Thinking of selling a cash covered put 10% below current price for earnings day which should net a pretty good premium, then set a sell stop order at the strike price to hedge on a spread betting account as this cannot be done out of hours on regular brokerages. Would this work?
Anyone tried cash covered puts with spread betting on earnings?
byu/factsoverfeelings89 inoptions
Posted by factsoverfeelings89
3 Comments
I’m not completely sure I follow, but it sounds like your stop sell order would be to go short shares to stem the loss from an overnight gap down below the strike price. I believe that would work from a technical perspective, but it would just lock in the intrinsic loss at the time of the share shorting.
So let’s say the stock is at 100 and you sell a put at 90 before earnings. The stock opens at 80 the next morning and you immediately short it to cover the put. You’re locking in a loss of 10, unless the underlying surges back up past your strike, in which case it could theoretically get worse.
If that’s what you want then it should work. Just don’t get the misconception that you would somehow be able to magically short stock at 90 if the stock opens at 80.
it’s better to buy back your contract before earning. Your strat can’t outrun IV crush or gap up/down.
This strategy seems risky for a few reasons. Timing the market on earnings is already difficult. Plus, using spread betting to hedge introduces leverage and its own set of risks. Have you considered simply selling covered puts on a different day, or exploring options strategies that don’t rely on such precise timing?