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Expanding the Crumbs strategy to regular stocks

Two months ago I started trading the Crumbs strategy against SPX spreads. The strategy is to move short strikes so low that the trade will be very safe and a likelihood of getting busted is lowered to a very minimum. This type of trading has 97% to 98% probability of profit. Only a black swan event would go and bust it. And today I decided to expand this trading to regular stocks and trade naked puts.

Crumbs strategy
Source: Pixabay
Trading naked puts with Crumbs strategy is safe. Relatively. It increases the POP to almost 100% (99% to be exact). The premium is very low. I will collect $21 bucks premium ($19.87 after commissions and fees) but it is almost a sure profit. Unfortunately, the capital requirements are a lot higher than with spread. Traders may consider this not worth it.

Today, I opened a new trade against Amazon (AMZN). I sold a December put contract with 115 strike price and collected $21 premium. The capital requirements or buying power is $1,150 and a total risk is $11,500.00 (that is in case the stock goes to zero). So you may think that this is not worth it – risking 12 grand to make 21 bucks? Go figure!

Well unless you can repeat this over and over every month with peace of mind sleeping well every night knowing that your trades will most likely expire worthless for a full profit. Of course, if you want a thrill and excitement of being in a roller coaster, raise your strikes up and collect $200 of the premium (or sell at the money puts). But be prepared that you may get assigned if the trade goes against you.

This strategy is to generate income, not to buy the underlying stock. If I want to buy the underlying, I would go closer to the money to collect nice and juicy premium and buy the stock for a better price. But I consider this strategy to generate income and not interested in owning the stock and in this case, I want it to expire every month worthless.


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