How to sell cash secured or naked puts in tastyworks / Trade demo video

hey traders welcome back to tiffany trades options my name is tiffany and i love to trade stock options today is september 8th 2021. it's about 9 53 in the morning and i wanted to um take some time today to do a trade demonstration video it's been a while since i put one of those out and i feel like it might be helpful to kind of go over some of the basics again uh reacquaint you with my trading style the things that i look for when i trade and um and we'll just go from there um as an option seller i am i am constantly looking for uh tickers that are trading with high volatility higher options premium and lately with the way the market has been going that's been a little bit tough um which is not awful it's just not always as fun sometimes it just takes a little bit more digging and searching so today i'm just going to do a very basic cash secured put in a low cost stock right now i have uh 5 561 dollars in this trading account this is the demo account that i use for this channel i am going to look for a stock that is under 55 there are some various schools of thought when selling puts this is a margin account so when i sell this put it is not going to reserve all 5500 or the equivalent of the strike price in capital to hold the position open it's only going to take a fraction of that you can if you have the risk tolerance for it open more than one position which will consume more of your margin capital requirement but you might exceed your total cash balance so depending on whether or not you are a person who is um trading primarily in cash secured puts or even in short or slash naked puts um these are uh some considerations to keep in mind when you are trading in a margin account i have no problem rolling puts if i need to for extra credit i have no problem rolling them down and out for more credit sometimes i might even in the very very instance roll them out and up for more credit um so i'm not afraid of assignment either if a stock that i choose that gets assigned to me then that's also totally fine you have to be prepared for assignment in all scenarios because in most us-based stocks assignment can happen at any time it's pretty rare but sometimes it can happen early just depends on what's going on with the market and the ticker that you're trading in so i always look for tickers that i have no problem owning would be happy to run the wheel on would be happy to run sell covered calls on would be happy to continue to sell puts on um and so with that in mind i'm just going to take a quick look at tastytrade's grid scanner and to get that in the web browser platform you just come over to this little grid right here it's already preset to high options volume because that's the grid that i'm primarily looking at because i like to trade in options that have high volume and high open interest which generally means that the bid in the ask spread is going to be a little bit tighter than most of your perhaps less liquid options you can sort this grid by last by net change by bid by ask by iv rank and so what i'm going to do to find a lower cost stock that is familiar to me is i'm just going to sort by the price and i'm going to scroll down to stocks that are now in the 55 range so that could include anything from cisco or below i understand that cisco's currently trading at 58 but i wouldn't be opposed to opening up a position in cisco if i decided that was gonna work and then i'm going to look at this and see if i can find anything that is familiar to me that also has high iv rank right now and as you can see iv is pretty low for most of these stocks except for this one kweb i don't know anything about this stock but it looks like it's an etf so i'm just going to skip out of that because it's an unfamiliar etf to me looks like it's really the china internet uh i'll do more research on that later to see if it would be something that i'd be willing to trade in but for purposes of this video i'm not going to do that now so looking at this list the most familiar names to me are cisco coca-cola pinterest exxonmobil intel altria gm amc i'm not going to trade in amc for reasons that should be pretty obvious um uh united airlines pfizer so i traded in united airlines a couple weeks ago with some pretty good success i had opened up a short put around the 43 strike in i don't know an early october expiration and um united had a pretty quick run up so it was a pretty short duration trade so let's explore what's going on there right now it has an iv rank of 22 which isn't super high but it's also not zero so it's better than nothing i open most all of my options positions anywhere from 30 to 60 days away i will sometimes make exceptions for this if i feel like i don't have much going on in the near term i might on occasion open up options that are about 14 to 21 days away but i'd say the average is anywhere from 30 to 45 days away and sometimes 60 if i need to roll out so the grid right now is telling me that united airlines earnings are going to happen between the week of october 8th and october 15th there are various ways that you can confirm this and usually what i do is i go on to e-trade and just check their earnings calendar i have no reason to doubt this is correct but just look for other sources as well just to consider whether some of the information is aligning and so i am actually going to open something in the 44 day range which is october 22nd and this is what the options chain looks like right now and if you are new to options trading this is what your standard options chain looks like on tastyworks this is the web browser platform it's going to look similar on things like think or swim which i'll cover right here similar options chain a lot more detailed information in terms of you know this activity up here but you can see that the chain is the same puts her on this side calls her on this side strikes and expiration is in