general info

Alert Scans

CSP 1% <=.20 Delta <=7 DTE: This is stocks offering CSP with 7DTE or less (Friday expiration) Paying 1% ROR at the .20 delta or lower.  This will be a lot of high IV stuff and may not be suitable for some.

Options-Guru Weekly Puts Stock: This is the same CSP scan posted on the options-guru.com. These stocks offer a ROR between 1% -2% and delta below .30. and 7DTE.  This scan is running once a week on Fridays intended for the next Friday expiration.  Medium to high IV.

CSP 30-60 DTE: This scan finds stocks that have dropped 8% in the last 10 bars and had a recent earnings announcement.  If you stay within 30-60 DTE you should be able to avoid any upcoming earnings announcements. This alert/scan looks for any stock that offers weekly options.  IV ranges from low to high.

52w Low: Stocks trading within 3% to the 52-week low.  This alert/scan only looks at stocks in the SP500.

 

CSP cash secured put is the most popular strategy in the group. You need to have the funds to own 100 shares of the stock of your choice. AAPL trading @149 let’s assume we want to own this stock at 135. We can sell the 135 cash secured put. This will require $13,500 in collateral in case of assignment. Assuming we can sell the 135 put for $160 this would represent a return of about 1.2% on our collateral or risk of $13,500. If AAPL stays above the 135 put, we keep our credit of $160 and we can do the process over again. If it drops below 135 we have to buy the stock at 135 even if it’s trading at 125. Our credit of $160 is kept no matter what happens. It’s best to find 5-10 stocks that you really want to own and do this strategy. You can do it every week or for a longer duration up to 90 DTE. It’s best for you to decide what DTE your comfortable trading.

Some info on the alerts. You will learn quickly to avoid holding a position during an earnings announcement.  Any alerts that say CSP 30-60 DTE will avoid an earnings announcement if you stay within this range.  This alert/scan looks for any stock that offers weekly options.  On the alerts that say 52w low it is just that. Stocks trading within 3% to the 52-week low.  This alert/scan only looks at stocks in the SP500. When quality stocks are trading close to the 52w low the talking heads on CNBC will mention this.  This can trigger traders to buy the dip.  We can sell a CSP below the 52w low.  But we must be mindful that some stocks will continue making new 52w lows.

Some info on strike selection and DTE for cash secured puts.   The sweet spot for delta is between .30 and 20.  IV or Implied Volatility will determine this.  Typically, lower IV stocks like AAPL with about 35% IV will require you to trade close to the .30 delta to make the risk worth the reward.  With a higher IV like TSLA with 70% IV you can choose a lower Delta .20 or below and still give a good risk reward. Think of delta as probability of assignment. .20 delta as 20% probability of assignment at expiration. Delta has other meanings, but we can touch on those later.  It’s also good to understand why IV is high.   Earning announcements can cause IV to be high and is best to avoid. Avoid anything biotech related.  I have seen Biotech stocks with IV over 600% move 90% on drug news.  The sweet spot for DTE is 45-60 DTE.  Max is 90 DTE as anything after this the theta decay is minimal.  Minimum is 5DTE.  A shorter DTE will require you to trade closer to the money of the actual stock price while a longer DTE will allow you to get further out of the money.  I consider shorted DTE to be more stressful.   Option open interest is also a good metric to look at.  Higher open interest is more liquid and will give a better bid ask spread and lessen the chances of early assignment.  OI above 200 is generally good.  Monthly expirations have the most open interest, so I look at these expiration dates first.

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