I prefer iron condors, iron butterflies, strangles and straddles for volatility crush plays (earnings). Or really, anything with elevated implied volatility rankings regardless of earnings or not. Tastyworks has a great and straight forward display of IVR.

 

The reality is that anyone investing in almost anything has made a killing the last 12 years.

 

You’re welcome

 

OK. you make a compelling argument. At what point do you close out of the 2900 option? With your spread, you could sell.... what.... carry the one.... ummmm... 25 of those and net $75K in premiums... for the same $300K. am I reading that right?

 

i don’t look at each leg as an individual position, but as a one. For a call spread like that, I’d aim for 50% profit if I’m being conservative. Otherwise If things are going well and im comfortable with the movement of the underlying I target 80% profit for the whole position. On a position like this (I toyed with it today in fact) I’d but a GTC order in for 80% profit at $6. Once the GTC triggers, It will close out both legs. If you’re super bullish and a week before expedition rolls around an AMZN is at $4000, I’d consider letting it go to expiration for 100% profit. But my personal rules for spreads is to target 80%

if that makes sense?

 

i didn’t fully answer your question; if your goal is to collect $75k in premium and you want to risk $300k, yes you could sell 25 of those spreads and collect $75k in premium. Your max loss is always the width of the spread minus the premium collected. So in this case
Width of spread
3050-2900=150
credit collected
30
150-30=120 max loss

in a regulation T account (or cash covered), the broker will withhold $12k in BP.

You can extrapolate out from there, which you’ve already done.

long answer long AF; yes.

 

Please actually move forward on this 😂😂😂

 

Mispoken and JamesBond, your posts are great, thanks for the info and discussion. I just started dabbling in options using the Tasty approach. Question: if I understand correctly, the overall goal is a lot of trades, each with a potentially small reward ($100-$500) and often with limited risk (maybe $500-$1000). By using tools such as IV, the goal is to tip the odds in our favor over the course of a lot of trades. Is that about right?

I’ve started trading with some small-scale, limited risk covered calls and iron condors/butterflies just to watch them play out and learn. Do you guys keep the majority of your portfolio in buy-and-hold stocks and use a small portion for options? Obviously if a few hours a month of option trading can average 1-10% per month, that seems pretty worthwhile, so I’m wondering how you diversify your funds.

I’m loving the options world, and how it appears to be somewhat of an art and a skill that can be learned, so again, thanks for the time in posting.

 

Hey Jiggawatt!

Generally speaking, yes; the tastytrade method is trade small and trade often. They use spreads to limit risk and they don’t swing for the fences. Generally; depending on the trade you put a GTC order in at a specified profit target between 25-80%, but this is trade dependent. You look for elevated IVR as this leads to higher premiums.

tastytrade is “ticker agnostic”, they don’t care what underlying stock is provided it meets minimum volatility. They open the trade 45 days before expiration, put the GTC in, if it doesn’t trigger reevaluate at 21 days from expiration, close or adjust.

I would recommend you look on the tastyworks platform and check out the “follow” tab (the three people). Pay close attention to trades from BOB IRA, Liz and Jenny, Jim Schultz, Johnny and Lindsay. See what they’re trading and why. You can easily click the duplicate button and it builds the same trade for you.

1% per month (12% annually) is a piece of cake to do some trades with minimal involvement every month. The more aggressive you get the more time you spend managing your trades. I’ve almost created another full time job for me, but I love it, so it’s all good.

hope this helps and wasn’t too scattered.

 

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