Naked Puts, Rolling Options for monthly income and Patreon Questions

Ask an Option Trader: Lot's a great questions from viewers so I decided to make my first Question and Answer video. Here are the questions I answer in today's video:

Patreon:
0:01:40 - Is there some minimum required knowledge in trading one should have before doing that, and if so do you have videos on teaching those basics?

0:03:00 - Do you do paid consultations for specific recommendations?

0:03:20 - Would someone living in the USA be able to follow all of your trades?

0:03:50 - How much minimum would someone have to have in their account to follow trades with you?

Selling Puts:

0:04:45 - How much money were you actually risking?

0:06:24 - This is way better than being an outright buyer of stocks. It's like Value investing. At one point you mention that you conduct over 20 trades a month; how big of a portfolio (Account Value) should that be in order to make that number of trades?

0:08:06 - As the stock price moves below and above the strike price, couldn't a buyer put those options to you (exercise their option) at any time and not have to wait until expiry? That is of course if you did not make the adjustments you made prior to the stock price hitting the strike price?

0:09:55 - Would you be better off selling a put longer out say 3 to 4 months out?

0:12:00 - What premium amount is generally worth your time?

Rolling Puts:

0:14:00 - When will you decide to roll the stock? Is it when the price drop below certain %, below strong support level and/or very close to expiry date?

0:15:24 - Do you look at IV when you roll the stock (does it matter)?

0:15:54 - Do you always roll using the same strike price or make adjustments and pick strike price that is closer to ATM / OTM?

0:17:42 - Maximum how many time will you roll the same stock?

0:18:12 - Will you do the same for Iron condor (when the price drop under sell put / long put or raise above sell call/long call)?

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My primary investment strategy is long term high yield dividend investing. I have been an actively trading the market for over 20 years and have built most of my wealth by reinvesting my dividends and following my 14 Personal Rules of investing. I actively trade options on both the American and Canadian Stock exchanges using options strategies and buying and holding high yield dividend paying stocks.

I generate monthly income in two ways. Averaging more than an annual 7% return by collecting dividends on high yield dividend stocks that I hold. The second income stream comes from the selling of option premium and taking advantage of theta decay. This neutral strategy allows me to make money in both bull and bear markets and limits my risk. Both of these strategies are suitable for passive income and create a stable predictable safe passive income.

Let’s Get Rich Together
Levi Woods

Disclaimer: I am not a financial planner and am not offering investment advice. This is an opinion channel only and should not be taken as any form of financial advice. I receive a small commission from the purchase of any item from using the links listed above. There are financial risks involved in taking on any monetary transaction that I discuss in my videos.

#options #monthlyincome #rollingoptions

[prabukrishnamurthy]

thank you. I am finding many answers for questions for both I have and not even thought of

[davecirelli]

Going further out in time and rolling up or out after 40-60% profit works well and avoids the gamma risk of trading the front month which is very common but not comfortable for me. Using only the top stocks is the key, meaning the stocks you would want to buy and with a margin account you need much less of an account size as long as you can manage buying power, so just start small.

[josephjones]

Recommended options strategies for the following account sizes:
$10k
$100, 000
$1 Million
$100 Million
$1 Billion and beyond

I just want to see strategies how your strategies will change if you had different sums of money.

[jt]

Will spread the word to the Asian community. Well explained, thumbs up.

[options]

Would you recommend using leverage or margins to trade options?

[sagig]

Great video! I must appreciate your Q&A video and will highly appreciate it if you continue with it every few weeks. One thing about options which I don't see you mention, perhaps it's too basic to mention, is that since an option is 100 shares, then the investment can be very sizable. If an investor wouldn't want to risk more than, say, $5000 then he will be limited only to stocks that are priced lower than $50 per share. In other words, option trading of the more expensive stocks can get dramatically expensive, hence highly risky. Would you agree with that? Is there a way "around that" to still trade options of more expensive stocks with less exposure? Again - great video!

[austinitel.]

Hi, could i ask, using your example, if i sell a put and the price of the underlying drops below the strike price, could i immediately close the price and not purchase the underlying at all? Because my intention is just to profit from the premium and i dont want to own the shares. Is there any way i can just pay the difference if the price falls below strike price and not be "forced to buy" the contract?

[Bondanalloy]

this is great. we need a good resource of trading options in canada. especially regarding our current broker choices and registered account options.

[sedul]

Hi Levi, 1)for a portfolio of capital dedicated for options (for example your club), what % of the portfolio should be secured as margin for options. i.e. $10k Cash, $5k margin used for options? 2) I am also in Canada, do you keep your funds in Canadian and just borrow USD on margin with IBKR to establish your positions?
I am interested to start and will join the club soon.

[sedul]

Canadian Related Question: A more complicated topic here that has been baffling me is around dealing with taxes associated with selling options / buying options in non-registered account in Canada. Namely a) Foreign Disposition b) Taxes for Selling Options and Assignment c) whether interest can be written off on Loans (Margin, HELOC, LOC), that are used to secure the credit risk associated with writing options. Not sure if you would be interested in talking about that and/or would have any insight to share.

[JJ-hijr]

Are you using IB to make your trades? QT is killing me with its fees 10.95+1... Last year starting out I gave up 25% of my primarily naked put profits on fees... I would like 98% of the time hold until close just to avoid more fees...

[willwang]

Are there any stocks under $30 you recommend for selling put options?

[UriahKiser]

Can you buy a put option to exit the sell put option before expiration

Example being you sell a put option January 19/2020 for January 19/2021 then in august of 2020
You want to exit out of the sell contract can you buy back the January 19/2020 put contract
Will that exit you from responsibility of the original sell put?

[anomanderrake]

Hey Levi, I was wondering if you also use a dividend investing approach in your RRSP as you do in your other accounts? Or do you focus mostly on growth stocks as you are still young.. Thanks!

[robertbarry]

Do you use any tool to help decide which strike price and expiration date when selling a put?

[bsdgffishtuna]

when selling puts do you make offer at bid or ask. For example if bid is $1 and ask is $1.10 - which is best choice?

[davebot]

I'm considering Alaris Royalty AD.TO at $14/share. The div yield at this price would be over 11%. Any thoughts on this one?

[Cami]

Great video thanks Levi! So I have a SELLPUT not with an intension of buying, so as close to expiration date, I want to exit the contract. Is possible that I have to pay much more premium to close it?

[UserName-dtkc]

Do you have a guideline on how much credit you like to receive on naked puts? For a condor or spread, I understand the 2 to 1 risk to reward, but naked puts are a bit different than spreads or condors. Thanks