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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: CommanderCricket who wrote (162161)1/8/2012 12:14:06 PM
From: Debt Free  Read Replies (2) of 206184
 
To all Option traders

As a result of reading this thread, I started selling puts a couple of years ago. So far I have focused mainly on selling pretty far OTM puts and for the most part have had pretty good success so far. My failure with my own portfolio is in the stocks I own and some not very good sell decisions.

Relative to the selling of puts, I have been essentially selling cash covered puts and was not concerned about margin requirements associated with any trade. In addition to being able to cover my potential puts sales with cash, I typically looked at all open positions that I have outstanding to determine if I could enter into any additional trades. I am now wondering if I can do more by better managing of the resources in my PF.

What I am wondering if it makes sense to “manage” the PF using the available margin in addition to just the cash component of the account (i.e. expand past the cash covered component). I am also wondering if it makes sense to look at only the near term month’s activity (Jan, Feb) and not all open positions when looking at the ability to cover the put sale with cash.

Assuming the portfolio below, a couple of things that I am thinking about doing to something along these lines

$200k Stocks

$100k Cash

$300k Total

$300k Available Margin



1) Limit my Jan & Feb exposure to $100k and trades beyond that would be looked at in context of the available margin. I would still have to limit the out month trades so when the roll into the window, I am not over exposed.

2) Manage based on how far out of the money the trade is. For instance if the OTM puts are less than 20%-25% below the current price then these would be cash covered. If the OTM puts are more than 25% then they do not have to be cash covered and would be looked at in regards to margin requirements. This may change on the individual stock and how far out the option is.

3) Start to utilize spreads to generate some add’l income and limit the risk and do not include these in the cash covered component of the portfolio

4) ??????

I am truly trying to learn from others here so I would appreciate hearing how others manage their portfolio relative to the amount of cash in their account and the margin required to execute the selling of puts and anything else that I may have missed.



Thanks

Doug
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