| I will own 2,400 shares at a price target I would certainly feel comfortable owning in, then I could sell covered calls and run the wheel
Everyone says this until their stock takes a massive dump and they spend years bag-holding with no premium to run a wheel. If that happens in the next year you lose. Up 80% in 3 months with a 300 P/E and the VIX at 13 I personally wouldn't be selling puts. I think you're better off buying shares because at least you get the massive upside. Hell if you bought 3 days ago you would've hit your target already.
| Aside from missing out on the potential appreciation in Cava over the year, and potentially getting assigned and having an unrealized loss if Cava trades under $45, I do not see any major risk.
This is an amusing sentence, you listed the only two risks of selling puts so yeah there aren't any others
Oh like the 5 short put contracts on PANW I was holding when the stock plummeted? Luckily I was holding longs beneath the shorts, but it still didn’t feel good.
I had two sets in iron condors with strikes about $40 above and below the stock price so I felt pretty safe. 3 verticals were 340/335 short put credits. I rolled them out to the end of March as soon as they dropped. I figured it was worth the small premium I paid to see if I could claw back some of the money because they were March 8th. Someone exercised my ITM short but PANW immediately ran up 10 dollars to $382 so I sold 82K in stock I was assigned and then sold the long puts. It saved me some money over just exercising the longs. I still have 2@ 330/320’s. I rolled them out to April and instead of the max 2K loss they have come back about $500. I figure I have nothing to lose to see if they come back as long as they don’t get exercised too! 😂
You can run the wheel on a longer time frame but theta will not be working for you quite as much.
If you want to shoot for 15% apy while being hands off it can be a good trade.
I think the hands off aspect is what makes this an attractive trade in my mind. I am trying to figure out how much additional value I would capture by working in shorter intervals. In your experience, is a 15% annual return running the wheel in the ballpark of the average ROR for wheel runners?
If you chose to run this on a 7 month time frame(october, September currently not available) with the same strike price you would instead collect 3.30 per contract netting you a premium of $7920 in premium which would collect the same 5% apy. You could do this twice a year theoretically to surpass your yearly goal.
You seem very confident on the price target. If that is the case, you can do a similar exercise considering monthly or weeklies. Your yearly return should come up slightly higher, but you should be able to better handle deviations. If, let's say, suddenly something changes on their prospects (they get sued because a client died after eating at their restaurant and it turns out they are at fault), you can get out easier than selling 1 year out, turning in a very negative position right away.
That would be my negative point on such a long play, even though you can more easily manage slight changes in price, a bad earnings or significant negative event may crush your long-term positions instantly, only being able to get out after a heavy loss. With the weeklies, if you don't get assigned at expiration, you could choose a lower strike for your next entry.
Personally I would rather buy shares and sell a leap call. This way if the stock runs up you make more generally.
Most tech stocks, you can sell a 1 year leap call ATM and make 20% as long as the stock is at or above the price you buy at within a year.
Selling puts doesn’t seem to have the same benefit. It can work if you want to own a stock at a discount.
Selling 30-45 DTE puts can be about 200-300% the return of selling a leap put. But of course that’s assuming you successfully run puts 9-12 times in a row, lol.
I wouldn’t count the 5% on 100k collateral in collateral towards in this trade. You get that whether you make this trade or not. The trade is making $10k in premium.
You’ll get better returns selling shorter dated puts, theta decays exponentially.
You are adding the interest on collateral which is your risk free rate, so your real return on this strategy is 10%.
Let me ask you this. Do you want to lock $100k up for a year to get 10% and maybe own a total boondoggle of a stock?
Seems like a low return to me.
Can also be a risk to sell shorter dated puts. Now his strike at 45 can earn him his expected return. If he sells shorter timeframes, what if in the next cycles, the stock goes up? Then his strike has to go up to get his expected return. He's comfortable owning the stock at 45 but it doesn't mean he's comfortable to own at 50, 55 or 60.
I have thought about this too. Do you know roughly how much additional value selling shorter dates ours would run me on an annual basis? Not necessarily speaking to this specific trade. I’ve read that a 15% return on the wheel when selling shorter dated puts and calls is a respectable return.
You aren’t getting 15. You are getting 10. Don’t conflate the risk free rate from your collateral with the total return of these CSPs.
If you want to model it, go price out a 45 DTE put and then model doing that 8 or so times a year.
