Congrats on having arrived at the right conclusion for yourself! Obsessing over investments and allowing them to swing your mood seems unhealthy.
I continue selling options, but really only as a hobby. I’m not losing any sleep over them, let alone feel like I need to look at them daily or for hours near expiry.
I probably differ in a couple of ways with my approach:
- I only sell puts for underlyings that I want to have in my stock picked portfolio, either existing not yet full positions or new ones that I want initiate. If I get assigned, I’m thus fine with that.
Assignment has happened in previous years, but not yet this year. - I only sell puts on volatile days for the underlying to garner the premium with the additional “fear factor” on those days.[1]
- I only sell long dated puts, preferrably 6-12 months till expiry.
- I usually pick a strike 10-20% below the underlying’s current price and I want to see a premium that is equivalent to dividend yield of the underlying at the time of selling the put (over the time till the expiry).
- I’ve automated buying back the put (since @larix.aurea’s advice to buy back my UNH put earlier this year) in a simplistic way: upon selling the put I immediately enter a GTC buy back order for 1/4 of the premium that I garnered.
This past Friday a buy back for a MRK put I sold in February triggered automatically for the first time. - My puts aren’t cash backed, but treasury backed, which generates about 4.5% (annualized) for the treasuries I hold.
- I stagger my risk exposure over the timeline such that assignment risk spreads out over time.
- I occasionally sell puts with strikes exceeding my collateral but only in very rare cases when I’m convinced this is just Mr Market having a bad day (e.g. see my LMT put in the footnote[1])
Things not yet automated:
- making sure that the strikes occurring at the same expiry date don’t exceed my collateral – and if they do, warn me closer to the maturity date to buy one of the options back if necessary.
I currently watch this manually, which is of course error prone. - notify me (to potentially sell a put) when one of my holdings or desired holdings has a bad day, e.g. a 5% drop or more.
I currently will see those drops only when I actively look at the portfolio, which I do regularly, but not daily.
My cash collected YTD on $16k collateral: $2561.87
- $587 in interest on the collateral
- $1974.87 in option premiums[1, 2]
This is about equivalent to an annualized cash return of maybe 20%?
For everyone excited about wanting to compare this to the VT, VOO, QQQ, Bitcoin or Gold return had I invested $16k on Jan 1 2025 into these assets (or any other asset), keep in mind that the accrued cash accumulated by the options sat in the IBKR account regardless of whether I wanted to access it on April 4 2025 or today or on any other day. Ditto for the collateral and the, ahem, option – no pun intended – of buying back all short options if I somehow felt like it.
Similarly …
If we only had some sufficiently advanced AI which could calculate this … I leave it as an exercise to the reader to do this calculation for my puts sold in 2025[1] (of course you can consult any AI you’d like to consult).
This comparison is probably more interesting for my options approach (as I really actually want to own the assets that I sell puts on) but perhaps less useful in the approach @larix.aurea chose as he did not necessarily want to own the assets he worked on with options (IIUC).
I think the question is only theoretically interesting anyway (for me, anyhow):
- would I buy an asset that has just fallen 10% on a given day? Probably not. It might fall another 5% the next day.
- would I sell a put option on an asset that just fell 10% on a given day? Absolutely, especially if the expiry is far enough in the future and the “fear” premium is beyond what I consider rational (see e.g. my UNH put sold).
YMMV, of course.
1 Puts sold so far 2025:
- BIPC 30P JUL25 sold for $102.93 on Jan 10 when the underlying's low was at $37.66 on that day.
I don't even remember the bad news on that day.
Bought it back on May 22 for $15.06.
Annualized realized rate of return: 8.1% (plus close to 5% on the collateral). - CMCSA 30P SEP25 sold for $144.19 on Jan 30 when the underlying's low was at $32.50 on that day.
I don't even remember the bad news on that day.
Bought it back on June 27 for $30.30.
Annualized realized rate of return: 9.36% (plus close to 5% on the collateral). - MRK 75P DEC25 sold for $283.18 on Feb 2 when the underlying's low was at $87.33 on that day.
I don't even remember the bad news on that day.
Bought back automatically on Oct 24 for $57.05.
Annualized realized rate of return: 4.2% (plus close to 5% on the collateral). - OZK 37.5P JAN26 sold for $218 on Feb 21 when the underlying's low was at $47.15 on that day.
I don't even remember the bad news on that day.
Bought back on Aug 27 for $51.05.
Annualized realized rate of return: 8.69% (plus close to 5% on the collateral). - UNH 160P DEC25 sold for $897.94 on May 15 when the underlying's low was at $248.88 on that day.
Yeah, those days when UNH was going out of business real soon now ...
Bought back on July 25 on advice from @larix.aurea for $131.06.
Annualized realized rate of return: 24.64% (plus close to 5% on the collateral). - SJM 80P OCT25 sold for $143.99 on June 11 when the underlying's low was at $94 on that day.
I don't even remember the bad news on that day.
Bought back on July 28 for $24.95.
Annualized realized rate of return: 11.56% (plus close to 5% on the collateral). - LMT 380P DEC25 sold for $799.94 on July 22 when the underlying's low was at $410.11 on that day.
I don't even remember the bad news on that day.
Bought back on August 28 for $295.
Annualized realized rate of return: 13.47% (plus close to 5% on the collateral). - ES 55P APR26 sold for $178 on August 25 when the underlying's low was at $61.53 on that day.
I don't even remember the bad news on that day.
Still short. Current market value according to IBKR is -$129.33. - EIX 47.5P APR26 sold for $249.75 on Oct 2 when the underlying's low was at $53.49 on that day.
I don't even remember the bad news on that day.
Still short. Current market value according to IBKR is -$59.50.
2 The ES and EIX options are still short and I’m indicating the price if I had bought them back already given IBKR’s pricing indication. Spreads, fees, etc are not yet taken into account, but both options are OTM and are slowely but surely crawling towards their standing buy-back price.