OA, I assume you have to cut at some point if the stock keeps trending down, correct? How do you deal with the theta decay between the March puts and April covered calls as you get close to the March put expiration?oldarmy1 said:oldarmy1 said:Let me tweet another approach I use in bear markets and paste it here.ryanhnc10 said:
Thanks for the reply, makes sense$JD....Bear market keep it tight and secure trade. Buy 1000 shares. Enter FIVE Apr 21 $40 covered calls for $3.55. Net on the 5 CC's would be $43.55, if called out. Buy 10 $42 Mar $42 Puts for $2.
— Disciplined Trading (@oldarmy1) March 9, 2023
The 500 uncovered call side shares becomes your profit trade.
I love doing this at these big volume days because either it will rebound well or fail. I don't want to be a bag holder long on failing stocks, so use a 50% covered call approach and use the premium from the covered calls to buy your put side protection on all 100% of a stock in a downtrend. If it keeps going down the premium on the calls will be earned into your account. The $42 puts mean you can't lose more than the small difference between premium call earned and cost of in the money puts.
If brave you can buy the shares here and wait to see if a rebound into last hour but the strategy DEMANDS you do not go into tomorrow without cover.$JD....Bear market keep it tight and secure trade. Buy 1000 shares. Enter FIVE Apr 21 $40 covered calls for $3.55. Net on the 5 CC's would be $43.55, if called out. Buy 10 $42 Mar $42 Puts for $2.
— Disciplined Trading (@oldarmy1) March 9, 2023
The 500 uncovered call side shares becomes your profit trade.