Selling 10-Delta Puts with 4-Day Expirations + 2 Free Webinar Registration Links – June 13, 2022
Can we sell 10-Delta weekly cash-secured puts and still generate significant annualized returns on a week where there is a market-recognized holiday reducing the number of days to expiration from 5 to 4? The answer is yes. This article will highlight 4 put sales I executed on the week of 12/20/2021 – 12/23/2021 where the market was closed on 12/24/2021 because Christmas Day fell on a Saturday.
What is the 10-Delta cash-secured put strategy?
This is an ultra-low risk put-selling strategy where we sell deep out-of-the-money puts with Deltas of 10 or less. Since share and put value are inversely related, Delta is signified as -10 or less. One of the definitions of Delta is the approximate probability of an option expiring in-the-money or with intrinsic-value. This means our trades have a near 90+% chance of success.
4 securities used on 12/20/2021 for 12/23/2021 expirations
- Vaneck Vectors Semiconductor ETF (Nasdaq: SMH)
- Invesco QQQ Trust (Nasdaq: QQQ)
- NVIDIA Corp. (Nasdaq: NVDA)
- Etsy, Inc. (Nasdaq: ETSY)
All options expired deep out-of-the-money.
Brokerage statement showing the 8 put contract sales
Final calculations after all contracts expired out-of-the-money
- Cash generated after commissions: $452.77
- Cash required to secure the put trades: $210,818.00 [(put strike – put premium) x 100 x #contracts]
- 4-day return: 0.214% ($452.77/$210,818.00)
- Annualized return: 11.2% (based on 52 weeks)
Advantages of using weekly options with the 10-Delta put strategy
- Greater annualized returns
- Avoid weekend risk
- Easy to avoid earnings reports
Disadvantages of using weekly options with the 10-Delta put strategy
- Smaller pool of underlyings to select from
- More frequent rolling decisions
- 4x the number and amount of trading commissions compared to monthly options (reduced commissions make this a minor factor)
- Less opportunities for management mitigation
***Both weekly and monthly options will work well with this strategy
Discussion
On a holiday week (4 trading days), we can still generate significant annualized returns using the ultra-low risk 10-Delta put-selling strategy. As always, we must be prepared with our exit strategy arsenal should the trade(s) turn against us or allow us to enhance our gains to even higher levels.