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Selling Puts is a fine way to...

By: StudioCity'98



...increase current income in your portfolio in a raging Bull or sideways chop suey. Suxx balls in a sharp sell-off, wake up with a bunch of OCC assignments, and risk of Margin Violation that can't be supported by SMA. Then you're put on violation 'handcuffs." Really suxx balls when Margin Clerk goes all forced liquidation on you. But I'm sure you know that already.

Sound like you're carrying a lot of time risk. Don't sell any further out than 20-25 days. Taking undue & uncompensated risk if you do. As a seller, you want to live on the sharp concave decay slope. And you want your exposure turning over as fast as possible. [+Velocity] = [+Greater annualized return]

Are you using Reg T margin or Portfolio Margin?  If Reg T, try to move into PM. Better all the way 'round. Who's the Broker? Some retail brokers make allowing PM unnecessarily more difficult than others. Some brokers are just lazy. Good brokers will look at account size & trading pattern. Sounds to me like it should be fairly easy for you to get.

If you're that sophisticated you may want to do diagonals (weeklys) on both sides, 8-20 days out.  You can get them on for a debit, so it doesn't eat into your margin, plus you get the benefit of the -neg theta. Position is +delta, -gamma, -theta.  Look into it. No need to gamma hedge.  I have them rolling all the time. Have to watch out for a sharp increase in +Vega, (1-2 per yr, maybe) otherwise, generally set it & forget it. On expiry roll up & out. Rinse & repeat.

Pro tip from a former CBOE floor trader. I was down there from 2000-2004, between Hedge Fund Trading Desks.  Good Times! :-)  If you like that I have all kinds of tricks for you.


[NOT ADVICE]
sorry, SEC makes me say that

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