the middle this is the united airlines chart on a one year view to give you an idea of what i look for when i am deciding which strike to open drawing some important resistance lines is pretty straightforward but you can identify trends in the stock and where it is sort of meeting its floor and meeting its ceiling and make some assessments based on that interpretation to decide which strike that you might want to open up your position in in this case for the near term right here this is july 9th to the present i can see that united airlines hits what could be perceived as some support right here in the 43 strike range between 43 and 44. and if i go out into a longer term view i could see it looks like it could be perceived to be around 45 so opening up a strike in the 45 or 46 range might prove viable keeping in mind that the stock price for united airlines is currently 47 so that's pretty close to the money if you are seeking high probability of profit trades you wouldn't want to open up your position further away from the money but keeping in mind that you will collect less credit if you do so but there's nothing wrong with that because if you it's up to you to decide what your your preference and your trading style is and so i will show you what i also look for in tastyworks when i decide which strike to select so this is the october 22nd expiration this is 44 days away and looking back at that chart it had looked like in the last two months or so the support for united airlines was about 43 so that's where i'm going to go right here so to select a cell put in tasty works you simply click select the bid side if you wanted to buy a put in tasty works you would select the ask side and that gives you the green buy function right here i am primarily selling options in almost all instances i'd say about 98 of the time i'm selling options so i'm always going to select the sell side this is the bid and the ask spread and this is something that you want to look for when you're trading options to see if you have a higher chance of getting filled at a quicker rate the wider the number is between these two positions the less likely it is or the longer it might take you to get filled for your position if it's closer you might get filled right away i'll show you an example with apple this is an example of a very tight bid ask spread their these are only about one penny apart which means that apple is very liquid highly traded stock chances of getting filled quickly are great for apple so when you're trading in something like amazon which i would never trade us naked put in just for account balance purposes you can notice that these are a little bit wider they're not so great but they're also three dollars wide so you might have to meet somewhere in the middle to see if you'll get filled or you might have to go down a few pennies or up a few pennies it just depends on what you're trading in another example of wider bid and asks would be in chipotle i still have no idea why chipotle is trading this much money i don't even think it tastes that good but you know i digress for just a quick second there you can see that these are pretty wide bids and acts so when you're looking at which strikes to select for your particular option trade you also want to look at the bid in the ask another thing to keep in mind about earnings is that if you open up a trade before earnings credit is likely to be a little bit less than it would be if you opened up a trade after earnings so i understand that there is an inherent risk in this trade because tastyworks is telling me that earnings is happening before october 22nd but that is also giving me a little bit higher premium than i wouldn't otherwise get it is possible that united airlines could sink from 46.93 below 43 as a result of earnings in which case i would either take assignment or i'd roll out the position for more credit so this is the view on tastyworks that gives you an idea of you know the chances of being in the money out of the money the numbers that i really like to look for on this page is specifically probability of profit i get to see right here what is the likelihood that my option is going to end up out of the money by expiration and right now it's telling me that 73 you can find this number on tasty works by using the inverse of delta obviously it's not popping up right here but um this right here this is a 16 delta you're gonna have a 84 probability of profit which you know or 83 which translates right here the further away you go the less credit you collect but the higher the chance that your option is going to expire out of the money by expiration so you can see that between the 43 strike and the 42 strike that there's about a 22 difference between the price of these options but there's only about a three percent difference in the probability of profit this is entirely a personal decision for you if you want to ensure a 75 or more greater probability of profit you might want to select the 42 strike if you don't necessarily mind taking the 3 increase or actually decrease in probability of profit but you want to collect more credit then certainly going to the 43 strike would be beneficial to you to set a limit order you can see that the bids in the ass right now are 134 and 147 so it's telling me that the midpoint is about 141 so i'm just going to lock this in right here to see additional information about your position including total return on capital the extrinsic value the theta and the delta you can select this little arrow button right here and then you're going to go to review and send and this is a confirmation page on tastyworks this is telling me that if this trade goes through then i will collect 141 dollars in credit less transaction fees which is about 114 or 115 to open and it'll be about 14 or 15 cents to close i am reducing my buying power by 561.94 and note back to the earlier part of this video where i discussed the difference between a