苍海泛舟
方显英雄本色-- 股市投资探讨
正文
Because of Gov. Short Ban, You can not play SKF anymore, it's integrity has been severely damaged and it is become a unfair trade for all SKF trader. You can have many complains about that, but for traders, we need to make money, we don't have time to argue and wait for things sort out. We need work around, like water, and move on.
When one door closed, another window opened.
So we can play UYG instead, it is 2X financial long ETF. The best of all, it does not impacted by Short ban and still function normally.
Today, I open this thread as an example to show how to Play UYG at this environment. That will be real time, use real price, and use real money to do so.
This morning I just sold 5 naked 20 puts of UYG at $2.4
Trade Strategy and Plan, how to make money?
1. Assumption:
Because of badly damaged financial sector, it need long time to heal. And there are still plentty of uncertainty out there.
But Gov. 700B rescue plan and short ban has put a floor under, so the down side risk has been reduced.
These two force will fight to each other for long time, that will drive financial sector move in a range for long time.
2. How to do it?
Current UYG move range is about from $18 to $24 the middle point is $21. So when it move close to lower "bottom" buy and when it move close to "Top" sell it To make it more profitable, we use option as trading vehicle.
You may not be always lucky to buy at bottom and sell at top, so using option as tool can help you to get extra gain.
1) Buy
When UYG move below "middle line" like today, you want to buy UYG, you don't buy it directly instead, you sell naked $20 puts ( Naked puts means: you don't have short position to cover your sold puts) By selling the right to someone who can sell UYG to you at $20 within a month, you make $2. about 10% gain.
By OE day, if UYG below $20, someone can put his or her UYG to you at $20. So you bought UYG at $20. You want to buy UYG anyway, so this is not problem. Since you made $2 by selling naked put, you actually cost of UYG is 20-2 = $18. That's lower your cost. IF UYG price is more than $20 by OE day, put expired worthless, and you keep $2 in your pocket, and play the game again next month. So you gained 10%.
2) Sell:
When UYG move above "middle line" and you want to sell UYG, you don't sell it directly, you sell $22 covered call
By selling the right to someone who can buy UYG from you at $22 within a month, you made $2. ( Covered call means: you have underline stock to cover your sold call.)
By OE day, if UYG more than $22, your covered call assigned. You sold UYG at $22 to someone who bought your 22c. So you made 22-18 = $4 +$2 that's about 30% gain.
If UYG less than $22 by OE day, 22c expired worthless. You keep $2 and made 10% gain. You can continue to play this game next month.
Assume only half time of a year, you have good trade, you annualized return will be 60-80%.
Today, I just sold 5 UYG $20 naked puts at $2.4/each to start the game.
Stay tuned in next few months for update on this game. That will be interesting.
Take care.
When one door closed, another window opened.
So we can play UYG instead, it is 2X financial long ETF. The best of all, it does not impacted by Short ban and still function normally.
Today, I open this thread as an example to show how to Play UYG at this environment. That will be real time, use real price, and use real money to do so.
This morning I just sold 5 naked 20 puts of UYG at $2.4
Trade Strategy and Plan, how to make money?
1. Assumption:
Because of badly damaged financial sector, it need long time to heal. And there are still plentty of uncertainty out there.
But Gov. 700B rescue plan and short ban has put a floor under, so the down side risk has been reduced.
These two force will fight to each other for long time, that will drive financial sector move in a range for long time.
2. How to do it?
Current UYG move range is about from $18 to $24 the middle point is $21. So when it move close to lower "bottom" buy and when it move close to "Top" sell it To make it more profitable, we use option as trading vehicle.
You may not be always lucky to buy at bottom and sell at top, so using option as tool can help you to get extra gain.
1) Buy
When UYG move below "middle line" like today, you want to buy UYG, you don't buy it directly instead, you sell naked $20 puts ( Naked puts means: you don't have short position to cover your sold puts) By selling the right to someone who can sell UYG to you at $20 within a month, you make $2. about 10% gain.
By OE day, if UYG below $20, someone can put his or her UYG to you at $20. So you bought UYG at $20. You want to buy UYG anyway, so this is not problem. Since you made $2 by selling naked put, you actually cost of UYG is 20-2 = $18. That's lower your cost. IF UYG price is more than $20 by OE day, put expired worthless, and you keep $2 in your pocket, and play the game again next month. So you gained 10%.
2) Sell:
When UYG move above "middle line" and you want to sell UYG, you don't sell it directly, you sell $22 covered call
By selling the right to someone who can buy UYG from you at $22 within a month, you made $2. ( Covered call means: you have underline stock to cover your sold call.)
By OE day, if UYG more than $22, your covered call assigned. You sold UYG at $22 to someone who bought your 22c. So you made 22-18 = $4 +$2 that's about 30% gain.
If UYG less than $22 by OE day, 22c expired worthless. You keep $2 and made 10% gain. You can continue to play this game next month.
Assume only half time of a year, you have good trade, you annualized return will be 60-80%.
Today, I just sold 5 UYG $20 naked puts at $2.4/each to start the game.
Stay tuned in next few months for update on this game. That will be interesting.
Take care.
Though I have never tried to sell naked call/puts,
and won't in near future
This make me understand option further
Covered call doesn't have downside protection. You still need method to reduce the downside risk.