Comments on: Best Technology ETFs for Our Option-Selling Portfolios: QQQ and XLK https://www.thebluecollarinvestor.com/best-technology-etfs-for-our-option-selling-portfolios-qqq-and-xlk/ Learn how to invest by selling stock options. Thu, 14 Oct 2021 13:18:44 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/best-technology-etfs-for-our-option-selling-portfolios-qqq-and-xlk/#comment-480154 Thu, 14 Oct 2021 13:18:44 +0000 https://www.thebluecollarinvestor.com/?p=20290#comment-480154 In reply to George.

George,

When I started writing articles about these ultra low-risk strategies, I tested several securities to see if Delta and implied volatility resulted in the same ranges. They were close but not precise.

Both approaches are excellent foundational methods of establishing high-probability trades. I have been using Delta for weekly puts very successfully for over a year. I, also, have another portfolio (small one) for IV trading ranges that is also doing quite well.

The main issue with using Deltas of 16 in place of IV trading ranges is that we don’t always have strikes with Deltas of 16 but we can always establish a trading range with IV.

As an example, the screenshot below shows a trading range for CPRT from $127.23 to $152.51 based on an IV of 28.77. For calls, the closest Delta is 13 (($155.00 strike) and for puts, the closest Delta is 19 ($125.00 strike).

It appears that using IV is a bit more precise but I will continue to monitor and evaluate. Again, both approaches are strong methodologies for successful, ultra low-risk trades.

VOLQ, like traditional IV stats, is based on annualized price movement and 1 standard deviation. The conversion factor must be used for the specific option contract we are trading.

CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/best-technology-etfs-for-our-option-selling-portfolios-qqq-and-xlk/#comment-480134 Thu, 14 Oct 2021 12:24:16 +0000 https://www.thebluecollarinvestor.com/?p=20290#comment-480134 In reply to Bob.

Bob,

The “wheel” (we call it the “PCP” or “Put-call-put” strategy in the BCI community), is a wonderful strategy. Whether we are selling calls or puts, our enemy is share depreciation and our trades must be managed if there is a share price decline. If AAPL drops from $140.00 to $130.00, some exit strategy intervention would have been appropriate.

That said, selling short-term options allows us to re-evaluate our bullish assumptions on the underlying securities. If share price continues to decline, the option premiums will not compensate us for the loss on the stock side.

If we decide to write calls against holdings we want to retain for the long haul (portfolio overwriting), we can first enter the trade by selling OTM puts and then, once exercised, write deep OTM calls accepting lower premiums in exchange for low-probability of exercise trades.

Bottom line: Unless we are favoring portfolio overwriting, it’s best to use securities that are elite-performers at the time of the trades.

Alan

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By: George https://www.thebluecollarinvestor.com/best-technology-etfs-for-our-option-selling-portfolios-qqq-and-xlk/#comment-480146 Thu, 14 Oct 2021 06:09:17 +0000 https://www.thebluecollarinvestor.com/?p=20290#comment-480146 Alan a few questions;

a) im very intrigued with your strategy of using IV to sell puts and calls with 84% probability of success

– how is IV different from delta– why not use strike prices at a delta of .16%. Is that not the sameÉ

– when using VOLQ, why do u need to use the IV calculator for a monthly given the VOLQ IS the 1 mth time frame.. Confused

Navigating the website, learning , learning, learning. I LOVE the put-call-put strategy . Fits my personality — i like to get paid !! haha

Thanks,

George

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By: Alan Ellman https://www.thebluecollarinvestor.com/best-technology-etfs-for-our-option-selling-portfolios-qqq-and-xlk/#comment-479907 Wed, 13 Oct 2021 21:04:53 +0000 https://www.thebluecollarinvestor.com/?p=20290#comment-479907 Premium members:

This week’s 4-page report of top-performing ETFs and analysis of the top-performing Select Sector SPDRs has been uploaded to your premium site. One and three-month analysis are included in the report. Weekly performance has also been incorporated into the report although not part of the screening process. Weekly option availability and implied volatility stats are also incorporated.

The mid-week market tone is located on page 1 of the report.

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Alan and the BCI team

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By: Bob https://www.thebluecollarinvestor.com/best-technology-etfs-for-our-option-selling-portfolios-qqq-and-xlk/#comment-479878 Wed, 13 Oct 2021 19:37:00 +0000 https://www.thebluecollarinvestor.com/?p=20290#comment-479878 Alan,

What would happen if I picked stocks like Apple and MSFT that I liked long term and constantly did the wheel, but say Apple is assigned at 140 from the put but stock drops to 130 and then I turn around and sell the ATM CC, gets called away, then sell the ATM Put. Keep repeating even though the stock stays under 140?

Thank you,

Bob

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By: Roni https://www.thebluecollarinvestor.com/best-technology-etfs-for-our-option-selling-portfolios-qqq-and-xlk/#comment-479712 Wed, 13 Oct 2021 11:59:56 +0000 https://www.thebluecollarinvestor.com/?p=20290#comment-479712 In reply to Barry B.

Thanks, Barry.

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By: Alan Ellman https://www.thebluecollarinvestor.com/best-technology-etfs-for-our-option-selling-portfolios-qqq-and-xlk/#comment-479698 Wed, 13 Oct 2021 11:12:45 +0000 https://www.thebluecollarinvestor.com/?p=20290#comment-479698 In reply to Joanna.

Joanna,

The guideline to initiate the MCU exit strategy is:

When the time-value component of the cost-to-close the initial short call is approaching zero and we can generate at least 1% more than this TV CTC by the end of the current contract with another position.

We use the “Unwind Now” tab of the Elite or Elite-Plus Calculators for these calculations.

Alan

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