Selling options

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#1 Tue, Dec 31, 2019 - 10:41pm
Connella
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Selling options

I am relatively new to this site and could not find a dedicated options thread, so I am starting one to see if there is any interest. I realize that most people here are probably stackers, but why not make some extra fiat from our knowledge of the PM markets?

I primarily trade ETFs like GDXJ, GDX, GLD and SLV due to their high volume and liquidity. I only sell options and never buy them (except in a spread) because I want to profit from time decay. When I trade in my IRA, I trade cash-secured puts and covered calls. However, in my taxable accounts, I also trade vertical spreads (bull-put or bear-call credit spreads).

In our current market environment, selling cash-secured puts on the above securities as a bullish strategy is my favorite approach because the seasonal pattern for gold is up through the end of February. However, PMs and mining stocks are overbought right now, so I also have some short-term covered calls in place as I wait for a possible pull-back before selling any more puts.

If anyone would like to discuss option strategies in more detail, please post.

Thu, Jan 2, 2020 - 1:25pm
Island Teal
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OK....I'll get this started

Connella....Thanks for starting this forum.

I had posted this a few weeks ago and got no comments and/or input.Maybe this will get some attention here.

Looking for comments on exit strategy re timing of sale of call options in relation to the expiration . Are there any hard and fast rules that apply? Thanks

Thu, Jan 2, 2020 - 2:28pm
Connella
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@Island Teal. Thanks for your

@Island Teal. Thanks for your post.

Are you referring to selling naked/covered calls or exiting an existing long call option? I primarily sell options and can help with the former, but not the latter.

Thu, Jan 2, 2020 - 2:49pm
vonalpha
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Selling Puts on Miners

Timing for selling puts on the Miners is finally here. I used to sell puts on stocks I wanted to own (prior to 2013) and if they are not put to me I used the funds to purchase some shares. On the weekly options I would load up for premium on puts that were way out of the money for the premium.... this does eat up margin so it has to be used smartly. In the past few weeks I have added puts to KL, AG, PAAS and Silv.... with expirations in Jan, Apr, May, Jul, Aug and Jan21.

Fri, Jan 3, 2020 - 11:55am
SteveW
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Comparing puts vs calls

Connella thanks for starting this thread. There has been some occasional discussion of options on main but rather limited.

I understand that big money makes nickels and dimes most easily by selling options and living off the time decay, a good strategy if you are able to use that.

I use any option except selling naked calls. My strategy is primarily to identify a stock that will increase in the near future and sell puts to subsidize the purchase of calls. While the sold puts can only return 100% of investment, the return on purchased calls is unlimited. I did quite well this past year using this strategy with KL including the Jan 2020 $35's that were picked up (sold $40 puts) in February and March. Selling higher strike puts and buying lower strike calls with the calls OTM or near allows an asymmetric higher call position than put position. If it all blows up you end up getting put for a stock you like but pay an excessive price against market. If it goes well the puts return 100% and the calls well over 100%

I usually do this on stocks I own and follow anyway. If I'm sitting on a big gain early as I was with KL I like to sell some calls to bring the cost near zero for a free ride. Thus I sold a third of my calls in August but held my shorts on $40 puts.

“Don't walk behind me; I may not lead. Don't walk in front of me; I may not follow. Just walk beside me and be my friend.” ― Albert Camus
Fri, Jan 3, 2020 - 2:39pm
SteveW
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Buying options

Since I'm reviewing part of my portfolio I'll include some history. At the end of February 2020 when AG was around $5.50 someone on main suggested long call options. I bought 30 calls 2020 Jan 17 strike $12 for $0.30. Sold 10 at $1.20 in August to cover cost, 17 at $0.64 in November.

AG was recently $12.40 but now it's $12.02 and my remaining 3 calls are 5 cents bid. The story here is that you have to sell to lock in cost and lock in profit before the time decay makes your position worthless.

I'll post when I make some option sales/purchases but of course only some positions are winners so DYODD.

“Don't walk behind me; I may not lead. Don't walk in front of me; I may not follow. Just walk beside me and be my friend.” ― Albert Camus
Fri, Jan 3, 2020 - 4:13pm vonalpha
Connella
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Option DTEs

@voalpha. I usually sell puts with 30-60 DTEs (days to expiration) to collect a decent premium while taking advantage of the rapid time decay under 30 DTEs. I will typically close my position when I have captured at least 50-60% of max profit and move onto the next trade. I was wondering why you choose to sell options that have expirations 6-12 months away? Do you see an advantage to trading long vs. short-dated options?

Fri, Jan 3, 2020 - 4:42pm SteveW
Connella
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Buying calls vs selling puts and covered calls

@SteveW. Congratulations on your option successes and thanks for sharing your approach. Like you, I have had good success selling puts and covered calls. However, buying calls has not worked out very well for me. When I buy calls, price usually goes down, stays the same or never quite gets to my strike price by expiration. You probably just have better ways of predicting trends than me!

Sun, Jan 5, 2020 - 1:34pm SteveW
Island Teal
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AG Options

SteveW, Connella

Amazingly I also had the same AG Options plan. Bought 1/17/20202 $12 calls last Feb for $.31. Sold the balance last Tues for $.66. Big mistake was not selling some in Aug for $1+.

Now looking at next position to take.

Mon, Jan 6, 2020 - 9:19am
Gerrard
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CDE Long Call options

Hi Team,

Im thrilled to be in a forum for minor options & look forward to sharing recommendations and strategies.

