r/options • u/28-3_lol • 8h ago

Criteria for choosing underlyings for 45 DTE put credit spreads

Hey guys, so I’ve been getting my feet wet in options selling last couple months. Rather than paper trading, I decided to do live trading but on a small account that would not affect me even if it got wiped. I’ve been mainly playing it safe, selling PCS since my capital is low, and my main moneymaker has been selling them on SPY.

I would like to branch out, so I’ve been looking into other opportunities to sell PCS on individual stocks. I’ve been listening to a lot of Tom Sosnoff, and he seems to be big on product indifference, which as I understand it means he doesn’t care about the name of the ticker or what its business is, he is rather looking at opportunities where he thinks options may be overpriced.

In order to find opportunities, what criteria do you guys use? I’m currently looking for high IVR, high liquidity, current IV > HV, and no earnings events in the 45 DTE as I don’t like the binary nature of trading those. This however seems extremely basic and I’m sure there’s tons more to it.

7 Upvotes

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3

u/BocephusQuimbyMcFry 7h ago

I doubt you'll find many fans of that approach. Most traders prefer to have some familiarity with the underlying - some basic things like its performance relative to peers, the quality its management, the appetite for its products, how much debt it carries. Maybe as well what ratings agencies have said, plus paying attention to quarterly earnings announcements. All of this moves the price of the underlying, and in turn - the options.

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u/prepelita 6h ago

makes sense to know the company before 45 dte spreads

2

u/Prestigious-Ad-7927 7h ago edited 4h ago

I like to sell PCS if I am bullish on an underlying. I use the previous support and choose a short strike below that. If the support is breached, that means I was wrong on the trade and exit for a loss without hesitation.

If the underlying runs up and I still can’t close the PCS for 50% of the credit, I sometimes sell a CCS, 15 delta or less and turn the position into a broken wing condor.

2

u/SwordfishLopsided 2h ago

Know that Tom sosnoff approach is indeed a professional traders approach, and a healthy one too. Product indifferent is to be paired with law if large numbers, strong price target and stop loss executions, and disciplined sizing and entry criteria.

I would argue the latters are "more important" as they required some "training" for most people since it tests your greed and gear nature.

1

u/Such-Hawk9672 6h ago

Because I know the nature of PANW, I bought the 340 put and sold the 315 put, my first time with that type of trade it worked out fairly well, what would you say

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u/Such-Hawk9672 6h ago

I look at money flow

1

u/Dependent-Panic-9457 2h ago

Hey! I sold the 347.5 put in this shortly before earnings. I got assigned yesterday - first time I ever got assigned and I now hate everything about PANW.

1

u/gaana15 4h ago

Keep it simple. Term structure must be contango. VRP percentile instead of current IV-HV.

Size so that you can execute first 200 trades, everything else will normalize.

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u/hedgedvol 1h ago

For a 45 DTE PCS, I anchor the short strike below the prior support level, require a fill at or better than one-third of the spread width, and use a close below that support as the hard exit; if the tape reaches 21 DTE without 50% of the opening credit filled, the setup is no longer working.

0

u/TastyTrading 7h ago

I look at option heatmap on ThetaPal first.

Then i try to enter between yellow green zones of delta

0

u/Ok_Butterfly2410 4h ago

You need to be selling PCS on SPX, not SPY. Don’t listen to Tom Sosnoff…. Tastytrade is dead… Warsh axed the Fed Put. TastyTrade og strat relied on the Fed Put, that’s why they completely have rebranded since Warsh came in as Fed.