Required Data (The calculators used by members are more advanced)
Enter the required data to find the maximum possible ROI.
Nearby Put: Sell to collect time value and keep expiration to two week maximum as much as possible.
Distant Put: Buy to reduce the amount of funds required to trade one unit. Since you will lose this money, pay only a dime, approximately while you collect hundreds for the short options, week after week.
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Enter the required data to find the ROI. Each option requires:
- Time to expiration
- Credit you will receive or the Debit you pay for the anchor
- Different strike levels
You should also determine what is the probability of winning. The ideal trade has a win probability greater than 70% and an Annual ROI greater than 200%. That edge in trading can make a huge difference in your account growth.
If you are losing, you can roll the short put forward in time to get more credit. If you roll down, you are increasing the probability of winning. You should always roll to get more credit. You may have to roll the anchor forward in time as well when you are rolling for more credit.
Watch for the early exit signals. IF you get an early exit signal and have a profit, get out and go to a different trade. If you are losing, you can roll forward and down until the price closes above your final strike level. In theory, you can win up to 100% of your trades if you only trade the stocks on the watch list. However, winning 100% is theory only. For example, if a nuke is used somewhere in the world, you could lose lots of money. BTW: I recommend you look for the early exit signals every day. Also, whenever you are short a put, you must make sure you did not get exercised by opening your account every day before the market opens.
To avoid getting exercised, you must watch two items:
- The “Time value” or the “Extrinsic value” of the short options.
When these are less than ten cents with heavy volume, you need to roll. With light volume, less than twenty-five cents suggests you should roll. - The expiration date for the option. If you let the option expire in the money, you will get exercised.
Avoid getting exercised at all cost (especially if you use the diagonal spread put method.
Paper trade until you know you can win.
Diagonal Spread Put ROI Calculator
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