guess it depends on the underlying and your ability to cover the cost. Love options as you can work with high priced stocks, having high premiums, ensuring you hedge against being short a call or put. Cheers.
You can just unwind your shares as mentioned here: ruclips.net/video/QrxyIKIWU7g/видео.html. Then close your put spread. The loss will be lesser than the max loss.
Interesting. Always learning. Thanks for your insights. Cheers
Going Naked on a put is okay, if you have the funds in your account for collateral and you do not mind owning the stock at that price, else NO, NO! I do not think most traders can go naked on a call as your trading house would crap its draws do to unimited risk.