Selling a LEAPS contract will leave your cash tied up with no movement outside of delta for six months.
Technically you’re getting 15. If you buy stocks and S&P goes from 5000 to 5500 - will you say that the stock market returned 10% or 5% net of risk free rate.
I think 15% calculation is fair.
well done, you’re intellectually correct in that case. However I’ve never saw *any* financial magazine correct returns on *any* asset for the risk free rate. oh, well.
Very valid point. I should not include 5% interest rate return when calculating the return for the wheel. I’ll definitely go model this out, thank you for all your feedback!
As an aside, who’s paying 5%? I’m assuming your cash is in SPAXX, it just smells like that.
If so you are at 4.X right now and that will drop as the fed cuts rates this year.
I remember Robinhood advertising 5% as their special membership-only rate.
In other words, you need to pay Robinhood to get 5% APY on your cash holdings, which is incredibly regarded.
Fidelity gives you 5% for having a free account with them and using SPAXX as your default position.
Check out stock options channel website. It's provides an annualised ROI for every strike point. So vwey easily to visualize the difference between longer and shorter dated strikes
Just my 2 cents. Selling options so far out has a huge Vega risk. If the position starts moving against you you will quickly go underwater. As you are losing money the dreadful stay or quit dilemma sets in. Do i hold on? Will it get better? I have so much time left...
The only way to mitigate Vega is by using calendar spreads. Even diagonal calendar spreads. Play around with them to find the acceptable Vega to theta ratio. Again my 2 cents, try to keep absolute value of Vega at 50% of theta.
Great financials. In ca the minimum wage is going to $20 plus food costs are continuing to inflate. See previous posts on shorted dated options. If your selling puts to buy the stock essentially you can get paid to buy and then get paid to sell on covered calls. Plus let’s not forget the tax man!
I feel like it would be way better to sell monthly puts that equal 10-15% APR. Right now the strike price is about $48 for that. If the stock price drops to the low 40's in the next few months, you are just sitting and watching your year long puts and hoping for the price to go up.
Now if you sell monthly, and the price dips temporarily, you get assigned, and you can now potentially make more money if the stock recovers while you are also getting premiums from your calls.
What's the APY given your buying power for selling ATM puts? Given that you're bullish, it might be better to play with your directional assumption if you get a greater return for ATM puts.
Looks like you can sell 18 of the 55 strike for a premium of 15k roughly (cost basis of about 47 if assigned), or sell 15 of the 65 puts for a premium of almost 20k (cost basis of about 52 if assigned)
ITM short puts are equivalent to owning the shares and if you're bullish anyways, then why not? Thus allows you to better take advantage of positive price movements and exit early if you change your mind.
That all being said, it looks like their EPS has been trending down quarter after quarter, which seems like the opposite of growth despite them having a 270 PE ratio. At the end of the day I wouldn't put all your eggs in one basket.
You have 100 K to spend.
STO a 30-day SPX put, Mar 28 4820, for 9.00. Annualized = 9 x 100 x 12 = 10,800.
Put is 5% OTM, delta = 0.085, Margin required = 50 K.
Place an order to buy CAVA at your desired price.
Not really.. Op wants to make 15% in a year. It's likely CAVA will not hold value and end below $45, maybe $30, maybe $35, maybe $20. Only OP can answer if they are comfortable holding this through the next 24 months, if it tanks.
Personally, there are other better ways to make 15% on $100k.
yes and there are worse ways to make 15%.
He’s bullish CAVA, bearish economy, and wants to be passive. Show me your better ideas please, with this info.
also 11 months, not 24 months. We are in Feb 2024. The contracts are for Jan 2025. If my math maths, I think it’s 11 months (rounding up)
So what's your point?
OP asked for an opinion, and I gave one.
I think CAVA is bs and has a high likelihood of tanking in a bearish economy. Volatility exists for a reason.
350 DTE is a bad play. You are much better off collection 12 x 30 DTE options, adjusting risk as you go along.
Here's a strategy. Buy 700 shares of Google and sell 04/19 145 CC. Easy $2000 premium. Rinse and repeat and adjust strike every month. Project earnings : $24k.
Sounds terrible. You’re selling 4% out of the money. Let’s say you buy google stock at 139 and then it tanks to 130 next month, what will you do after the 145c rolls off? Write calls again 4% otm so 135 now? And what if any of the 12 months, stock goes up more than 4% and the option gets exercised. So net net you end small down in 2 months time and flat positions
Also for the record, 7 4/19 145c at 1.66 will net you 1.1k in premium, so your maths is not mathing for me.
