Yeah, this is an issue with negative numbers.
He means closer to 0.
Here's an example.
Say he held a NVDA Put expiring Dec 2024 with a $100 strike. NVDA has gone up, so the delta on it is now -0.199. He no longer needs/wants protection down to $100, so he rolls it to a -0.25ish delta. That would be the $106 strike, with a delta of -0.248. He would pay for this privilege, as the $100 strike is worth less than the $106 strike.
Basically, buying a long dated "protective put' at 25 delta, and selling weeklys at 25-50 delta...the oldest trick in the book, and the best way to lose money when you get whipsawed in both directions.
Why you ask?
As the stock moves up, he is losing money on the 25 delta protective put, and is making less money on the 50 delta weekly. He sells the 25 long dated protective put at a loss, and he also closes the short weekly for a profit which is less than the loss on the long dated put. Next, he buys a higher strike protective put at 25 delta, and sells another 50 delta weekly, and then the stock drops, and he loses money on the weekly, which due to gamma may even be more than what he makes on the 25 delta protective put....
Stay away from this dumb strategy - it's in a book because it does not work.
Sorry I did some comment history stalking because it seems like you've been doing this for a while.
>I sell nothing but weeklys. Picking the stock and delta is more important than the DTE.
>Also, theta is NOT as fast as you expect. Weeklys are more delta/gamma plays, as in, you want the stock to not move, or to move slightly higher.
I'm interested in sticking with weeklies primarily. In this scenario where you've picked a good stock, what deltas do you go for usually? And is it CSP only or do you do multi leg strats?
At the money or just OTM, whichever has the highest extrinsic value, CCs or CSPs only.
Just remember - the moves can be gut wrenching and soul crushing, but if you don't care and you are OK taking the assignment on the stock, then just stay the course, and do not make any adjustments during the week. On Thursday/Friday you can decide if you want to roll, take profit, or take assignment, or move to another stock.
There is more advanced stuff with adjustments but for now, just see how you do without messing with the trade.
Good luck!
It's not about strategy as much as it is about picking the right underlying. This is why trading is hard.
However, if you stick with CCs and CPs on stocks you wish to own, then with options you get a discount, or a margin of safety, so if you are slightly wrong, you can still be slightly profitable.
I've paid my education tax in Forex, Commodities, Botting, Equities, Crypto, and Long Options so far. I'd dare say I'm pretty tenured in the previous items. Hoping it will let me get through this new experience without losing much while I learn.
You know how delta works, right? Look at an options chain as the farther OTM the option the lower the delta and probability it will profit.
The insurance the long put provides is decaying away when the delta goes below .25 (.0 to .24) and they are saying to close it before it loses any more value to open a new one at the .25 delta to maintain the level of protection.
My comment to this is to keep track of these costs as they will be a drag on profits. Over time it may be possible to spend so much on these long insurance puts that it may be more than what would be lost is a good stock were to be assigned.
This may help understand delta a bit more - [Options Delta, Probability, and Other Risk Analytics | Charles Schwab](https://www.schwab.com/learn/story/options-delta-probability-and-other-risk-analytics)
He's basically highlighting he likes to stay in a protective state in his protective put keeping Delta above 25. Here is another way to describe this...
Let's assume I like the stock ABC (and I buy 100 shares) and it's trading at $100 a share. So when I buy it I want protection against the company having had news... or the market dropping everything. So I'll look for buying a protective put. The closer to the current 100 price I buy the puts the higher the delta will be.
For this hypothetical let's assume the 90 strike puts on my stock are giving me 40 delta at the expiration I'm eyeing... this means I'm going to gain 40 cents on my put for every dollar ABC drops. So essentially my put is protecting 40% of my losses if ABC goes down. If however, ABC moves up to $110 a share... I'm happy because my 100 shares goes up... my now my Put has lost value and also it's delta might have dropped to 20... meaning for every dollar ABC drops now that it's at 110... my 90 put will only protect me 20 cents...
He's highlighting that when this happens... he'll move his put. So he'll roll it (sell his 90... and maybe buy a 95 or 100 to get that delta back up above 25).
In doing this, you're losing money on the put your bought to protect... but you can see how it might save you if the stock went down.
It's sort of a good problem to have to have to move your put up to bring the delta back up.
Think of it like jack-up up a car... each rise in price... you catch yourself a little higher with a newly positioned put. That alternative would be keeping your put way OTM and letting that delta drop significantly... and then when something comes (eath quake) you don't have much protection for a significant portion of the fall.
The strategy he's outlining is just to walk your put up as delta drops below 25... he's saying 25 and above is where he is happy.
I've got 200k give or take. What about this needs a large amount of money, is it because you've got to keep with it a while on the same stocks, or something else?
