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Selling 10-Delta Puts with 4-Day Expirations + 2 Free Webinar Registration Links

Can we sell 10-Delta weekly cash-secured puts and still generate significant annualized returns on a week where there is a market-recognized holiday reducing the number of days to expiration from 5 to 4? The answer is yes. This article will highlight 4 put sales I executed on the week of 12/20/2021 – 12/23/2021 where the market was closed on 12/24/2021 because Christmas Day fell on a Saturday.

 

What is the 10-Delta strategy?

This is an ultra-low risk put-selling strategy where we sell deep out-of-the-money puts with Deltas of 10 or less. Since share and put value are inversely related, Delta is signified as -10 or less. One of the definitions of Delta is the approximate probability of an option expiring in-the-money or with intrinsic-value. This means our trades have a near 90+% chance of success.

 

4 securities used on 12/20/2021 for 12/23/2021 expirations

  • Vaneck Vectors Semiconductor ETF (Nasdaq: SMH)
  • Invesco QQQ Trust (Nasdaq: QQQ)
  • NVIDIA Corp. (Nasdaq: NVDA)
  • Etsy, Inc. (Nasdaq: ETSY)

All options expired deep out-of-the-money.

 

Brokerage statement showing the 8 put contract sales

4-Day, 10-Delta Trades

 

Final calculations after all contracts expired out-of-the-money

  • Cash generated after commissions: $452.77
  • Cash required to secure the put trades: $210,818.00 [(put strike – put premium) x 100 x #contracts]
  • 4-day return: 0.214% ($452.77/$210,818.00)
  • Annualized return: 11.2% (based on 52 weeks)

 

Advantages of using with the 10-Delta put strategy

  • Greater annualized returns
  • Avoid weekend risk
  • Easy to avoid earnings reports

 

Disadvantages of using with the 10-Delta put strategy

  • Smaller pool of underlyings to select from
  • More frequent rolling decisions
  • 4x the number and amount of compared to monthly options (reduced commissions make this a minor factor)
  • Less opportunities for management mitigation

 

***Both weekly and monthly options will work well with this strategy

 

Discussion

On a holiday week (4 trading days), we can still generate significant annualized returns using the ultra-low risk 10-Delta put-selling strategy. As always, we must be prepared with our exit strategy arsenal should the trade(s) turn against us or allow us to enhance our gains to even higher levels.

 

Our recently updated online put-selling course

Our best spreadsheet for calculating initial & final returns

 

Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI teaemail testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a name unless given permission:

Hi Alan,

I’m glad you do the things you do. I listened when you did a talk for Michigan AAII. So glad I did. You are making me some money.

Thanks,

John

 

Upcoming events

1. Mad Hedge Investor Summit

Wednesday June 15th, 2022

12 PM ET – 1 PM ET

Covered Call Writing Dividend Stocks to Create a 3-Income Strategy

 Dr. Alan Ellman, President of The Corp.

Barry Bergman, BCI Managing Director

Covered call writing is a low-risk option-selling strategy that generates weekly or monthly cash-flow. By mastering the skill of strike price selection and adding dividend distributions, a potential 3-income strategy can be crafted with a goal of beating the market on a consistent basis.

Topics covered in this webinar include:

  • Strategy analysis
  • Option basics
  • What is covered call writing?
  • Dividend distribution
  • Stock selection
  • Option selection
  • Trade management

Real-life examples will be highlighted with Dow 30 stocks using option-chains and calculation spreadsheets. Attendees will have the opportunity to participate in written Q&A during the entire webinar.

Registration link 

 

2.American Association of Individual Investors: Greensboro North Carolina Chapter

Saturday June 18, 2022

10 AM – 12 PM ET

The PCP (put-call-put or wheel) Strategy

Using both covered call writing and selling cash-secured in a multi-tiered low-risk option-selling strategy where we either generate cash-flow or buy a stock at a discount.