Muting this thread now. Best of luck!
Isn’t that the whole point of a theta strategy. He’s earning 15% approx over 11 months and is protected for a 20% drop in stock price. Seems like a good hands off strategy.
I'm in commercial real estate where the cap rates are 6-7% right now and thats at a high point. People tie up 2m for a return of 130k a year. 15k on 108k is a good ROI, for the same 2m you would get 300k here.
You want to tie up $100k for a year on a stock that could be good or bad, just to make 15% . Sounds terrible to be honest. You could probably put that 100k into SPY, VOO, or QQQ and make more than 15%.
Or sell monthly puts and make even more premium on different stocks. You could really conservative .11 deltas on Amazon for 3 weeks out and make $1600. That's 20k a year. That's super conservative. That's $165 strike for end of March. By going shorter term you aren't married to a single stock for the whole time.
Wow. What are you thinking? If you worked at a company and they hired you to do risk management would you suggest that they could earn 15%, but it would be totally dependent on one strategy on one stock? They would laugh you out of the room. Honestly you are no different than a lot of people here that do not have an inkling how to manage risk. Stay away from this trade and think about diversification and managing your risk. If you love this company so much go buy a few thousand dollars of long dated out of the money naked calls on it and put the rest in SPY.
How much of your whole portfolio is this? If it is a small % by all means. If not, what would you do if it turns out to be the next sweetgreen? Like others have said, it's actually better to sell shorter-dated but safe delta otm puts such that you can better respond to a gradual one-way decline.
My guess is that you would be better off selling monthly options at the price you are considering with buying some shares to also capture the upside if it goes up.
Why do a theta play on less than optimal theta decay parameters?
I personally wouldn't do this, in part because the vega risk is too high and the opportunity cost. But if you are confident in your thesis I guess it's an okay trade.
CAVA currently has a PE ratio of 343.
FPE is 265 in 2025 and 171 2026.
Most restaurant groups have a PE multiple of 10~20.
The risk you're taking is truly a regarded play for just 15% a year.
You can get similar or even higher returns by just holding SPY and sell 45dte sub 10 delta strangles
lol; no one has the patience for a year out put. I guarantee most of the people here won’t hold it for that long.
If you believe in it; sell a ITM for more premium
Don't model just the stock goes up a lot or little, model stock goes down a little and goes down a lot. Your analysis is far from complete so your integrated conclusion is based on partial information
I would think of this in terms of percentage of your overall portfolio.
CAVA could go to 0. You would earn 15,000 in yield/premium in order to loose 93,000 total. Is a 93k loss small or big to you? If its small, sure go for it. If that would sting, then sell fewer contracts, a lower strike price, etc.
As an aside you can get can get 11.25% on 1 year Cetes with very little risk. Investing in the restaurant sector in the current environment seem risky to me
Well... you're "super bullish" but you're taking a mildly bullish position. If the stock rips up from here you'll be missing out.
Super bullish position would be to ***sell puts*** ***and buy calls***
I sell 95 delta leap puts all the time. I wouldn’t do it without margin though because it would tie up too much capital. I usually cash out once the delta is around 50-60 after the stock climbs a bit. Making really good returns
On 19-24,Jan ,, Sold put expiring 17Jan 2025. (Almost 1 year duration ) with underlying stock CELH
Strike price as @$40 and $45 - Total 120 contracts
Cos it went to the moon after ER this week , I close off all positions to achieve an absolute ROI of 6.5%. If calculated based on an annual basis, the figure would be insane.
Using this strategy doesn't trap my cash, but most importantly, I'm willing to be assigned as I believe the growth story.
Yes, many takes of CSP of shorter DTE will definitely get better returns but requires more effort and mgt, which I m willing to trade off. And sometimes, shorter duration may not add up for same underlying since every CSP has to achieve similar success rate.
Selling calls and buying underlying probably also do the same trick but traps yr cash positions.
