Gotcha. Thanks for the explanation. Let's say SPY reaches SPY 106 by before May opex but then bounces back to 107 to close opex out. Would I still have to pay out on the 106 puts I sold (I guess I would if someone exercised them)? And I will get money for selling them upfront (which should be reflected in my account immediately) but as they get closer to 106, they will continue to show a greater loss in my account, right? But as long as SPY doesn't reach 106 and they don't get exercised, that loss won't be realized, right? One more thing – if I thought that the SPY were to tag 106, am I better off selling 105 puts or are the premiums so low for them that it just isn't worth it?
Red just asking what is your logic of fighting the tape ?
Yes I am bear by heart but the two questions are:
When bond bubble bursts why do you not think there should be a superbull market in stocks ?
Where do you think bond investors are going to go with the money ?
Bond market is 10 times bigger than stocks and 100 times bigger than commodities…. No one in the world can deny the biggest bubble in the known history is happening in bond market…
I frankly do not see logic against stocks right now…
The goal is too “never” have to buy them back Monica. You want them to expire worthless… never reaching below 106 by opx.
And NO, don't sell 122 puts! If the market goes down you will lose the difference between the 122 and the 119 on every put.
That's $3 per contract. The odds are heavily against the bulls at this point, regardless of what the media is going to spin this week.
Volatility is going to come back into this market this week, and there will be some selling. How much is unknown? But the upside here is severely limited now.
Not a bad idea. If you feel convinced that the market will not get to SPY 122 and that instead it will go down quickly (not that you or I do), couldn't you also buy 119 puts and sell 122 puts, rather than buy 119 puts and sell 106 puts? Or is that just the same as doubling down on one side rather than hedging your bet?! And, lets say you sell those 106 puts and the market rallies but you still feel that the market is headed severely lower by expiration. Doesn't it make sense to buy back those puts in that case since they are now worth less and you will make money on them (since you sold them)? Just want to make sure I understand all this correctly.
Well, they did have 7 weeks straight up from the March, 2009 bottom. So, it's possible we could go up for another week.
But, I think Sundancer feels pretty strongly that we will turn this week. I hope so too. Maybe you should split up you puts and buy half your spreads in May and half in June? Just a thought…
Not gonna do it.
Your article is always useful.
Thanks.
Selling naked puts? Better pray that Israel does not attack Iran.
Gotcha. Thanks for the explanation. Let's say SPY reaches SPY 106 by before May opex but then bounces back to 107 to close opex out. Would I still have to pay out on the 106 puts I sold (I guess I would if someone exercised them)? And I will get money for selling them upfront (which should be reflected in my account immediately) but as they get closer to 106, they will continue to show a greater loss in my account, right? But as long as SPY doesn't reach 106 and they don't get exercised, that loss won't be realized, right? One more thing – if I thought that the SPY were to tag 106, am I better off selling 105 puts or are the premiums so low for them that it just isn't worth it?
Red just asking what is your logic of fighting the tape ?
Yes I am bear by heart but the two questions are:
When bond bubble bursts why do you not think there should be a superbull market in stocks ?
Where do you think bond investors are going to go with the money ?
Bond market is 10 times bigger than stocks and 100 times bigger than commodities….
No one in the world can deny the biggest bubble in the known history is happening in bond market…
I frankly do not see logic against stocks right now…
The goal is too “never” have to buy them back Monica. You want them to expire worthless… never reaching below 106 by opx.
And NO, don't sell 122 puts! If the market goes down you will lose the difference between the 122 and the 119 on every put.
That's $3 per contract. The odds are heavily against the bulls at this point, regardless of what the media is going to spin this week.
Volatility is going to come back into this market this week, and there will be some selling. How much is unknown? But the upside here is severely limited now.
Not a bad idea. If you feel convinced that the market will not get to SPY 122 and that instead it will go down quickly (not that you or I do), couldn't you also buy 119 puts and sell 122 puts, rather than buy 119 puts and sell 106 puts? Or is that just the same as doubling down on one side rather than hedging your bet?! And, lets say you sell those 106 puts and the market rallies but you still feel that the market is headed severely lower by expiration. Doesn't it make sense to buy back those puts in that case since they are now worth less and you will make money on them (since you sold them)? Just want to make sure I understand all this correctly.
Well, they did have 7 weeks straight up from the March, 2009 bottom. So, it's possible we could go up for another week.
But, I think Sundancer feels pretty strongly that we will turn this week. I hope so too. Maybe you should split up you puts and buy half your spreads in May and half in June? Just a thought…
If I do think we are turning, you think May or June puts at this point? I hate to be finally in the right position but wiped out due to time decay.
Thanks Red. We'll see.