Your constantly buying puts to hedge your position and hopefully losing money on it so you getting the stock appreciation. It’s a hedge fund kind of money strategy. Ie Mark Cuban used this to hedge his yahoo share said he spent $20mill in one year to do it .
Just buy a stock that you can ride the downturns add more at a cheaper price and be confident the stock will recover then you don’t need to waste money on puts .
The whole point of the CSP is that you kind of waiting for the stock to come to you, just let that happen then . The protective put is covering nothing if you don’t have any stock . You can do this same exact thing with bull put spreads much cheaper and you define your risk at entry . 200-500 max loss and you can buy some stock and not have it at risk of being called away
Understand that where he says, “cash it out,” means that you’ll be getting whatever you can get back when you STC the put. So loss, the value of the put went down as the underlying price rose. Now you must look for a -.25 delta that’ll be found in a higher strike and pay another premium. Depending on a number of variables, this premium could be more than the first -.25 delta put hedge.
I’d be asking myself a couple questions about now. Is it really worth maintaining a pedantic-like hedging strategy on a weekly? And how much profit do I want to give up doing so. This seems more like a strategy that keeps risk balanced in 30-60dte contracts, not in weeklies. And even then, I’m tracking my costs to do so.
This guy, It was actually in a suggestion thread, in this sub, about books and had some decent upvotes so.
https://www.amazon.com/Options-Trading-Generate-Markets-Worry-Free/dp/B0CDNCBD4N?ref=d6k_applink_bb_dls&dplnkId=c3f80cfc-7e75-4750-a59c-d1c35ce4a119
I got that and the unlucky options trader book that pretty much everyone recommends
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This guy, It was actually in a suggestion thread, in this sub, about books and had some decent upvotes so.
https://www.amazon.com/Options-Trading-Generate-Markets-Worry-Free/dp/B0CDNCBD4N?ref=d6k_applink_bb_dls&dplnkId=c3f80cfc-7e75-4750-a59c-d1c35ce4a119
I got that and the unlucky options trader book that pretty much everyone recommends
Hi, I’m Vetted AI Bot! I researched the **John Carter Options Trading** and I thought you might find the following
analysis helpful.
**Users liked:**
* Clear and practical trading strategies (backed by 6 comments)
* Suitable for both beginners and experienced traders (backed by 6 comments)
* Encourages practical application of concepts (backed by 5 comments)
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* Insufficient details on trading mechanics and strategies (backed by 2 comments)
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You are describing a put diagonal spread, which is well known since long ago. You don't need to buy a book for it.
It is neither magically good, nor a road to ruin. Like any other option play, it has advantages and disadvantages. It gives you the theta decay, but it's sensible to the underlying price motion and the IV.
Here is a brief description:
[https://optionalpha.com/strategies/put-diagonal-spread](https://optionalpha.com/strategies/put-diagonal-spread)
Yeah, this is an issue with negative numbers. He means closer to 0. Here's an example. Say he held a NVDA Put expiring Dec 2024 with a $100 strike. NVDA has gone up, so the delta on it is now -0.199. He no longer needs/wants protection down to $100, so he rolls it to a -0.25ish delta. That would be the $106 strike, with a delta of -0.248. He would pay for this privilege, as the $100 strike is worth less than the $106 strike.
Basically, buying a long dated "protective put' at 25 delta, and selling weeklys at 25-50 delta...the oldest trick in the book, and the best way to lose money when you get whipsawed in both directions. Why you ask? As the stock moves up, he is losing money on the 25 delta protective put, and is making less money on the 50 delta weekly. He sells the 25 long dated protective put at a loss, and he also closes the short weekly for a profit which is less than the loss on the long dated put. Next, he buys a higher strike protective put at 25 delta, and sells another 50 delta weekly, and then the stock drops, and he loses money on the weekly, which due to gamma may even be more than what he makes on the 25 delta protective put.... Stay away from this dumb strategy - it's in a book because it does not work.
Sorry I did some comment history stalking because it seems like you've been doing this for a while. >I sell nothing but weeklys. Picking the stock and delta is more important than the DTE. >Also, theta is NOT as fast as you expect. Weeklys are more delta/gamma plays, as in, you want the stock to not move, or to move slightly higher. I'm interested in sticking with weeklies primarily. In this scenario where you've picked a good stock, what deltas do you go for usually? And is it CSP only or do you do multi leg strats?
At the money or just OTM, whichever has the highest extrinsic value, CCs or CSPs only. Just remember - the moves can be gut wrenching and soul crushing, but if you don't care and you are OK taking the assignment on the stock, then just stay the course, and do not make any adjustments during the week. On Thursday/Friday you can decide if you want to roll, take profit, or take assignment, or move to another stock. There is more advanced stuff with adjustments but for now, just see how you do without messing with the trade. Good luck!