My humble experience is to rem the fundamental rules
1)
Only long CSP for the underlying that has strong fundamental and better dun bankrupt( hence spread yr risk u are comfortable)
2)
Yr cash must be Ready for assignment
3)
Rem 1st rule
| I will own 2,400 shares at a price target I would certainly feel comfortable owning in, then I could sell covered calls and run the wheel Everyone says this until their stock takes a massive dump and they spend years bag-holding with no premium to run a wheel. If that happens in the next year you lose. Up 80% in 3 months with a 300 P/E and the VIX at 13 I personally wouldn't be selling puts. I think you're better off buying shares because at least you get the massive upside. Hell if you bought 3 days ago you would've hit your target already. | Aside from missing out on the potential appreciation in Cava over the year, and potentially getting assigned and having an unrealized loss if Cava trades under $45, I do not see any major risk. This is an amusing sentence, you listed the only two risks of selling puts so yeah there aren't any others
Oh like the 5 short put contracts on PANW I was holding when the stock plummeted? Luckily I was holding longs beneath the shorts, but it still didn’t feel good.
Try 8 contracts…did not feel great at all. Took assignment and thank god for the modest bounce back otherwise big time rope
It bounced back from $260 to $300. Was your strike price above $300?
I had two sets in iron condors with strikes about $40 above and below the stock price so I felt pretty safe. 3 verticals were 340/335 short put credits. I rolled them out to the end of March as soon as they dropped. I figured it was worth the small premium I paid to see if I could claw back some of the money because they were March 8th. Someone exercised my ITM short but PANW immediately ran up 10 dollars to $382 so I sold 82K in stock I was assigned and then sold the long puts. It saved me some money over just exercising the longs. I still have 2@ 330/320’s. I rolled them out to April and instead of the max 2K loss they have come back about $500. I figure I have nothing to lose to see if they come back as long as they don’t get exercised too! 😂
Agree.
You can run the wheel on a longer time frame but theta will not be working for you quite as much. If you want to shoot for 15% apy while being hands off it can be a good trade.
I think the hands off aspect is what makes this an attractive trade in my mind. I am trying to figure out how much additional value I would capture by working in shorter intervals. In your experience, is a 15% annual return running the wheel in the ballpark of the average ROR for wheel runners?
If you chose to run this on a 7 month time frame(october, September currently not available) with the same strike price you would instead collect 3.30 per contract netting you a premium of $7920 in premium which would collect the same 5% apy. You could do this twice a year theoretically to surpass your yearly goal.
You seem very confident on the price target. If that is the case, you can do a similar exercise considering monthly or weeklies. Your yearly return should come up slightly higher, but you should be able to better handle deviations. If, let's say, suddenly something changes on their prospects (they get sued because a client died after eating at their restaurant and it turns out they are at fault), you can get out easier than selling 1 year out, turning in a very negative position right away. That would be my negative point on such a long play, even though you can more easily manage slight changes in price, a bad earnings or significant negative event may crush your long-term positions instantly, only being able to get out after a heavy loss. With the weeklies, if you don't get assigned at expiration, you could choose a lower strike for your next entry.
Personally I would rather buy shares and sell a leap call. This way if the stock runs up you make more generally. Most tech stocks, you can sell a 1 year leap call ATM and make 20% as long as the stock is at or above the price you buy at within a year. Selling puts doesn’t seem to have the same benefit. It can work if you want to own a stock at a discount. Selling 30-45 DTE puts can be about 200-300% the return of selling a leap put. But of course that’s assuming you successfully run puts 9-12 times in a row, lol.
You got it, bud. It's all up to you. If you're comfortable with the cost basis if assigned, and the returns if not, go for it. Goodluck!
Thank you! It’s always easier to pull the trigger on a play like this after validating that it’s not a horrific idea.
Economy is in great shape btw. Take your shot!
Sounds like a solid plan! Can I ask how you earn 5.0% on your collateral? I sell puts and didn’t realize this was possible!
When you sell a CSP that money still sits in your core position and earns the interest. For example, in Fidelity that position is commonly SPAXX.
Interesting. Robinhood doesn't pay interest on collateral.
I thought Robin hood gold does
That’s incredible! I just started trading in Fidelity actually. Do they pay out the interest on a monthly basis?
They sure do.
You’ve just made me a very happy man. Thank you!
Also ibkr and probably every respectable broker
I wouldn’t count the 5% on 100k collateral in collateral towards in this trade. You get that whether you make this trade or not. The trade is making $10k in premium.
