Here’s a list of the 20 cheapest puts that work great for tail hedging

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by Arrow222

Hey guys,

With VIX at it’s lowest point in a year, premiums from selling puts have seen significant decreases at the same expiry and % OTM level. You may be going closer ATM or selling larger positions to maintain the same weekly profits.

At the same time, hedges have become cheap, like buying puts back before the 2020 crash. When Boeing was at $300, their 1 year out $150 puts were like $0.30. Puts still aren’t as cheap as Feb 2020 but it’s getting close.

I compiled a top 20 list of the cheapest May put options defined by Theta/Strike * 100. (Aka the yield on collateral if you do CSP).

These options are found by using FDscanner with the following parameters:

  • Puts only
  • Option Premium < 1% of strike
  • % OTM < 10%
  • Expiry: May 21st

After running the filters, sort by the Theta Annual % column. Theta Annual % is the annualized yield on collateral if you do CSP, finding the smallest value means you’re paying the least in theta for the long put position.

Ticker IV Strike Share Price Last % of Strike % OTM Volume Open Interest Theta Annual %
CLGX 12.88% $75 $79.46 $0.25 0.27% 5.61% 9 33 3.41%
FPRX 16.70% $35 $37.82 $0.25 0.36% 7.46% 1 1 4.48%
HWCC 13.19% $5 $5.26 $0.05 0.50% 4.94% 21 927 5.11%
GSAH 14.34% $10 $10.54 $0.05 0.50% 5.12% 691 15213 5.11%
GLUU 13.25% $12 $12.48 $0.1 0.63% 3.85% 5 19 5.17%
GWPH 12.60% $210 $217.33 $1.2 0.62% 3.37% 1 115 5.20%
AJRD 14.05% $45 $47.21 $0.45 0.56% 4.68% 12 257 5.27%
RY 18.17% $85 $92.48 $0.37 0.44% 8.09% 23 63 5.97%
COST 22.52% $320 $354.94 $1.5 0.46% 9.84% 191 918 5.98%
VZ 20.71% $52.5 $58.29 $0.22 0.40% 9.93% 98 2271 6.12%
AJAX 13% $10 $10.23 $0.1 1% 2.25% 380 13089 6%
AEP 20.93% $77.5 $85.55 $0.37 0.45% 9.41% 24 489 6.22%
JNJ 20.34% $150 $162.8 $0.82 0.55% 7.86% 475 1986 6.28%
K 22.34% $57.5 $63.32 $0.35 0.57% 9.19% 30 264 6.41%
DEO 18.97% $155 $167.44 $1.05 0.63% 7.43% 27 46 6.45%
MRK 22.43% $70 $77.08 $0.37 0.51% 9.19% 216 1697 6.47%
KO 23.03% $47.5 $52.5 $0.25 0.53% 9.52% 800 3972 6.53%
TM 22.65% $140 $154.16 $0.85 0.52% 9.19% 4 43 6.65%
CM 15.33% $95 $98.71 $1 0.87% 3.76% 2 133 6.72%
COST 21.75% $325 $354.94 $2.02 0.61% 8.44% 267 1202 6.82%​
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If you find yourself increasing your buying power usage, like diving into VIAC and similarly affected stocks, consider looking into cheap puts with a fraction of your collected premium for hedging. Make sure you can never get wiped out on a -30% crash.

Cheap puts on lower IV stocks can pay out higher during market crashes. Eg a 10% OTM monthly put for a boomer stock can cost 1/5-1/10 a high IV tech stock. Even if it crashes by half as much, it can pay out more than the equally OTM put on a high IV tech stock.

From the list above, do also remove SPACs because of their $10 floor, and any other stocks that you’re confident won’t drop due to merger at a higher price or other reasons.

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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