For Charles Schwab, you have to actually buy into money market. It''s about 5% right now and you can use it as a collateral for cash secure puts. If you get assigned, you'll have to sell your money market shares. So, it's not as dynamic as Fidelity.
I do this with puts now. I add 5% to the premium %I get paid for total income. Schwab's customer service is exceptional and therefore I stick with them. They are constantly adding new features, so I stick with them. It is not that much of a hassle.
You’re definitely the best to explain the mechanics of trading options for beginners ! Good job! Would you be able to delete the fake comments that baits about probably fake portfolio managers in your comments ?
Can the put buyer exercise option right before expiration date any moment strike price is met See video at 4'30", please confirm, same question for the call, is the expiration date the only day buyer can possibly exercise option right, than you ❤
I DISAGREE.....I HAVE SCHWAB AND YOUR CASH MONEY DOES NOT PAY 5%....SCHWABS MONEY MARKET FUND MAY PAY CLOSE TO 5%, BUT YOU MUST SELL YOUR MONEY MARKET FUND AND CONVERT TO CASH BEFORE DOING A CASH SECURED PUT...SCHWAB PAYS BETWEEN .35% TO .45% INTEREST FOR CASH.......MAIN REASON I JUST MADE A FIDELITY ACCOUNT THIS PAST WEEK
@@johnsala3868 BEEN WITH SCHWAB FOR YEARS AND HAVE NO ISSUES WITH GETTING INTEREST ON MY CSP COLLATERAL....IT IS TICKER SYMBOL SWVXX AND THAT'S WHERE THE CSP'S GET OPERATED OUT OF AND NOT TO BE CONFUSED WITH THE COMMON CASH BALANCE!
@@johnsala3868 Been with Schwab for years and my CSP collateral interest just keeps rolling in every month...ticker symbol swvxx....not to be confused with the regular cash balance! For those that need more details call Schwab and speak to a Broker! You're welcome;)
@@johnsala3868 at Schwab you can sell CSP using their money market fund as collateral. I do it all the time. You just need to monitor your trade and if you’re like 2 days from expiration and think your trade will be ITM at expiration, I sell enough from money market to have in cash to settle CSP. If not, Schwab will do this for you at expiration and charge you for a broker assisted trade.
Schwab interest rates are ridiculously low (0.45% IIRC). Furthermore they don't allow using a money market fund as cash to secure a put (and won't auto-sell to cover purchases).
I have a Schwab regular taxable brokerage account with no margin. I have to manually sweep cash by purchasing their money market fund (ticker swvxx, price is always $1) which pays over 5% interest. I can sell cash secured puts using swvxx as collateral with no issues. If I get assigned, I have to sell the required swvxx shares to cover the assignment. The swvxx settlement is next business day so it gives enough time to cover the assignment. Schwab will send you a message to remind you to do so. I've had no issues with Schwab thus far.
Hi there, since the market may be due for a correction soon and if it becomes a bear market for years, is this selling covered call strategy still viable? I am on the verge of buying my first SPY. Thanks so much!
Possibly a dumb question as I might be missing the obvious here. Why did you refer to puts, especially at the money as having more risk than a covered call? If you are going to buy SPY at say $530 and sell an ATM CC and the SPY drops to $515 by expiration, how is that any more risk than you selling a put at $530 and the index drops to $515? You are still $15 below your entry price (not accounting for premium collect of course). It seems like with the put you would have that $53,000 earning interest until assignment on top of the premium but with the buy/write you took the interest on cash off the table. But, again, both trades you are down $15 per share. Thanks!
The Cash-Secured Put in this scenario puts you at a paper loss of $15 per share whereas the Covered Call has Opportunity cost but no actual loss as you already owned the shares and the gap between market price and strike price is missed opportunity only.