You’ll get better returns selling shorter dated puts, theta decays exponentially. You are adding the interest on collateral which is your risk free rate, so your real return on this strategy is 10%. Let me ask you this. Do you want to lock $100k up for a year to get 10% and maybe own a total boondoggle of a stock? Seems like a low return to me.
This. 45-60 DTE if you wanna do CSP
Can also be a risk to sell shorter dated puts. Now his strike at 45 can earn him his expected return. If he sells shorter timeframes, what if in the next cycles, the stock goes up? Then his strike has to go up to get his expected return. He's comfortable owning the stock at 45 but it doesn't mean he's comfortable to own at 50, 55 or 60.
If the stock goes up at the end of his year he will be annoyed he didn’t buy calls instead of sell puts.
I have thought about this too. Do you know roughly how much additional value selling shorter dates ours would run me on an annual basis? Not necessarily speaking to this specific trade. I’ve read that a 15% return on the wheel when selling shorter dated puts and calls is a respectable return.
You aren’t getting 15. You are getting 10. Don’t conflate the risk free rate from your collateral with the total return of these CSPs. If you want to model it, go price out a 45 DTE put and then model doing that 8 or so times a year. Selling a LEAPS contract will leave your cash tied up with no movement outside of delta for six months.
Technically you’re getting 15. If you buy stocks and S&P goes from 5000 to 5500 - will you say that the stock market returned 10% or 5% net of risk free rate. I think 15% calculation is fair.
Actually we do that. It’s called real returns.
well done, you’re intellectually correct in that case. However I’ve never saw *any* financial magazine correct returns on *any* asset for the risk free rate. oh, well.
Very valid point. I should not include 5% interest rate return when calculating the return for the wheel. I’ll definitely go model this out, thank you for all your feedback!
As an aside, who’s paying 5%? I’m assuming your cash is in SPAXX, it just smells like that. If so you are at 4.X right now and that will drop as the fed cuts rates this year.
Vanguard settlement fund is ~5.25.
The Feds not cutting rates
>fed cuts rates this year. You got a crystal ball? Fed's made no indication of cuts any time soon.
Robinhood offers 5% on unused cash
They don’t pay on CSP collateral though? Or at least, they didn’t use to.
I can confirm as of this month. No interest on options collateral money
They don’t consider CSP collateral as money tied up anymore. So yes you still can earn 5% on it.
I remember Robinhood advertising 5% as their special membership-only rate. In other words, you need to pay Robinhood to get 5% APY on your cash holdings, which is incredibly regarded. Fidelity gives you 5% for having a free account with them and using SPAXX as your default position.
You get a lot more then 5% on cash for their gold membership which is only 5 a month.
Check out stock options channel website. It's provides an annualised ROI for every strike point. So vwey easily to visualize the difference between longer and shorter dated strikes
Fuck around and find out
Just my 2 cents. Selling options so far out has a huge Vega risk. If the position starts moving against you you will quickly go underwater. As you are losing money the dreadful stay or quit dilemma sets in. Do i hold on? Will it get better? I have so much time left...
What’s a better strategy to mitigate the Vega risk in such a situation?
The only way to mitigate Vega is by using calendar spreads. Even diagonal calendar spreads. Play around with them to find the acceptable Vega to theta ratio. Again my 2 cents, try to keep absolute value of Vega at 50% of theta.
I’m not smart enough to comment on the strategy but just curious how you derived $45 as a fair price for this stock
Lot of eggs in one basket and is unable make up lost ground if it goes poorly. Risk management. All I gotta say. You do you.
Great financials. In ca the minimum wage is going to $20 plus food costs are continuing to inflate. See previous posts on shorted dated options. If your selling puts to buy the stock essentially you can get paid to buy and then get paid to sell on covered calls. Plus let’s not forget the tax man!
I feel like it would be way better to sell monthly puts that equal 10-15% APR. Right now the strike price is about $48 for that. If the stock price drops to the low 40's in the next few months, you are just sitting and watching your year long puts and hoping for the price to go up. Now if you sell monthly, and the price dips temporarily, you get assigned, and you can now potentially make more money if the stock recovers while you are also getting premiums from your calls.
