Thread by @team3dstocks

Ive explained this several times, including on monday's post. the call-bagging takes place as we approach thursday/friday, & mon-wed is when they move the stock in the direction retail wants to give them FOMO. Therefore premiums are always the highest/juiciest earlier in the week

https://twitter.com/OTrader11/status/1430949669815951365

If I wait until thursday or friday to start selling, there'll be barely any juice on the calls to swing trade short (unless the stock pops & gives a daytrade opportunity on those days). So how do i maximize premiums without getting steam rolled? I start SMALL early in the week

then I get aggressive as we approach mid week. So if my max loss per credit spread is 1R, and i decide to start early, i would risk maybe 1/4R or 1/8R, leaving room for the stock to go higher. that's why i said on monday "im staying small since we're still EARLY IN THE WEEK"

This way, if the stock tanks for whatever reason right after monday (i actually DONT want that, since im not sized in yet), i at least have some skin in the game (profit will be pussy, but better than zero). And if the stock pops higher (best case scenario), I can now size in

reason it's the best case scenario (if the stock keeps popping after monday) is b/c im now getting JUICED up premiums even though we're almost close to Thu/Fri (premiums usually go down as u approach exp). So that's literally every call seller's dream (high theta + high premiums)

Take $DKNG & $NVDA for example. Every C-spread I sold on Monday hit their max loss (but remember, they're on pussy size since no reason to size up this early in the week). Then as they both popped, I just kept selling more spreads, on more size, each yielding MORE premiums.

So by the time Wed comes, im now on full risk (risking 1R) on each of the newer, bigger spreads, while on small risk (1/4R 1/8R) on the losing spreads. Once the bagging begins (like today) the profit from the bigger spreads more than cover the tiny losses from the earlier spreads

And if im SUPER lucky, and the stock keeps getting creampied into Friday, then sometimes I end the week with ALL credit spreads yielding max profit (even the tiny ones from mon-tue) thanks to time decay. That's the main advantage selling calls has. time decay works FOR u.

Now what about worst case scenario? that's if ALL the stocks u sold calls on keep popping all the way into friday and close at the highs (extremely rare, but i still expect the worst). In that case I'll lose on all the earlier week C-spreads AND the late week ones. Full red week

But who cares, I dont expect to clap FOMO call buyers' cheeks 5-10 wks in a row without getting my own cheeks clapped every once in a while. Welcome to trading. red weeks WILL happen. Expect them. As long as they dont erase my prev gains, im fine (which is why I NEVER sell naked)

That's also why I always keep my credit spreads relatively tight (the difference between the strike price of the call you shorted and the one you bought to hedge). The wider the spread b/w those, the bigger ur profit BUT the bigger ur max loss as well. So always keep that in mind

Another way to manage risk on C-spreads is to remember that ITM spreads always have a better RR (but lower win%) than ATM or OTM spreads. So I like to mix things up to minimize my risk. anyway that's it. that's how I execute my sells. find what works for u

#BearTipOfTheDay

Shit, forgot to add the tag.

#ThuFriRule option tips