Ah Ok. Well it’s still a gain anyway and with IB the costs would be very low, so it’s still a win situation. On a 2 weeks option of 100chf I think it won’t be bad. Also you block the money for 2 weeks only and with the goal to buy the same ETF anyway.
Again, it’s not a way of optimize, just a way to make a tiny bit more money.
Or maybe it’s just a game.
Hi ma0,
Blocked money is a kind of speaking. If I buy the put, problem solved, but when the stock go down, let’s say 3000$ the put also.
Now, with options you get or pay the incertitude in the future.
If you have the VT at 74 and want to sell a put for the next week at 30, probably nobody is going to buy your put because the probabilities are practically 0.
Higher volatility -> Better prime.
Longer expiry -> Better prime.
All is normal. A fund that have VT now from clients can say, we pay 100$ each option but we assure that somebody is going to buy them in the future if the value go at… let say, 72… and so on.
The thing is that you are going to get the stocks in the future, that’s for sure. But if you want to have a decent prime you must go far away in the date and that can be really annoying.
I know people that are “chasing” stocks or ETF for months or years! Just selling the puts too far in date, OTM. Normally they are not executed but if they are, they had the money.
Is like having dividends without paying taxes 
Regars.
I can’t really read it well but I suppose it cost 0.90 x 100 = 90 usd for a put at 46. Not sure what’s the ask price though.(and the rest stuff is also unclear to me).
Well, I’d sell that option myself. If something bad happens, before november 20 I’ll have 100 VT at 4600 usd +/-. If not, I’ll have 90 usd more.
Of course if I get the ETF, it means it might be worth 45 or less at that point, meaning that I’ve lost 100 usd, but the fact that I’d do it with VT means that I believe in it and that I’d buy it anyway.
Thanks for the insightful discussion!
My takeaways are:
lot size is 100 shares per contract
have the cash available to absorb the risk
if practiced infrequently, gains too low for trader to be considered professional
if not professional, then the option premium is a tax free gain
Not necessarily. It’s just a way of calling them. In fact, according to Wikipedia (I know, THE source):
Option contracts traded on futures exchanges are mainly American-style, whereas those traded over-the-counter are mainly European.
Nearly all stock and equity options are American options, while indexes are generally represented by European options. Commodity options can be either style.
Very interesting thread! Thanks @Gojuryu!
This topic of selling options (both puts and calls) has been consuming me for some time now, so here are some of my ideas.
First of all, like the majority on this forum I’m a buy and hold for the long term investor. I was also considering using the VT ETF at first, but then came to the conclusion that a combination of VTI+VEA+VWO (50%, 40%, 10% respectively) has more advantages. One of it would be that, in case one has a significant amount to invest (say anything higher than $10k), instead of going for the DCA or VCA one can employ a different strategy adding short put options to the mix. So, in this scenario, my idea is to sell 1 VEA Jun19’20 40 PUT @ 0.50 and collect a total of $50 (total cash after tranzaction: $10’050). If the price at maturity will be higher then 40 for VEA, then the option expires worthless and one gets to keep the premium (total cash on 19 Jun 2020: $10’050). However if the price at maturity will be less then 40 for VEA, then one will have bought 100 VEA shares for $4k (total cash on 19 Jun 2020: $6’050). In this ITM scenario, and assuming there’s a correlation between VEA and VTI/VWO share prices, at maturity the prices of VTI/VWO would have dropped too (say a second wave o covid-19 is confirmed and new lock-downs imposed) so one can use the remaining cash (i.e. $6’050) to buy the corresponding VTI/VWO shares much cheaper then what would have paid if going all in now. Of course the downside of this strategy is if the prices keep going up no mater what then one would lose the opportunity for buying cheaper now (in this case, better go all in now and don’t complicate your life).
The other idea I had, with regards to selling calls, i posted it some time ago here. And to expand on it a bit, I think it could work as a strategy for re-balancing the VTI+VEA+VWO portfolio.
Super keen on hearing what you guys think about it.
Very interesting concept. Could you expand a bit on it pls?
Unless you’re a considered a professional trader, options premia are considered capital gains and therefore not taxed.
For options on US equities, let’s do not forget the section 871(m) of the IRS tax code.
Depending of the derivative, a dividend equivalent payment is calculated and US tax withheld (even if the investor never received a cash payment).
The rules are complex and exceptions apply.
Further information here: https://ibkr.info/article/2837
Hi,
Option: 7160$ in your account now.
Buy now: 91 stocks and 35$ in 3 months.
If VT doesn’t go to 70$ in August, you repeat the operation for November.
If VT go below 70$ in August, you’ll get 100 VT + 160$ cash.
Whatever happen you win selling an option that buying the stock.
Regards.
You couldn’t have made it clearer than that. Thanks a lot @Tino!
Thank you too @Guillaume_GVA! I was not aware about this rule, but it sparked some more ideas 
Nonetheless, with regards to the US withholding tax on dividends, as I understood reading this forum, it shouldn’t be an issue for Swiss residents (as you can reduce it in half by filling out the W8-BEN form and then offset the other half against your tax payments via the DA-1 form).
The professional trader status is coming up a lot. As a private person, trading options more frequently puts you at risk of gaining this status. Which would also have an effect on the buy&hold part of your portfolio (no tax-free capital gains anymore).
Was someone in this forum categorized as a professional trader already? I got to know one person who was categorized as a professional trader because he was trading options (not on a large scale, but definitely more than just securing his buy&hold assets).
How about creating a GmbH and doing the options/futures trading within the company? Did anyone consider this, or is already doing it? From my point of view, this should be the safer option. Of course, you need to have 20k to create the GmbH and you’ll have to pay social security stuff etc.
For me, the risk of infecting the buy&hold part of my portfolio is too high at the moment. I’m also currently learning about options, but would not use more than 10-20% of my net wealth to trade them.
Pushing this thread again to get more visibility…
Interesting to see that nobody replied to my last comment! So I assume that most of you would rather risk infecting their B&H portfolio by trading options/futures and/or using leverage than to consider opening a separate company for those activities. Do I get that right?
Or am I the only one being afraid of infecting the B&H portfolio part and having to pay taxes on the gains?
If you buy and hold, there are no gains to be taxed.
Sorry, I don’t understand your reply. Can you elaborate more please?
We are talking about selling put options here. Which puts us at risk of being qualified as a professional investor.
I’m not talking about the B&H part, I’m talking about the options/futures part. This stuff is not for beginners, and there’s a reason why you need to check additional boxes in IB before you able to trade those instruments.
OK I thought you were talking about the buy and hold part. I don’t see the buy and hold part being “infected” if you were qualified as a professional investor, since you never realise gains on it.
Not true if you want to retire early. Then you have to sell some shares, because dividend payments alone are usually not enough to cover your expenses. Unless you set your SWR to 2% or less, which means a bigger nest egg (and maybe working way too long, even you would be FI already).
I don’t know if the tax authorities would really differentiate in B&H part and the options part. I think once you “acquired” this status, it will have effects on your whole portfolio. Which would suck when you want to retire and find out you have to tax your capital gains.
But that only matters when you retire, you could worry about that at this point (setup a company for it maybe even can use that as an excuse to withdraw your pillar).
I’m straying from the topic, so will open a new one if this goes much further but wouldn’t you need some kind of qualification to create a GmbH with its business purpose being to trade stocks and derivatives? Asking because I’m very interested by that possibility as a way to enact early retirement (by still having an official professional activity provided by the GmbH).
NB: the “at any moment” is for American options.