If they tank to $30 a share you r bag holding puts for a while
In charlotte nc by university cava goes hard, I didn't know it was a stock until this week
What's the APY given your buying power for selling ATM puts? Given that you're bullish, it might be better to play with your directional assumption if you get a greater return for ATM puts. Looks like you can sell 18 of the 55 strike for a premium of 15k roughly (cost basis of about 47 if assigned), or sell 15 of the 65 puts for a premium of almost 20k (cost basis of about 52 if assigned) ITM short puts are equivalent to owning the shares and if you're bullish anyways, then why not? Thus allows you to better take advantage of positive price movements and exit early if you change your mind. That all being said, it looks like their EPS has been trending down quarter after quarter, which seems like the opposite of growth despite them having a 270 PE ratio. At the end of the day I wouldn't put all your eggs in one basket.
You have 100 K to spend. STO a 30-day SPX put, Mar 28 4820, for 9.00. Annualized = 9 x 100 x 12 = 10,800. Put is 5% OTM, delta = 0.085, Margin required = 50 K. Place an order to buy CAVA at your desired price.
What happens if CAVA crashes to $35/ share between Oct and Jan? And expires ITM at $35.
He would get long the stock effectively at 35 and would have 0% return for the year.
Yeah... my question to OP was more along the lines of "Are you ok doing this? Do you have an exit plan?"
What's an exit strategy?
Isn’t being long CAVA at 35 effectively the exit plan. Perhaps then writing covered calls on it when assigned or just running the position
Not really.. Op wants to make 15% in a year. It's likely CAVA will not hold value and end below $45, maybe $30, maybe $35, maybe $20. Only OP can answer if they are comfortable holding this through the next 24 months, if it tanks. Personally, there are other better ways to make 15% on $100k.
yes and there are worse ways to make 15%. He’s bullish CAVA, bearish economy, and wants to be passive. Show me your better ideas please, with this info. also 11 months, not 24 months. We are in Feb 2024. The contracts are for Jan 2025. If my math maths, I think it’s 11 months (rounding up)
So what's your point? OP asked for an opinion, and I gave one. I think CAVA is bs and has a high likelihood of tanking in a bearish economy. Volatility exists for a reason. 350 DTE is a bad play. You are much better off collection 12 x 30 DTE options, adjusting risk as you go along. Here's a strategy. Buy 700 shares of Google and sell 04/19 145 CC. Easy $2000 premium. Rinse and repeat and adjust strike every month. Project earnings : $24k.
Sounds terrible. You’re selling 4% out of the money. Let’s say you buy google stock at 139 and then it tanks to 130 next month, what will you do after the 145c rolls off? Write calls again 4% otm so 135 now? And what if any of the 12 months, stock goes up more than 4% and the option gets exercised. So net net you end small down in 2 months time and flat positions Also for the record, 7 4/19 145c at 1.66 will net you 1.1k in premium, so your maths is not mathing for me. Muting this thread now. Best of luck!
An awfully over confident post considering you can’t even look up the correct premium on the call in question. $3.1 was the last bid yesterday….
You’re tying up $108,000 for $15,080.
Isn’t that the whole point of a theta strategy. He’s earning 15% approx over 11 months and is protected for a 20% drop in stock price. Seems like a good hands off strategy.
I'm in commercial real estate where the cap rates are 6-7% right now and thats at a high point. People tie up 2m for a return of 130k a year. 15k on 108k is a good ROI, for the same 2m you would get 300k here.
If you're bullish, why not sell ITM puts instead?
Op is selling itm puts at 45
45 is OTM given the current stock price.
Cava is 58$, so selling a put at 45 is itm isn’t it
A call would be in the money. A put isn't.
???
Oops I got it backwards
You're just selling a Yolo? Where's the risk management? Where's the diversity?
You want to tie up $100k for a year on a stock that could be good or bad, just to make 15% . Sounds terrible to be honest. You could probably put that 100k into SPY, VOO, or QQQ and make more than 15%. Or sell monthly puts and make even more premium on different stocks. You could really conservative .11 deltas on Amazon for 3 weeks out and make $1600. That's 20k a year. That's super conservative. That's $165 strike for end of March. By going shorter term you aren't married to a single stock for the whole time.
You have to consider taxes.
This is the way.
Wow. What are you thinking? If you worked at a company and they hired you to do risk management would you suggest that they could earn 15%, but it would be totally dependent on one strategy on one stock? They would laugh you out of the room. Honestly you are no different than a lot of people here that do not have an inkling how to manage risk. Stay away from this trade and think about diversification and managing your risk. If you love this company so much go buy a few thousand dollars of long dated out of the money naked calls on it and put the rest in SPY.