My Open positions

1) CDE mar 20' $20 Calls (opened @ around $0.1) now deep in the money since Sept. 19': will see how the SPOT price plays out but looking to close soon & realize profits - however open to suggestions from all..

2) CDE jan 21' $30 Call s(opened @ around $2.2) this is a long term hold if we acheive new ATH in the yellow metal that most ppl are expecting I'd be chuffed with this position

My Question to you @Conella (other than a covered call strategy) can you suggest how could I yield better returns selling options on the above positions, ie: how would of you played the move in CDE

Tue, Jan 7, 2020 - 2:57pm
SteveW
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CDE

I set up my first option position for the year today. CDE was downgraded from neutral to sell yesterday, by Roth Capital who took the position that the stock has performed well recently but production and valuation is likely to disappoint. Looking at the chart it dropped the first two trading days of this year as well as yesterday's elevator drop (was the downgrade telegraphed?) and is at $6.95, off its recent peak of $8.29.

Wanting plenty of time for both the company to report good results and also for gold and silver to improve in price I went for both Jan 21 and Jan 22 options. In both cases I sold $10 puts and used the proceeds to purchase twice the number of $7.50 calls. I hold a small position in CDE shares.

This is not advice by any means but simply allows me to record results win or lose.

“Don't walk behind me; I may not lead. Don't walk in front of me; I may not follow. Just walk beside me and be my friend.” ― Albert Camus
Wed, Jan 8, 2020 - 4:17pm
SteveW
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Calls bought today

For Feb 21 AUY $4, AG $12 and Apr 17 KL $45.

“Don't walk behind me; I may not lead. Don't walk in front of me; I may not follow. Just walk beside me and be my friend.” ― Albert Camus
Wed, Jan 8, 2020 - 5:45pm SteveW
Gerrard
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Hey Steve

Hey Steve

What expiry and premium paid are the calls above if you dont mind me asking please

Wed, Jan 8, 2020 - 7:47pm
SteveW
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Long calls

AUY strike $4 expiry Feb 21 bought at $0.14. AG strike $12 expiry Feb 21 bought at $0.48. KL strike $45 expiry Apr 19 bought at $2.90. All are OTM so it's all premium.

“Don't walk behind me; I may not lead. Don't walk in front of me; I may not follow. Just walk beside me and be my friend.” ― Albert Camus
Sat, Jan 11, 2020 - 2:56am Gerrard
Connella
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CDE

@Gerrard,

With the strong bull move since mid-October, 2019, buying calls in September has turned out to be a great move on your part! I would have been selling 30 delta naked puts until some shares got assigned to me and then I would have sold 30 delta calls against the shares until the shares got taken away from me. Then rinse and repeat. I don't know if it would have done better than buying a call like you did during what turned out to be a strong uptrend. I have not looked at CDE before but I like the high volatility and the pull back to support with an oversold RSI and declining volume. I will be looking at selling some $6 puts first thing Monday morning thanks to you!

Sun, Jan 12, 2020 - 1:27am SteveW
Gerrard
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thanks Steve,I'm always

thanks Steve,I'm always interested to see how others play the mining options & see if it can help me tweak my game

best of Luck with those positions

:-)

Sun, Jan 12, 2020 - 1:32am Connella
Gerrard
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My pleasure Connella, I

My pleasure Connella, I actually quite like CDE its a high beta Gold stock with a chart that resembles more the Silver price chart than gold, the stock can make some big moves up and down so it can be a nice play for options

Mon, Jan 13, 2020 - 3:06am
Connella
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Optionable mining stocks

I went through quite a few mining and royalty company stocks as well as mining and precious metal ETFs to see which ones had sufficient volume, open interest and tight enough bid/ask spreads (< 0.05 cents) for selling puts and calls. I narrowed it down to the following ones:

AUY, FCX, GDX, GDXJ, GLD, GOL, KGC, NEM, SLV, WPM

All of them look like they may have completed a pullback and are potential candidates for selling puts (or buying calls) except FCX, which is range bound. If anyone is aware of other mining stocks with tight bid ask spreads, please feel free to let me know.

By the way, I will say once that I am not a financial advisor or professional trader, so please perform your own due diligence and do not rely upon my opinions for making investment decisions!

Mon, Jan 13, 2020 - 10:00am
Connella
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AEM put

Sold to open AEM 21 Feb 20 55 Put for a credit of .75 per contract

Trade rationale-pull back to the oversold region in an uptrend with high 52 week IV percentile rank of 62%

Thu, Jan 16, 2020 - 12:59am
Connella
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Good large mining stocks for long calls

It was nice to see a solid green day for gold and the miners today. All of the stocks and ETFs mentioned in this thread were up today, including AEM, AG, AUY, CDE, GDX, GDXJ, GLD and KL.

It seems that most of the people posting in this thread like to buy calls, which are cheapest when volatility is low. Of the 26 largest miners and precious metal ETFs I watch, volatility is crazy low in KL, followed by OR, FNV and WPM. If I bought calls, KL would definitely be the one to choose, although any of those four have calls that are relatively cheap at the moment. KL also has the tightest bid-ask spread for better fills.

For anyone who prefers to sell premium like me, AEM still has the highest volatility (the only statistical edge when selling options), with the highest daily volume and tightest bid-ask spreads of any large gold miner/ETF I can find for the largest credit.