Loading ...Question for Gus
Sorry for delay. You said you made 300% on your options and I’m checking with you, what should I do differently, since my entry and exit were quite nice, yet return not that much. Well little over 50% is not bad, but I think I should get more, since I got lucky with starting shorts at the exact top.
Btw, I’m not new to the markets, but I’m new at options, and apparently I’m not utilizing them correctly. Since next time I will not be that lucky with entry, 🙂 I better start using them properly.
As marked on the chart, on that reversal day, 27 July I think, I bought Jan 2024 SPY 405 puts. So around 6 months out. I thought this should give me plenty of time to ride markets down through seasonal Fall weakness. I did ride it well down. But never in this move I even saw potential 100% gain. So what did you do? What I need to change with this put options gambling?
This are SPY put options I bought
https://finance.yahoo.com/quote/SPY240119P00405000/chart?p=SPY240119P00405000
Edit, thanks Fully for making chart clickable, I need to learn this part yet
It looks like you played it conservatively by allowing plenty of time but you chose a strike so far out of the money. Understand if you did that to not have to pay a large premium, however that means the large drop didn’t benefit you as much as if you had a closer strike.(That would have cost more up front. You will find it is a balancing act about choosing which strike depending on how big a move you think is possible in the timeframe you expect it to occur in. I don’t use SPY because it has higher premiums. Better to get your feet wet being conservative as you did than to take to much risk with either a way out of the money strike and or too little time to let your thesis play out. Good luck.
Yep, longer term safer. But I see because of this less reward because of less risk, yeah makes sense, thanks
The answer is easy, less time to expiration. My puts had an October 29th expiration, I also bought them 4 dollars out of the money. The more confident I am in the move, the shorter the expiration date and the further out of the money is my strike price when buying.
If i am playing a swing trade on a day or two of movement i am expecting, I sometimes by with 5 days of expiration. The new fad in the market is 0TDE, or playing options that expire the same day. I would avoid those for a while.
I bought October 29th, because when i got them the last week of August, I was expecting a DCL to happen latest early October. So this gave me enough time to bail with minimal losses if i was wrong after a couple weeks, and short enough to make some nice profit if I was right. It worked out for me on that trade.
With delay (again) thanks for the explanation and all the details. I see I’m for now too chicken. Usually I’m looking longest times until expiration for warrants, leaps etc. I see with short term trading I will have to other way. If I feel strongly about the ST incoming move, which seldomly happens he-he. But now I know.
Just to add, my strike price on my option trade was 420, as that was my minimum target. I was planning to sell as i got close to my target price with time to spare in the expiration, taking advantage of the time decay premium. I sold the day i did because of how short term oversold we were at the time. I got extremely luck and timed it almost perfectly on that low on Wednesday.