Trading Cash Covered Puts ... Larry H.

I've been selling cash covered puts in my IRA account. YTD, I've sold 70 puts with 54 winners (77%). I've profited $31,100. Since the market downturn, I've focused on trading options and minimized trading stocks. I have tested day trading high volume TSM stocks this week, but cautiously. Traded CREE and BIDu. Looks interesting but may require too much time to be profitable. Have you a current recommendation on high volume TSM stocks for day trading? With current high volatility and downside pressure, would you recommend selling naked puts on inverse ETFs as a means of hedging?

Appreciate hour report and your recommendations on books (Connors and Dent).

....

Larry,

I'm glad that you've made some money using TSM puts. Intraday, as well as every evening, I run a screening program that looks for TSM puts that meet annual return and downside protection criteria (as well as other criteria that change depending on the time to expiration: >10 contract volume, >25 contract open interest, 0.25 bid/ask spread, 0.45 put premium).

So far as day trading, I only trade AAPL. In an IRA account, when you sell a positon, you have to wait three days for funds to clear. With an expensive stock like AAPL ($255), I sell high delta puts ($290) instead of buying/selling the stock shares. While the spread is a little wider--requiring a greater stock price movement--there's no three day wait for funds to clear.

You could certainly sell inverse ETF puts (e.g., SH). I've done that, as well as bought gold (GLD) and bonds (TLT) as hedges in these volatile times.

ric

Successfully Trading Cash-Covered Puts ... Matti V.

Ric,

I just closed OPEN naked put position for a nice $635 profit. I still have CSTR, MED and BIDU naked put positions. I'm new to writing naked puts and not sure when to close a position so I'd really appreciate if you could tweet also when you close a position.

Next, I'm starting to study your day trading method, which seems excellent. I think your TSM service is the best value that I've seen.

Thanks.

Matti,

As a rule of thumb, I close a naked put position when I've earned 75% of the premium. In fact, as soon as I open the position, I put in a GTC order to close at 75% of the premium. At the other extreme, I use double the premium as a stop loss.

Ric