So I have the grand sum of four gbp so far, but I am not complaining. I’m continuing the wheel. Let’s take a look at ford on the daily chart:
The RSI here is 55.00 ish.
The weekly chart:
Rsi is 52.04
So it’s looking a bit toppy really, meaning the next put is going to have to be further away from the current price.
The markets are closed now, but approximate prices are:
Current stock price 10.04
Five day strike IV = 53%
9.5 = 0.06 per share = 6.00 per contract
9.00 strike, 0.02 per share = 2.00 per contract.
Twelve day strike IV = 53%
9.5 = 0.22 per share = 1 contract 22.00 usd
9 = 0.12 = 12.00
8.5 = 0.07 = 7.00
19 day strike IV = 50.8
9.5 = 0.29 = 29.00
9.00 = 0.16 = 16.00
8.85 = 0.13 = 13.00
So… looking at these figures, I am a little bearish, I think the price is going to drop a bit. I think the price of the share is good for 8.00 tbh.
Lets look at the yearly chart for support:
So possibly there is support around 9.00, it hasn’t been too much lower, and we have been in some crazy times.
Lets zoom into the tail end of that yearly chart:
So the RSI for the year is 56.00. Notice the current price is quite a bit over the MA.
Generally my thinking is that it’s overbought a little recently, premiums are low on a weekly and perhaps 0.07 for an 8.5 strike is OK. This is until May 9. Ex dividend is May 07 and I think most people would hold past that and I can roll out if there’s a big drop closer to that. If I’m assigned earlier I’ll get a divident and 8.5 is a price I’d be OK holding at. Not saying I’ll do it… but that’s my thinking.
I made an order for a strike, 8.00 on May 16 for 5.00 I think, but it never filled. The bid was 2.00 (per contract I’m talking about now, so 0.02, so perhaps I should have known better).
I did a limit here for 0.04 cents at 8.50 strike and it filled. So yes, the lesson is keep it closer to the ask? The stats for this option are:
Delta 6.8
Gamma 10.65
Theta 0.655
Max return 3
Break even 8,47
Possibility of profit 95%
Delta: 6.8
This means there’s roughly a 6.8% chance the option will end in the money (i.e. Ford below $8.50 at expiry). A low delta like this indicates low risk of assignment.
Gamma: 10.65
Gamma measures how quickly delta changes when the stock price moves. A gamma this high means delta could rise sharply if Ford drops, but it’s less relevant for such a short-term, far out-of-the-money put.
Theta: 0.655
Theta is the estimated daily decay in the option’s value — in this case, $0.655 per contract (not per share). That’s about 0.00655 per share. The total decay over 11 days could be around $7.21, but the option can’t lose more than the $4 premium you received. Theta accelerates as expiry approaches and isn’t a straight line.
Max return: 3
This likely refers to the annualised return based on the collateral at risk ($850). Earning $4 over 11 days on $850 works out to about 0.47% unannualised, or around 3% annualised if repeated.
Break even: 8.47
If assigned, you’d be buying Ford at $8.50, but you already collected $0.04, so your effective cost basis is $8.47.
Probability of profit: 95%
Based on current pricing models, there’s a 95% chance this trade expires profitably — meaning the stock stays above $8.50 and you keep the premium.
I didn’t use any stop loss on my order, but I want to briefly explain how this works on interactive brokers.
Here’s an example of a stop loss order when selling a put option on IB. The idea is to close the position automatically if the option price rises too much — in this case, if it hits $6.00. But this screen confused me at first, so let me explain how it works.
First, “All or None” means the order won’t go through unless all 100 shares (one full contract) can be sold at once. I leave this set to “No” because I want the order to fill, even partially, if the market gets close to my stop level.
Now look at the price. I sold the option for $5.00 — meaning $0.05 per share, or $5.00 total for the contract. That’s the most I can earn. So setting a stop loss at $6.00 doesn’t make sense at first glance — how can it go above $5.00?
But here’s the key: that $6.00 is the cost to buy back the option, not the amount I sold it for. If the price of the option goes up — for example, if the stock drops and the put becomes more valuable — then closing it will cost me more. A stop loss at $6.00 means I’ll buy it back if it rises to 6 cents per share (or $6 total), cutting my losses quickly. That -100 in red shows my maximum estimated loss if that happens.
But this doesn’t guarantee I’ll get out at exactly $6.00. If the market moves fast or liquidity is thin, I could be filled at a worse price — or not at all, depending on timing.
What happens if the stock falls sharply and the put goes in the money? The buyer of the option can exercise it at any time. I’m not linked to them personally — the clearing system assigns early exercises randomly. If it’s assigned, I have to buy the shares at the strike price. If the stock is trading much lower, I take the loss, because I’m buying something for more than it’s worth.
And that’s why the option gets more expensive to buy back when the stock falls. It’s worth more to the buyer. So even if I sold it for $5.00, I might have to spend $10.00 or more to close it — unless I cut the loss earlier with a stop order like this.
So that is is for now. I shall try and sell another order today so all the money is being used. I’m starting to look into a few other strategies also and will update soon.
Continuing…
I decided to use Ford to practice Poor Man’s Covered Call, and so the first step was buying a leap. This one was as far out as possible.
Ten dollar strike, around 400 days out for 160 usd.
Now I had the cash to cover the PMCC, but they aren’t allowed without a margin account. I didn’t want to get into debt, but thought about it and many strategies won’t work at IB without a margin account, regardless of if you use it or not, and you only pay if you do use it, so … I thought what the hell.
I got had to go through a questionaire about margin, which was difficult, but I kept my setting (about wealth and experience the same).
So that was that. I think by then I had the nine dollar strike and the others weren’t filling.
After a while I got an email that I had been autoenrolled in a share lending scheme, which I was informed by AI meant that my application was being dealt with. I have a feeling it was auto-approved straight away and I didn’t notice as there was never an email nor notification. I started to get really worried because this account has become a huge deal to me and is a big part of my plans going forward. Eventually I intend to get a long-term visa and become resident abroad and this is possible with IB, thought I would have to close some other accounts.
Anyway, after a few days I thought something might be up so I specifically went to settings to check and saw I had a margin account. Then looked at the spending power, and it was 6k. I only put in 2k. So I was off and away.
So then my direction changed a little and I’ll continue in the next post.