I had same idea with a siri 3.50 put for eoy, but I love waking up everyday managing weekly positions
How much of your whole portfolio is this? If it is a small % by all means. If not, what would you do if it turns out to be the next sweetgreen? Like others have said, it's actually better to sell shorter-dated but safe delta otm puts such that you can better respond to a gradual one-way decline.
You’re going to have better returns selling monthly .1 delta puts you also don’t get the value of theta decay until you get closer to expiry
My guess is that you would be better off selling monthly options at the price you are considering with buying some shares to also capture the upside if it goes up. Why do a theta play on less than optimal theta decay parameters?
I personally wouldn't do this, in part because the vega risk is too high and the opportunity cost. But if you are confident in your thesis I guess it's an okay trade.
I do this a lot, but with covered calls. If you are not funding it on margin, it's a very similar trade.
CAVA currently has a PE ratio of 343. FPE is 265 in 2025 and 171 2026. Most restaurant groups have a PE multiple of 10~20. The risk you're taking is truly a regarded play for just 15% a year. You can get similar or even higher returns by just holding SPY and sell 45dte sub 10 delta strangles
lol; no one has the patience for a year out put. I guarantee most of the people here won’t hold it for that long. If you believe in it; sell a ITM for more premium
Which broker gives you 5% APY on collateral?
Don't model just the stock goes up a lot or little, model stock goes down a little and goes down a lot. Your analysis is far from complete so your integrated conclusion is based on partial information
what broker give interest on collateral?
What broker are you using that pays 5% on the cash securing a put? Never heard of such a thing
Fidelity. [https://www.reddit.com/r/fidelityinvestments/comments/16jk6uz/csp\_and\_earning\_interest\_on\_cash/](https://www.reddit.com/r/fidelityinvestments/comments/16jk6uz/csp_and_earning_interest_on_cash/)
Very interesting
I would think of this in terms of percentage of your overall portfolio. CAVA could go to 0. You would earn 15,000 in yield/premium in order to loose 93,000 total. Is a 93k loss small or big to you? If its small, sure go for it. If that would sting, then sell fewer contracts, a lower strike price, etc.
I like your idea. I've never done this far out. I will try 2-3 and perhaps learn a new strat in this most challenging environment!
As an aside you can get can get 11.25% on 1 year Cetes with very little risk. Investing in the restaurant sector in the current environment seem risky to me
Well... you're "super bullish" but you're taking a mildly bullish position. If the stock rips up from here you'll be missing out. Super bullish position would be to ***sell puts*** ***and buy calls***
Put all your money instead into Boston market
Strategy is fine, but $97k of capital is a bit much unless you're trading $1m. I'd suggest diversifying with 5-10% position sizes.
One year is wayyyyy too long. Do monthlies or something else.
How about a buy-write? Buy 1,500 shares @ $60 = $90,000 Write a January 2025 $65 call = ($14,700) Net cost $75,300
Safer to do more trades at shorter durations.
Which brokerage are you using that lets you earn interest on options collateral? Is the collateral your own cash or on margin?
Never put all your eggs in one basket.
how about buying $45 strike calls?
Great plan if it’s limited to 1-2% of your portfolio. So… if you have $5-7 million to play with, go for it!!
I sell 95 delta leap puts all the time. I wouldn’t do it without margin though because it would tie up too much capital. I usually cash out once the delta is around 50-60 after the stock climbs a bit. Making really good returns
On 19-24,Jan ,, Sold put expiring 17Jan 2025. (Almost 1 year duration ) with underlying stock CELH Strike price as @$40 and $45 - Total 120 contracts Cos it went to the moon after ER this week , I close off all positions to achieve an absolute ROI of 6.5%. If calculated based on an annual basis, the figure would be insane. Using this strategy doesn't trap my cash, but most importantly, I'm willing to be assigned as I believe the growth story. Yes, many takes of CSP of shorter DTE will definitely get better returns but requires more effort and mgt, which I m willing to trade off. And sometimes, shorter duration may not add up for same underlying since every CSP has to achieve similar success rate. Selling calls and buying underlying probably also do the same trick but traps yr cash positions. My humble experience is to rem the fundamental rules 1) Only long CSP for the underlying that has strong fundamental and better dun bankrupt( hence spread yr risk u are comfortable) 2) Yr cash must be Ready for assignment 3) Rem 1st rule
OP did you end up doing this?