Zoom webinar for Chapter members

 

3. Wealth365 Summit

Tuesday July 12th, 2022

4 PM ET – 5 PM ET

Selling Cash-Secured Puts 

Exit Strategy Choices After Exercise of Cash-Secured Puts 

Selling cash-secured puts is a low-risk option-selling strategy which generates weekly or monthly cash flow by agreeing to buy shares at a price we determine, by a date we determine. In return for undertaking this obligation, we are paid a cash premium. We only sell puts on shares we would otherwise want to own and, if exercised, and shares are put to us, they are purchased at a discount from the price when the put trade was initiated.

This presentation includes an introduction to option basics, defines selling cash-secured puts and provides real-life examples. The focus of the webinar details the steps available to put sellers should the put be exercised, and we now own the discounted stock or ETF shares. The seminar includes a discussion of the PCP (put-call-put or wheel) Strategy and the  among other exit strategy opportunities.

Register for free here

 

4. Money Show Orlando live event

October 30th – November 1st, 2022

OMNI ORLANDO RESORT AT CHAMPIONSGATE

Visit Alan, Barry and members of the BCI team at Booth # 415

Masters Class

Comprehensive Course on Selling Cash-Secured Puts

Detailed start-to-finish 6-part program

This presentation will provide all the information, with real-life examples, necessary to master the strategy of selling cash-secured puts. The program is divided into 6 sections:

  • Section I:
    • Option basics
  • Section II
    • Traditional put-selling
  • Section III
    • PCP (wheel) strategy
  • Section IV
    • Buy a stock at a discount instead of a limit order
  • Section V
    • Ultra-low-risk put/Delta strategy
  • Section VI
    • Ultra-low-risk put/Implied volatility strategy

This presentation was developed to benefit both beginner and experienced option traders and will provide all the information needed to initiate the strategy and elevate returns to the highest possible levels.

45-minute presentation

Covered Call Writing: Multiple Applications Based on Current Market Conditions

Real-life examples with Invesco QQQ Trust (Nasdaq: QQQ)

Covered call writing is a low-risk option-selling strategy geared to generating cash flow with capital preservation a key requirement. This presentation will demonstrate how the strategy can be crafted to benefit in all market environments. Market situations highlighted are:

  • Normal to bull markets
  • Bear and volatile markets
  • Low interest-rate environments

A popular large-cap technology exchange-traded fund, , will be used to establish rules and guidelines to benefit in these market circumstances.

Registration link and more details to follow.

 

Alan speaking at a Money Show event

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Market tone data is now located on page 1 of our premium member stock reports and page 1 of our mid-week ETF reports.

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

10 Responses to “Selling 10-Delta Puts with 4-Day Expirations + 2 Free Webinar Registration Links”

  1. Barry B June 11, 2022 10:46 pm
    #

    Premium Members,

    This week’s Weekly Stock Screen And Watch List has been uploaded to The Blue Collar Investor Premium Member site and is available for download in the “Reports” section. Look for the report dated 06/10/22.

    Also, be sure to check out the latest BCI Training Videos and “Ask Alan” segments. You can view them on The Blue Collar YouTube Channel. For your convenience, the link to the BCI YouTube Channel is:

    http://www.youtube.com/user/BlueCollarInvestor

    Best,

    Barry and The Blue Collar Investor Team
    [email protected]

  2. Harley June 13, 2022 1:08 am
    #

    Hi Alan.

    Just got around to completing last week’s PCP strategy article. Thanks.

    Curious though, on how you got the 5.2% improvement in BE for the ITM CC? Shouldn’t it just be an improvement of 2.5%?

    Thanks,
    Harley

    • Alan Ellman June 13, 2022 6:19 am
      #

      Harley,

      The 5.2% (actually 5.3% as I re-calculated the math) to breakeven (BE) in the article referred to the 2nd leg of the trade (call leg) where the cost-basis of the stock was $79.59, and the in-the-money call premium was $4.25.

      This brings the breakeven price point for this call leg down to $75.34 which represents a 5.3% difference ($4.25/$79.59).