@mjs28s Your thoughts are completely correct, whether you take a $15 drop and get assigned from CSP or own the stock and suffer a loss its still a loss in value. And yes if your broker allows interest on account cash while in csp's like Fidelity then you would earn interest until being assigned aka double dipping as he calls it, so if you start with a cov call that option is lost vs starting with a csp and possibly rolling the position out and down to try to maintain the interest earning potential and avoid getting assigned.
@@theflightsimulationexperie6894 I guess you don't have the account type that offers automatic cash sweep into their default govt money market funds that are currently paying around 5% then. Too bad. Joe knows it works since he actually gave it the "double dipping" term and I know it works as when selling puts the value of that fund doesn't drop but stays the same and earns interest and is paid that interest each month and is listed as paid in the Activity & Orders page.
You really have to have the capital to do SPY options at a delta that makes it worthwhile to do this option. Getting $47 per contract per week doesn't cut it because you can get the same return in a money market account of T-Bills. Sidenote: don't use the Schwab cash reserve money market that only gives 0.25%.
Same question here with the addition of iwm. If you had to pick one to start with for both growth and option income, which one would it be? If strictly for option income, which one would you choose? Thanks
I would stick with SPY as the gold standard. Qqq is fine also but more volatile and it would just be my secondary position. If I had the capital to write 4 contracts, 3 would be SPY and 1 would be QQQ.
Yes you can use it right away to either spend it or reinvest back into the security. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎
On daily call writing, wouldn't it be optimal to establish positions for the next day within an hour of market opening? This is because of the high level of "Theta Decay."
You COULD do that, but for me I like to open my positions near end of day and then hold that through near end of the day the next day. As far as opening a brand-new position, you can start earlier in the day.
@AverageJoeInvestor I neglected to mention opening toward the end of the day for the next day. The best way also, and if there is sufficient capital available, is through a tax-free IRA, since the option premium is taxed as "ordinary imcome." I started the daily strategy in mid-April through allocating $370,000 to 700 sh of SPY. Between then and now, through a combination letting options expire and sell/close transactions, approximately $11,000 net was earned. Of course, it entails a lot of constant monitoring.
Needed some graphs at the end summarizing all the numbers we figured out during the episode. Daily vs weekly vs monthly line on graph. Can’t believe you didn’t do that. Kinda dropped the ball bro
Annual interest is calculated wrong. It will be more, as you grow your capital weekly or monthly, you'll be getting more and more interest paid every month
Make sure to pay attention to IV and IV Rank. When IV is really low the market tends to be moving up and you are capping upside. I prefer to sell calls when IV is average or above average.
@@steve99912 there is no magic formula. I just dont like selling SPY premium when IV is as low as it is. Nothing saying you cant, just not my style. You have to sell near the money to get any real income and then you miss out on upsidr moves when you sell ATM. Id rather see IV higher and sell at a 20-25 delta. If spy IV is really low it might be worth selling calls on other holdings you might have with higher IV rank.
Happy Friday Everybody! THANK YOU for watching and being part of the community! Make sure to leave your $0.02 in the comments! =)
For Charles Schwab, you have to actually buy into money market. It''s about 5% right now and you can use it as a collateral for cash secure puts. If you get assigned, you'll have to sell your money market shares. So, it's not as dynamic as Fidelity.
I do this with puts now. I add 5% to the premium %I get paid for total income. Schwab's customer service is exceptional and therefore I stick with them. They are constantly adding new features, so I stick with them. It is not that much of a hassle.
I love this however spy can swing by 5 dollars a day now. So a .2 delta is more vulnerable than it used to be
You’re definitely the best to explain the mechanics of trading options for beginners ! Good job! Would you be able to delete the fake comments that baits about probably fake portfolio managers in your comments ?
I'm mostly on telegrams, with the user name.