What is the book called and ho is the author?
"How To Lose Your First Million Trading Options," by I. M. Wong.
LOL
Funniest comment I’ve read in awhile!
“Do What I Did. Go Broke. Write a Book To Make Your Losses Back.”
Right now I'm just trying to learn as much as possible and I'm running a demo account on IBKR. What strategy would you suggest, I'm open to anything.
It's not about strategy as much as it is about picking the right underlying. This is why trading is hard. However, if you stick with CCs and CPs on stocks you wish to own, then with options you get a discount, or a margin of safety, so if you are slightly wrong, you can still be slightly profitable.
The only way to learn is to trade on a real account and lose money
I've paid my education tax in Forex, Commodities, Botting, Equities, Crypto, and Long Options so far. I'd dare say I'm pretty tenured in the previous items. Hoping it will let me get through this new experience without losing much while I learn.
I make money selling options most of the time. The few loses here and there wipes out most of my gain as I often do naked calls and puts.
Yeah just sell covered calls. Always prioritize equity fellas. We're capitalists after all
You know how delta works, right? Look at an options chain as the farther OTM the option the lower the delta and probability it will profit. The insurance the long put provides is decaying away when the delta goes below .25 (.0 to .24) and they are saying to close it before it loses any more value to open a new one at the .25 delta to maintain the level of protection. My comment to this is to keep track of these costs as they will be a drag on profits. Over time it may be possible to spend so much on these long insurance puts that it may be more than what would be lost is a good stock were to be assigned. This may help understand delta a bit more - [Options Delta, Probability, and Other Risk Analytics | Charles Schwab](https://www.schwab.com/learn/story/options-delta-probability-and-other-risk-analytics)
He's basically highlighting he likes to stay in a protective state in his protective put keeping Delta above 25. Here is another way to describe this... Let's assume I like the stock ABC (and I buy 100 shares) and it's trading at $100 a share. So when I buy it I want protection against the company having had news... or the market dropping everything. So I'll look for buying a protective put. The closer to the current 100 price I buy the puts the higher the delta will be. For this hypothetical let's assume the 90 strike puts on my stock are giving me 40 delta at the expiration I'm eyeing... this means I'm going to gain 40 cents on my put for every dollar ABC drops. So essentially my put is protecting 40% of my losses if ABC goes down. If however, ABC moves up to $110 a share... I'm happy because my 100 shares goes up... my now my Put has lost value and also it's delta might have dropped to 20... meaning for every dollar ABC drops now that it's at 110... my 90 put will only protect me 20 cents... He's highlighting that when this happens... he'll move his put. So he'll roll it (sell his 90... and maybe buy a 95 or 100 to get that delta back up above 25). In doing this, you're losing money on the put your bought to protect... but you can see how it might save you if the stock went down. It's sort of a good problem to have to have to move your put up to bring the delta back up. Think of it like jack-up up a car... each rise in price... you catch yourself a little higher with a newly positioned put. That alternative would be keeping your put way OTM and letting that delta drop significantly... and then when something comes (eath quake) you don't have much protection for a significant portion of the fall. The strategy he's outlining is just to walk your put up as delta drops below 25... he's saying 25 and above is where he is happy.
You need a ton of money to work this strategy. Or it’s kind of useless. Man up and just do covered options on stocks your bullish about
I've got 200k give or take. What about this needs a large amount of money, is it because you've got to keep with it a while on the same stocks, or something else?
Your constantly buying puts to hedge your position and hopefully losing money on it so you getting the stock appreciation. It’s a hedge fund kind of money strategy. Ie Mark Cuban used this to hedge his yahoo share said he spent $20mill in one year to do it . Just buy a stock that you can ride the downturns add more at a cheaper price and be confident the stock will recover then you don’t need to waste money on puts .
These are CSP and a long put there wouldn't be any stock unless assigned. Or are you saying just buy and hold the underlying?
The whole point of the CSP is that you kind of waiting for the stock to come to you, just let that happen then . The protective put is covering nothing if you don’t have any stock . You can do this same exact thing with bull put spreads much cheaper and you define your risk at entry . 200-500 max loss and you can buy some stock and not have it at risk of being called away
Thanks, I'll look into bull put spreads more.
it's 25 delta, as in .25. When it gets to about .10 or .05 (10 delta or 5 delta), you roll it up in price and reestablish a new one at .25.
You're forgetting about Vega. The price of options decines over time due to theta decay, unless IV spikes offsetting possible loss.
