Options.....need names for selling puts

[lordxot]

I'm looking for names on which to sell put options. Started doing this last March 2020, and have found it to be a worthwhile way to earn income. I sell puts in my IRA and margin acct. I search for new issues to sell puts on and thought i might inquire here if any have some favorites to share. This is not a thread about the merits of selling puts or the dangers....do or do not. I simply want names of reasonable issues.

These don't have to be good companies, just good options. A good option for me is one that can be sold for a reasonable return at a strike that most likely will expire worthless, and in a short time frame.

An example is CYH...Community Health Systems. This stock dropped -18% on 4/22 with the DJI down -1000 points. Reason is also that HCA(Hospital Corp of America) gave lower 2022 guidance in their earnings call and the sector got creamed....a perfect storm for CYH. I was able to sell $8 puts for 5/20 for $.25. The 52 week low for CYH is $9.21. The Friday close was $9.43, down -$2.06. This is a good annualized return....37.5%(12 x .25 = 3/8 =37.5) I'm willing to risk owning CYH for $8 and will likely take the shares if it happens and then sell calls. But i usually just buy the puts back, take my loss, and move on. CYH earnings are 4/27. One is not supposed to sell puts in front of earnings but the extreme move on 4/22 was too good an opportunity to let pass. Last price on these puts was $.35.

I sometimes will buy a stock on which to sell a call but really don't want to own any but income stocks. POWW is an example. POWW is $4.19 currently and a $5 call for Jan 2023 can be sold for $.70...at minimum, a simple return of 16.7%. With POWW at 52 week lows, this seems reasonable ....................Xot

[bobfl]

Legal disclaimer: Never do what I discuss or you could lose your life savings. :-)

Paypal, down from a high of $300 in a year to $84. GM, down from $65 to $38. Boeing down about $100, Google, Ford, QQQ, on and on. My thought is, "Well it can't go down much lower; sell a put." But I thought that about Microsoft. I sold puts then it dropped to $17. I had to extend it out a year so it would not be called. I had a couple that I had to extend out in 2008 so they would not be called. At least I picked up a grand each time I moved it out until I could get out. My new rule was everything can go 50%+ lower than I thought was the low. So now I keep cash to cover a possible call. Better than buying the stock and losing the money. I calculate the % I make from the put sales price versus the cash I am holding out.

[bobfl]

Guess a person could add Amazon now with that 9% premarket drop today, Friday. If interested in owning it, just determine what you would want to own it at (in case it gets called) and sell a put for that.

[richardsok]

Xot --

Delighted to be tossing ideas around with you again. Let me pitch something your way related to your OP. Hope you will share yr thoughts.

Some time back I mused about a protocol where I would sell monthly SPY puts (rolling them over month by month) and hedging the whole shebang by buying a big block of puts say, three months out. The near-term puts would erode value more quickly than the more time-distant longs. Nothing really new there. Your garden-variety calendar spread. The problem was, of course, in event of a big drop, my short near-term puts would lose value more rapidly than my longer term long puts would gain.

Which led me to theory B. What if I hedged short SPY puts by pairing it with long puts of a SPY proxy

SPY is an index and, as such, its near term at-the-money options are very expensive. What if we sold a block of SPY puts say, at-the-money? Today's SPY is at 421. The JUNE 17 421 SPY puts sell for 15.40

Now, to pull a sample proxy out of a hat, let's pick AAPL and eyeball its two-year chart with SPY as an overlay. What we see is AAPL indeed follows SPY very roughly, except AAPL makes moves that are FAR more relatively volatile than SPY.

In theory, APPL puts should be more pricey than SPY -- but they're not. AAPL is at 162 this morning. You can buy its at-the-money June 17 puts for 7 bucks.

I could buy fifteen AAPL ATM puts (June 17 expiration) for every ten SPY puts I sell for a nice 6-wk profit and be WAY over-hedged in case of a steep fall.

Now I just picked AAPL as my sample proxy at random. With a little searching, one could find other stocks that tracked SPY chart patterns much more closely and I bet buying their ATM puts would be even cheaper than AAPL. Maybe MUCH cheaper.

You could diversify for extra caution. Your only qualifications are that they be optionable and liquid stocks or ETFs AND that they track SPY closely. You pick FOUR different proxys: A, B, C and D For each one you buy 15 or even 20 ATM puts and pair each by selling ten SPY puts with the same expiration.

You make a handsome gain every time you roll the process over so long as the market remains stable or bullish -- and if it drops hard your gains should be even better.

I thought it was an interesting idea but never followed up. (I probably would have proposed it to you long ago if you hadn't skipped outta Dodge a while back.) With my crude modus operandi, I'd have to paper trade for months to gain confidence this would actually work -- but perhaps someone with your skills could run a back test.

Thoughts?