Small and large dividend stock and ETF investors can use covered calls and puts trades to generate monthly income from options premiums and options trading.
9.1.23. DG is down sharply on lousy earnings and guidance. It's a great company that will bounce back next year. So I did some bottom fishing. I sold DG 9.29.23 expiration (28 days) $125 strike puts (delta -.27) for the ask price of $1.50 when the option was $1.40 bid, $1.50 ask. OTM probability was 70.8% and implied volatility was 26.4%. Wall Street analysts are lowering their target prices to $135 to $181. Before all 21 analysts could adjust their target prices, the high TP was $270, mean was $189.93 and low was $150. For me, this is a speculative income trade and a longer term speculative trade on a company that I expect to bounce back. On my possible $123.50 net debit, the dividend yield is 1.9%.
Is it possible that we are using different stock picking and income strategies?
You trade for higher premiums and take higher risks that your trades will be assigned than I do.
Are you trading puts on dividend stocks you want to own or are you trading puts on the high momentum stocks that can give you good capital gains if assigned, or large losses if they continue sinking like PayPal did to me last year and Paycom is doing to me this year?
While I had a lot of stocks and QQQ assigned to me in August, I generally have only one or two assignments or trades when I buy back options to avoid assignment.
What is your experience, and how do you handle that?
I do up to 25 puts trades a month to diversify and reduce my risks of assignment?
How many trades do you do a month?
Can you give us an example of a recent or current trade so we can learn from you?
Or can you suggest three or four trades that you would do this week?
9.1.23. DG is down sharply on lousy earnings and guidance. It's a great company that will bounce back next year. So I did some bottom fishing. I sold DG 9.29.23 expiration (28 days) $125 strike puts (delta -.27) for the ask price of $1.50 when the option was $1.40 bid, $1.50 ask. OTM probability was 70.8% and implied volatility was 26.4%. Wall Street analysts are lowering their target prices to $135 to $181. Before all 21 analysts could adjust their target prices, the high TP was $270, mean was $189.93 and low was $150. For me, this is a speculative income trade and a longer term speculative trade on a company that I expect to bounce back. On my possible $123.50 net debit, the dividend yield is 1.9%.
You sell put's when IV is low ?!?!
I sell put's when IV is high, thus i get good premiums
and always use a delta of 25 to 29, anything under this is
often useless since premiums are minuscule.
Then i only take on trades when i expect IV to drop after placing my trade
and thus stabilize the stock price in a range that's profitable for me,
and i place contingency orders is many cases...
Rob K, Thanks for a great comment.
Is it possible that we are using different stock picking and income strategies?
You trade for higher premiums and take higher risks that your trades will be assigned than I do.
Are you trading puts on dividend stocks you want to own or are you trading puts on the high momentum stocks that can give you good capital gains if assigned, or large losses if they continue sinking like PayPal did to me last year and Paycom is doing to me this year?
While I had a lot of stocks and QQQ assigned to me in August, I generally have only one or two assignments or trades when I buy back options to avoid assignment.
What is your experience, and how do you handle that?
I do up to 25 puts trades a month to diversify and reduce my risks of assignment?
How many trades do you do a month?
Can you give us an example of a recent or current trade so we can learn from you?
Or can you suggest three or four trades that you would do this week?
Again, thanks for the comment.