@Cryptoworld224
Can the put buyer exercise option right before expiration date any moment strike price is met See video at 4'30", please confirm, same question for the call, is the expiration date the only day buyer can possibly exercise option right, than you ❤
Yes! Schwab also pays over 5% on your CSP collateral....absolutely game changing!!;)
I DISAGREE.....I HAVE SCHWAB AND YOUR CASH MONEY DOES NOT PAY 5%....SCHWABS MONEY MARKET FUND MAY PAY CLOSE TO 5%, BUT YOU MUST SELL YOUR MONEY MARKET FUND AND CONVERT TO CASH BEFORE DOING A CASH SECURED PUT...SCHWAB PAYS BETWEEN .35% TO .45% INTEREST FOR CASH.......MAIN REASON I JUST MADE A FIDELITY ACCOUNT THIS PAST WEEK
@@johnsala3868 BEEN WITH SCHWAB FOR YEARS AND HAVE NO ISSUES WITH GETTING INTEREST ON MY CSP COLLATERAL....IT IS TICKER SYMBOL SWVXX AND THAT'S WHERE THE CSP'S GET OPERATED OUT OF AND NOT TO BE CONFUSED WITH THE COMMON CASH BALANCE!
@@johnsala3868 Been with Schwab for years and my CSP collateral interest just keeps rolling in every month...ticker symbol swvxx....not to be confused with the regular cash balance! For those that need more details call Schwab and speak to a Broker! You're welcome;)
@@johnsala3868 at Schwab you can sell CSP using their money market fund as collateral. I do it all the time. You just need to monitor your trade and if you’re like 2 days from expiration and think your trade will be ITM at expiration, I sell enough from money market to have in cash to settle CSP. If not, Schwab will do this for you at expiration and charge you for a broker assisted trade.
Schwab interest rates are ridiculously low (0.45% IIRC). Furthermore they don't allow using a money market fund as cash to secure a put (and won't auto-sell to cover purchases).
Fidelity
You can use a high div MM fund as a sweep account.
I have a Schwab regular taxable brokerage account with no margin. I have to manually sweep cash by purchasing their money market fund (ticker swvxx, price is always $1) which pays over 5% interest. I can sell cash secured puts using swvxx as collateral with no issues. If I get assigned, I have to sell the required swvxx shares to cover the assignment. The swvxx settlement is next business day so it gives enough time to cover the assignment. Schwab will send you a message to remind you to do so. I've had no issues with Schwab thus far.
@@mm96817Exactly what I do. It’s considered a cash equivalent so you can use it to cover csp margin requirements.
@@janshuster1426Fidelity is amazing!
Hi there, since the market may be due for a correction soon and if it becomes a bear market for years, is this selling covered call strategy still viable? I am on the verge of buying my first SPY. Thanks so much!
Possibly a dumb question as I might be missing the obvious here.
Why did you refer to puts, especially at the money as having more risk than a covered call?
If you are going to buy SPY at say $530 and sell an ATM CC and the SPY drops to $515 by expiration, how is that any more risk than you selling a put at $530 and the index drops to $515? You are still $15 below your entry price (not accounting for premium collect of course).
It seems like with the put you would have that $53,000 earning interest until assignment on top of the premium but with the buy/write you took the interest on cash off the table. But, again, both trades you are down $15 per share.
Thanks!
The Cash-Secured Put in this scenario puts you at a paper loss of $15 per share whereas the Covered Call has Opportunity cost but no actual loss as you already owned the shares and the gap between market price and strike price is missed opportunity only.
@mjs28s Your thoughts are completely correct, whether you take a $15 drop and get assigned from CSP or own the stock and suffer a loss its still a loss in value. And yes if your broker allows interest on account cash while in csp's like Fidelity then you would earn interest until being assigned aka double dipping as he calls it, so if you start with a cov call that option is lost vs starting with a csp and possibly rolling the position out and down to try to maintain the interest earning potential and avoid getting assigned.
I’ve done this and as far as I’m aware, you don’t college interest on cash that has been “secured” for a put contract with fidelity.
@@theflightsimulationexperie6894 I guess you don't have the account type that offers automatic cash sweep into their default govt money market funds that are currently paying around 5% then. Too bad. Joe knows it works since he actually gave it the "double dipping" term and I know it works as when selling puts the value of that fund doesn't drop but stays the same and earns interest and is paid that interest each month and is listed as paid in the Activity & Orders page.
