Sell Put in general is a weak bullish strategy.
Today I'd like to introduce 6 scenarios of sell put:
1. When the stock market plunges
When the market crashes but the company's fundamentals haven't changed, I generally sell put because the iv of the option is high and can bring better returns
But you should judge by yourself: whether the company's fundamentals have changed or not.
2. Before the earnings release
If you predict that the earnings is still good, then you can sell put before the earnings report. The options' iv will drop significantly after the earnings, so you can earn the difference of iv.
For example, sell put $Tesla (TSLA) $ before earnings.
3. When the company's fundamentals get better
When the company's fundamentals become better, the institutions generally upgrage the company's target price and rating.
TIP: do not pay attention to the specific target price given by the big banks, but rather pay attention to the qualitative and quantitative logic and the financial forecast of the company, as well as the value of the changes.
However, if the institutions lower the target price and revenue and profit expectations, the company's fundamentals generally have become worse.
Specifically, the key word to look for is expectations. The stock price is looking at the future and not the past.
For example, I recently sell put of $Pinduoduo Inc.(PDD)$ .
4. Arbitrage opportunities brought by privatization
For example, I now sell put $Activision Blizzard (ATVI)$ every week
5. When I can caluculate a reasonable forward pe of a company
There is no P/E for companies that have lost money in the past and current year, and many will use P/S to calculate comps. But P/S should be used with caution.
For example, in the new energy vehicle industry, if you look at the PS, you will feel that $NIO Inc.(NIO)$ , $XPeng Inc.(XPEV)$ , $Li Auto(LI)$ is cheaper than tesla.
But this comparison is not reasonable, because tesla's profit margin is way higher than the 3 companies, who can't catch up even years later.
You can calculate the Forward PE just like institutions.
$Tesla Motors(TSLA)$ 23 years eps expected 5+, corresponding to the forward pe of more than 50 x, which is lower than the 3 ev companies.
6. When the options held are about to expire
As the company's fundamentals remain to be good, I will sell put on a weekly/monthly basis. For example, I sell put of $Tesla Motors(TSLA)$ and $Meituan(03690)$. When they expire or are going to expire, I sell the new puts.
Do you have other scenarios to sell put?
Welcome to share your thoughts in the comment section~
To learn more about my series for beginners- Options Insights, you can click:
Options Insights III: What is Cash-Secured Puts (TSLA, QQQ, PDD)
Options Insights IV: The Downside of Cash-Secured Puts
Options Insights VI: The Advantages of Cash-Secured Puts
Options Insights: Criteria For Selecting Long-Term Target & Recommendations
Options Insights II : Why choose QQQ over SPY?
Options Insights: A Good Time to Sell Put of TSLA & TENCENT Now
Options InsightsⅤ: Why GOOG is a good choice for sell put?
Options Insights VII: How To Trade Apple After Its Earnings?
Options Insights Ⅸ: How to Control Risk? Technically & Mentally
Options Insights Ⅹ: What Strategy To Use When Stocks Won't Rise Much?
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