margin account and selling short or naked puts and a cash secured put i'm going to mentally in my head reserve 4 300 for this trade despite the fact that tastyworks is only going to take away 561 while the trade is open this is telling me that if the price of the option is below 43 at the time of expiration then my potential max loss is 41.59 but i don't necessarily perceive that to be a max loss because that would mean that united airlines has to go to zero to actually get to a max loss of this dollar amount i would then be the owner of a hundred shares of united airlines and i can turn around and sell a covered call so i can perform the wheel strategy which would necessarily continue to increase the cash into my account while holding on to the asset of a hundred shares if you ever need to go back and edit your order you just simply select the back button right here or edit order you can go up you can go down you can reset to the mid prices you can review and send and you can see that that order was filled very quickly obviously united airlines has gone down just a few pennies from when i initially looked at the chart when it was around 47. this is of no concern to me if united airlines dips now or even further in the future from now until october 15th or so i'm not gonna touch the trade i usually don't manage my positions if they have not gotten to the 50 mark i will roll out or figure out what to do with it within 7 to 10 days of expiration there are other schools of thought that include doing that at a around 21 to 18 days i personally have i do that sometimes but my my style has adapted to be seven to ten days but it's certainly up to you if you want to manage it sooner rather than later then that's obviously a matter of personal preference if at any time between now and expiration united airlines sinks below 43 i am also not going to do anything i'm going to keep an eye on it i will watch it and if and when necessary if it's still below 43 by the time i'm ready to manage it i might roll it out as is at 43 or i might take assignment or i might try to roll out and down and collect additional credit that will be a to be determined decision obviously dependent on the stock price and what it's doing it should go without saying that this video is not intended to be financial advice this is not a trade recommendation i'm not telling you to trade united airlines i don't think that anyone should trade or follow others into trades blindly please do your research please make your own decisions please come to conclusions based on your own risk tolerance and trading style the purpose of this video is to demonstrate how to sell a cash secured slash naked put in a margin account in tastyworks i'm going to look at the history now it is telling me that i've collected 141 dollars less 114 which is 139.86 so i'm going to come over to the trade journal which as you can see it's been a long time since i've traded in this account and i'm going to come over to september 8th 139.86 i'm gonna delete all of these days in between with no activity and i'm going to add ual short put so this is how i track my credit i almost entirely look at credit collected into my account credit that needs to leave my account i very rarely look at profit and loss because i don't think it's an accurate reflection of how my trading style works particularly when i have to roll in the money trades those necessarily count as losses on my profit and loss statement but i am only rolling for credit so it's not as if the account account balance is decreasing but the profit the realized profit and loss statements are you know getting the values that are entered um which doesn't always line up with the amount of credit that i've collected at the end of the year so that is why this channel focuses only on credit received into and out of the account but there are other schools of thought on that as well if you are someone who focuses exclusively on profit and loss then that's great that that works for your trading style i will keep an eye on ual this is where i will also come back and enter in any closing transactions i'm going to aim to close this position around 50 to 55 profit if it gets there before expiration that'll be excellent if it doesn't then i'll roll out for additional credit which you'll see logged as additional inputs right here the trade journal will be updated when this is closed i cannot promise or guarantee that i will post a video about this closing i can show you how to quickly set a closing order which is you select the option in tastyworks you have the option to close position and you can set your price yourself i'm going to say close at profit i'm going to select 55 it's pulling up 63 dollars so i'm going to leave that as limit it's going to be a time and force which means good till cancelled i'm going to review and if this closes at 55 profit i will keep 78 in credit it'll increase my buying power by 641.27 i'm gonna send that in and that is now a working order in ual if you have any questions at all please don't hesitate to reach out you can uh reach me below in the comments you can email me the email address is tiffanytradesoptions gmail.com you can also join my patreon which is linked in the description below where i have a discord attached to my tier 2 patreons i am posting my trade activity there every day going over my thought process chatting with my patreon members about options trading stock trading dividend investing uh and sometimes non-financial stuff if you want to give that a look it's in the link in the description of all of my videos thank you very much for watching i hope that you all have a great day and let me know if you have any questions about options take care

Channel: Tiffany Trades Options

Views: 967

Rating: 4.9459457 out of 5

Keywords: how to sell cash secured puts, how to sell naked puts, tastyworks, trade demo video

Id: qWjjDhEdH1s

Length: 20min 5sec (1205 seconds)

Published: Fri Sep 10 2021