re: Options premiums plays

quote:

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During a real sell-off, you would get completely wiped out. Luckily we haven't seen one since you started using this strategy, but don't mistake that for "limiting downside risk".

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I simply wouldnt trade and close any open position I have, again limits any long term downside to this...something you dont have just buying and holding and then suddenly need the money after big downturn.

I closed a position last year that was down over $300 on the day, so yes, certainly have seen a sell off in a day before on this.

During this week

The S&P lost 10% in 2 days there, I chose not to trade during that week knowing the extreme IV/volatility of what was going on. My big loss came the following week, but it was $300, not 10% of our savings (or $6k-$7k), vaporized.

Again this is NOT long term investment account money, it's savings, meant to stay liquid, and continually go up with maybe small down swings in very short periods. If things get crazy, i just sit on the sideline and collect the interest, once its not as crazy, sell way out the money put options to gamblers effectively.

Again, also well aware the S&P has rallied a ton since April of last year when that happened and "I would have been better off just leaving it in the S&P 500". I am purposely limiting my upside to also limit my downside to collect way more than a typical "savings" account would but keep it liquid without any big long term losses when we could need that money at any point.

Also I've sold options for the better part of 5+ years now, well through big downturns like 2022, this strategy is just newer with XSP as its a newer index (on RH at least) where premiums are taxed 60% long term which I am taking advantage of for tax purposes.