You really have to have the capital to do SPY options at a delta that makes it worthwhile to do this option. Getting $47 per contract per week doesn't cut it because you can get the same return in a money market account of T-Bills. Sidenote: don't use the Schwab cash reserve money market that only gives 0.25%.
@Cryptoworld224
Do you prefer SPY or QQQ for DCAing and buying & holding? Thanks
Same question here with the addition of iwm. If you had to pick one to start with for both growth and option income, which one would it be? If strictly for option income, which one would you choose? Thanks
I would stick with SPY as the gold standard. Qqq is fine also but more volatile and it would just be my secondary position. If I had the capital to write 4 contracts, 3 would be SPY and 1 would be QQQ.
Great vid, once you receive the premium can you spend it right away or do you have to wait until expiration?
Right away.
Yes you can use it right away to either spend it or reinvest back into the security. THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎
Thanks for the content, what option tool are you using on the web page？ optionplay? Thanks in advance.
Am I mistaken or was the video the day before about how daily or weekly calls were better than monthly because of more premium?
What if price drops and keeps on dropping? Premiums will be less. For covered calls, do we just pray and hope price to come back up?
At Fidelity, do you have to use margin for your cash to also earn interest when selling puts?
I'm on Fidelity and sell cash secured puts. I do not have margins enabled and do earn interest on the cash held for the options.
No. The cash is in your account, just as normal. However it is locked (cannot withdraw or use it to buy something else) to secure the put.
How about a debit call spread for bullish outlooks and debit put spread for a bearish outlook?
On daily call writing, wouldn't it be optimal to establish positions for the next day within an hour of market opening? This is because of the high level of "Theta Decay."
You COULD do that, but for me I like to open my positions near end of day and then hold that through near end of the day the next day. As far as opening a brand-new position, you can start earlier in the day.
@AverageJoeInvestor I neglected to mention opening toward the end of the day for the next day.
The best way also, and if there is sufficient capital available, is through a tax-free IRA, since the option premium is taxed as "ordinary imcome."
I started the daily strategy in mid-April through allocating $370,000 to 700 sh of SPY. Between then and now, through a combination letting options expire and sell/close transactions, approximately $11,000 net was earned.
Of course, it entails a lot of constant monitoring.
Needed some graphs at the end summarizing all the numbers we figured out during the episode. Daily vs weekly vs monthly line on graph. Can’t believe you didn’t do that. Kinda dropped the ball bro
That’s good feedback. Thanks
Is the option premium taxed if I sell a cash secured put and it is not assigned?
Yes
Ordinary income.
Do in retirement accounts, no taxable income.
You can use all that cash and make more with other stocks
Can you add an analysis for selling ITM covered calls? Thanks!
You can calculate this yourself as well. Good practice
Annual interest is calculated wrong. It will be more, as you grow your capital weekly or monthly, you'll be getting more and more interest paid every month
SPLG is the little brother of SPY
THANK YOU for watching and for leaving your $0.02 in the comments! 👍😎
SPLG hardly has options volume.
Volatility is just so ridiculously low right now selling options doesn't give you crap for premium.
Make sure to pay attention to IV and IV Rank. When IV is really low the market tends to be moving up and you are capping upside. I prefer to sell calls when IV is average or above average.
So wait 8 months u til VIX is over 12?
@@steve99912 there is no magic formula. I just dont like selling SPY premium when IV is as low as it is. Nothing saying you cant, just not my style. You have to sell near the money to get any real income and then you miss out on upsidr moves when you sell ATM. Id rather see IV higher and sell at a 20-25 delta. If spy IV is really low it might be worth selling calls on other holdings you might have with higher IV rank.
For average investors, 100k+ is not practical.
99% of the people who watch your videos KNOW how options trading work. So stop treating people like bloody beginners !!! Ridiculous !!!!
your patreon too expensive.