To The Moon

Recently, I have been very busy and had little time to write daily routines. However, when I was busy, I unexpectedly found that my energy was limited, and I increasingly felt the advantages of sell put as a trading strategy. The extensibility is quite high, which can save a lot of judgment costs.

During this period, the market situation has become very complicated, the Palestinian-Israeli dispute is heated, the FOMC meeting on the last rate hike and the impact of the US bond sale plan. These macro factors have overshadowed the performance of individual stocks and led to a two-month correction. Fortunately, the fundamentals of the U.S. economy are still strong, and although there are signs of a mini soft landing ahead, the stock market can continue to dance and dance before the rate cut announcement.

As for the market performance in the first two months, my attitude is to limit the decline, and then pick and choose some stocks to sell put according to the trend. In my opinion, the risk of selling and buying stocks is the same. After becoming adept at using the sell put, I found that two advantages were greatly underestimated:

• First, don't worry about closing positions

• Another is that it's easier to get a sense of accomplishment.

There is a saying in the Chinese stock market: those who can buy are apprentices, and those who can sell are masters. A trade that does not need to consider closing a position can save at least 80% of the judgment cost. We have to admit one thing, under the premise of considering getting a phased return, it is not an easy thing to judge when to close a position, which many people ignore.

It's easy to open a position, even if you just have expectations about the stock, such as "I saw someone else buy it," "I think this stock will go up," "the technical level looks OK." However, closing positions needs to obtain certain stage feedback, profit or loss, under this premise, it is also necessary to collect a lot of objective information to assist decision-making, and even regret after closing the position early/failed to close the position earlier. In short, it is a need to share the energy to do a clean-up work.

But the sell put does not need to consider so much, in the opening position is all over: want to buy the bottom pick the option with the absolute delta; Don't want to buy bottom, choose the absolute value of small, that is, out-of-the-money options.

In addition, it is easier to get a sense of accomplishment by selling put, and you can clearly feel the time cost. I joke with my friends that selling put is just like placing mobile games, and it is OK to order vegetables. The return on investment is very cost-effective.

Many people like to be an option buyer, although the buyer needs to expend more energy on information acquisition and judgment, and must endure the error of judgment most of the time, but occasionally get a big reward will make up for the previous mental wear. Option buyers are the right choice for energetic people with plenty of time to focus on trading. But sell put is extremely friendly to most people who have to work for a family and have little energy to distribute transactions.

How to pick strike price

Whether it's stock trading or derivatives trading stock selection is fundamental, everyone has a preference for stocks and we'll talk about that later.

The most important part of sell put strategy is the choice of exercise price. There are many ways to choose, the same stock at the same time, different people will choose different exercise prices, taking people around me for example, there are roughly two categories: brainless extreme price out and bid price.

The first type of friend is called A, the main feature is more money + busy. Because there is so much money, it does not care about the cost performance of the annual income, and the exercise price will choose some extreme situations that may fall to the price. Moreover, because of the wide range of stocks, the position is diversified, so there will not be a margin call caused by the halving of stocks. Although the single royalty is small, but A position is large, so the cash in the pocket on Friday due date is not low, and the weekly income is stable, similar to the fixed interest, A is the best mentality I have seen to sell put players.

The other type of friend is called B. B is a relatively common sell put player, focusing on one or two stocks, usually FANNG, such as Apple, Tesla, Microsoft, limited energy to understand the recent news of important impact events of individual stocks, familiar with the stock price trend, and have a good idea of the current price valuation. B will care about the annualized return of royalties, and will also be careful not to take high orders. Therefore, B's exercise price will choose the price suitable for bottom-hunting according to the current trend, and even choose the parity exercise price aggressively when it approaches the bottom-hunting price.

A and B are typical sell put players, most of the exercise price choose outside the price, the operation idea is biased toward the bottom of the stock, worry, is also the most common sell put exercise price selection routine.

My style will be closer to Mr. B most of the time, to say that the difference is to add a look at the option transaction, the exercise price choice idea is open, such as the bottom rebound with the large single option price exercise price has a miracle effect:

This is the third type of strike price selection: choose at the money or in-the-money options. According to my observation, this year has also become the mainstream use of institutions. Previously introduced an ETF likes to sell around 5% in-the-money options, but according to the observation of the past few months, 15% in the price is not uncommon, typical such as $Eli Lilly(LLY)$ and $Microsoft(MSFT)$ $.

Based on my experience over the past few months, if you also want to reduce your trading focus and allocate more energy to other things, you can try the following lazy operation:

1: Choose sell put, but only do FANNG related company stocks, Apple, Microsoft, NVIDIA, Amazon, weight loss drug manufacturers can also be included, focus on one or two companies you fully understand.

2: On this basis, pay attention to the option transactions of this company, the buyer pays attention to the turnover, the seller pays attention to the turnover, especially the option order transactions with more than one million and the expiration date within 1 year. FANNG's option transaction accuracy is higher.

3: The seller transaction is more valuable than the buyer, especially the sell call transaction that expires in the same week, and the obvious peak signal of the week.

Yes, it is as simple as that. After the above three steps, the daily trading judgment process is basically omitted to look at the information and then take a look at the stock price trend and movement.