      Alan

  3. Mike June 13, 2022 2:53 am
    #

    Alan,

    My question is about options on ETFs in this current environment. Are there certain ETF strategies that we should consider during this downturn?

    Additionally when the market decides to turn upward,whenever that might be, would buying an ETF and then selling calls be something to consider?

    Thanks and have a great week.
    Mike

    • Alan Ellman June 13, 2022 6:26 am
      #

      MIke,

      Writing ITM call strikes or deep OTM put strikes on the best-performing ETFs seeking monthly initial time-value returns between 1% and 3% is a reasonable approach in volatile market environments.

      My best-performing portfolio year-to-date is the one dedicated to the Select Sector SPDRs (middle section of our ETF Reports).

      Trading in these challenging market conditions is not for every investor but for those of us who do, taking a defensive posture and being prepared to take advantage of every exit strategy opportunity is critical to our success.

      Alan

  4. Alan Ellman June 14, 2022 8:31 am
    #

    Premium members,

    The latest Blue Chip Report of the best-performing Dow 30 stocks for the July 2022 contracts has been uploaded to your premium member site.

    Look in the “resources/downloads” section on the right side and scroll down to “B”

    Alan

  5. Alan Ellman June 14, 2022 5:07 pm
    #

    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.

    New members check out our ongoing and never-ending training videos (“Ask Alan” and Blue Hour webinars). We add at least one new video each month. Only premium members have access to the entire library of these training tools.

    For your convenience, here is the link to login to the premium site:

    https://www.thebluecollarinvestor.com/member/login.php

    NOT A PREMIUM MEMBER? Check out this link:

    https://www.thebluecollarinvestor.com/membership.shtml

    Alan and the BCI team

  6. Ilya June 16, 2022 1:11 am
    #

    Dear Alan,

    I would like your opinion on a strategy I am considering in this volatile market environment:

    The essence of the strategy is as follows: we write a naked deep OTM monthly call on a liquid ETF (for example, SPY). We receive a premium for this written call option.

    Next, we must ensure that the market value of the underlying financial instrument does not rise above our strike. If the market value goes to the levels where we think it could reach the strike soon, then we buy the underlying financial instrument. Obviously, we need to have sufficient cash on our brokerage account to be able to buy the relevant number of underlying shares. The timing of when to do so depends on individual preference and willingness to take risks.

    Many thanks, in advance, for your thoughts.

    Sincerely,
    Ilya

    • Alan Ellman June 16, 2022 7:40 am
      #

      Ilya,

      I commend and encourage you for thinking outside the box.

      The strategy success is dependent on timing the market on a consistent basis, and I know of no investor or even expert who has that ability. All we can do is throw the odds in our favor.

      Here are some points to consider before making a final decision on implementing this strategy:

      1. Naked option trading requires a higher level of trading approval that most retail investors would have a difficult time obtaining (appropriately so).

      2. The upside is premium generated for a deep OTM call strike which, by definition for a security like SPY, would be miniscule.

      3. If we are forced to buy the security as the price approaches the deep OTM strike, the % return would be similarly miniscule.

      4. As an alternative, how about selling deep OTM cash-secured puts that generate a pre-defined initial time-value return goal range because we will know our cost-basis in advance. In this case, if the trade turns against us (as opposed to the proposed trade), shares are purchased at a discount from the price at trade entry.

      I will give consideration to creating a detailed article or produce a video including more in-depth analysis of this proposed strategy.

      Thanks for sharing.

      Alan

      • Roni June 16, 2022 11:18 am
        #

        Alan,

        the problem with all trading methods at the moment is high risk.
        The situation is worse than volatility. The market is dropping consistently this year, and it does not look like the bottom is near.

        For example, In April, I sold one OTM CSP NVDA 05/20/2022 215.00 P and bought it back at a considerable loss before expiry.
        Today NVDA is trading @ 155.00.

        Let us stay out for a spell and wait for the recovery.

        Roni