Today I again took advantage of the increased volatility and sold a December 1325 put for $4.50. I sold the December contract so I would have 50 days until expiry - a few days more than usual, but I went further out in time to receive a larger premium due to both the increase in the VXN as well as the number of days until expiry. The 1325 level was last crossed in late April and would represent a retracement of 61% of the run from March to last week. I do see this pullback continuing further, but I still think that buyers will step back in to ride the market higher into the end of the year. There are also multiple levels of support beneath the market.
Depending on how the market reacts tomorrow (jobless claims and Q3 GDP in the am), I am looking to sell another put - either a Nov 1400 (I didn't plan on selling another Nov, but I don't think the high premium is justified by an option with 21 days left until expiry and 17% otm)or a December 1400 put ($7.95 mark) that I would close out once the VXN declines or I take in 50% of the premium. Also of note is that in order for the NDX to get down to the 1400 level in 3 weeks, we would need another financial crisis sell off reminiscent of last fall - I just don't think a move like that is in the cards.
Index level: 1684.23
Sell to open: 1 Dec 09 1325 put
Credit received: 4.50
Initial Margin req.: $13,250.00
Commission: $1.25
Net credit: $448.75
Days to expiry: 50
Simple return: 3.39%
Yield: 24.72%
% to ITM: 21.23%
%Probability of expiring ITM: 5.80%
VXN level: 27.91%
Mmkt equivalent earnings @ 1.30%: $23.60
Please view my disclosure on the bottom of this blog!!
Year End Summary – 2021
3 years ago