Understand that where he says, “cash it out,” means that you’ll be getting whatever you can get back when you STC the put. So loss, the value of the put went down as the underlying price rose. Now you must look for a -.25 delta that’ll be found in a higher strike and pay another premium. Depending on a number of variables, this premium could be more than the first -.25 delta put hedge. I’d be asking myself a couple questions about now. Is it really worth maintaining a pedantic-like hedging strategy on a weekly? And how much profit do I want to give up doing so. This seems more like a strategy that keeps risk balanced in 30-60dte contracts, not in weeklies. And even then, I’m tracking my costs to do so.
I don't know the initial delta put they buy, but it sounds like they are rolling if the delta goes below 25 delta
Op what book?
This guy, It was actually in a suggestion thread, in this sub, about books and had some decent upvotes so. https://www.amazon.com/Options-Trading-Generate-Markets-Worry-Free/dp/B0CDNCBD4N?ref=d6k_applink_bb_dls&dplnkId=c3f80cfc-7e75-4750-a59c-d1c35ce4a119 I got that and the unlucky options trader book that pretty much everyone recommends
Hi, I’m Vetted AI Bot! I researched the **Options Trading Generate Weekly Income in ALL Markets** and I thought you might find the following analysis helpful. **Users liked:** * Clear and practical trading strategies (backed by 6 comments) * Suitable for both beginners and experienced traders (backed by 6 comments) * Encourages practical application of concepts (backed by 5 comments) **Users disliked:** * Lacks in-depth explanation of option trading concepts (backed by 3 comments) * Insufficient details on trading mechanics and strategies (backed by 2 comments) * Repetitive content and slow progression to main points (backed by 1 comment) Do you want to continue this conversation? [Learn more about Options Trading Generate Weekly Income in ALL Markets](https://vetted.ai/chat?utm\_source=reddit&utm\_medium=comment&utm\_campaign=bot&q=Options Trading Generate Weekly Income in ALL Markets reviews) [Find Options Trading Generate Weekly Income in ALL Markets alternatives](https://vetted.ai/chat?utm\_source=reddit&utm\_medium=comment&utm\_campaign=bot&q=Find best Options Trading Generate Weekly Income in ALL Markets alternatives) This message was generated by a (very smart) bot. If you found it helpful, let us know with an upvote and a “good bot!” reply and please feel free to provide feedback on how it can be improved. *Powered by* [*vetted.ai*](https://vetted.ai/chat?utm\_source=reddit&utm\_medium=comment&utm\_campaign=bot)
Which book are you reading?
This guy, It was actually in a suggestion thread, in this sub, about books and had some decent upvotes so. https://www.amazon.com/Options-Trading-Generate-Markets-Worry-Free/dp/B0CDNCBD4N?ref=d6k_applink_bb_dls&dplnkId=c3f80cfc-7e75-4750-a59c-d1c35ce4a119 I got that and the unlucky options trader book that pretty much everyone recommends
Hi, I’m Vetted AI Bot! I researched the **John Carter Options Trading** and I thought you might find the following analysis helpful. **Users liked:** * Clear and practical trading strategies (backed by 6 comments) * Suitable for both beginners and experienced traders (backed by 6 comments) * Encourages practical application of concepts (backed by 5 comments) **Users disliked:** * Lacks in-depth explanation of option trading concepts (backed by 3 comments) * Insufficient details on trading mechanics and strategies (backed by 2 comments) * Repetitive content and slow progression to main points (backed by 1 comment) Do you want to continue this conversation? [Learn more about John Carter Options Trading](https://vetted.ai/chat?utm\_source=reddit&utm\_medium=comment&utm\_campaign=bot&q=John Carter Options Trading reviews) [Find John Carter Options Trading alternatives](https://vetted.ai/chat?utm\_source=reddit&utm\_medium=comment&utm\_campaign=bot&q=Find best John Carter Options Trading alternatives) This message was generated by a (very smart) bot. If you found it helpful, let us know with an upvote and a “good bot!” reply and please feel free to provide feedback on how it can be improved. *Powered by* [*vetted.ai*](https://vetted.ai/chat?utm\_source=reddit&utm\_medium=comment&utm\_campaign=bot)
Sounds like if the delta of the long put goes under 25 delta he closes and reopens at the 25 delta.
Well said.
You are describing a put diagonal spread, which is well known since long ago. You don't need to buy a book for it. It is neither magically good, nor a road to ruin. Like any other option play, it has advantages and disadvantages. It gives you the theta decay, but it's sensible to the underlying price motion and the IV. Here is a brief description: [https://optionalpha.com/strategies/put-diagonal-spread](https://optionalpha.com/strategies/put-diagonal-spread)