Thanks Tiger for organising a physical meetup yesterday for trade to win participants. It's a pleasant little event to get to see everyone's faces along with the interactions.
Whilst listening to the experiences and questions shared and answered throughout the event, I am beginning to feel a little nugget of concern about the application and concept behind the simple use of cashed secured put to generate income in the current environment.
Take $Palantir Technologies Inc.(PLTR)$ as an example. It was shared that collecting 2-3% premium weekly using cash secured puts is viable with this ticker. Disclaimer for this strategy being risky for assignment.
Perhaps let us dive deeper into my thoughts on this example using cash secured put strategy.
In order to collect a premium of around 3% per week, the option seller will probably be required to open a position near ATM, around delta 0.4. That means a more than 40% chance of assignment.
Bear in mind the philosophy of selling cash secured puts only on fundamentally good companies you want to own in the first place. 20 analyst consensus on $Palantir Technologies Inc.(PLTR)$ from Tiger app price it at an average of around $90. Which is about 20% to the downside from the current close. If the option seller were to be prudent with strike price selection and sincere in getting assignment, that's only 0.2% premium weekly selling cash secured puts at strike 90.
Granted there are many ways to adjust cash secured puts to avoid assignment, but it's not without cost to margin and time.
The question that begs to be answered is if selling simple cash secured puts with high delta weekly still a viable strategy for popular retail ticker like $Palantir Technologies Inc.(PLTR)$ or should you perhaps explore other option strategies in the coming week?
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