Testing New Option Strategy

I had a big epiphany in the last half of the year (2024) when I started selling option premium. I mostly sold covered calls and cash-secured puts and focused on the weekly expirations. I’ve been keeping the risk very low and not using any margin.

I’ve been assigned 6 times in the last 6 months, 4 for puts and 2 for covered calls. This has caused me to buy 1,000 shares of SMH and 500 of IWM, so it cost me a pretty penny in my trading account. Yet, despite this I have 41 winning trades and 7 losing trades. That’s over an 85% win rate.

Of the losing trades, every single one was when I went long either calls or puts.

So far I consider myself lucky that the market has a bullish bias and I’m focusing on IWM and small caps stocks now.

Going forward, and to manage my assignment risk, I’m going to start focusing on 45 DTE options and sell them at 21 DTE. Based on TastyTrade analysis, OTM around 25 Delta, tend to see the most theta decay between 45 and 21 DTE.

The decay curves behave differently for ATM and OTM options. This is very interesting.

This lets the trader capture the decay, make money, and still have time to manage the trade in case it goes against them.

I like this a lot but it does require some planning, so in December I’ll be planting the seeds for a profitable 2025.