r/options
Liquidity, volatility and yield
Selling July $12 puts on ARCC for income, citing high dividend yield, decent IV, and strong liquidity as key factors.
- High dividend yield (10.2%) provides a safety cushion and enhances total return potential for cash-secured strategies.
- Attractive implied volatility (IV Rank 56%) allows for premium collection above recent realized volatility levels.
- Stock is trading near the lower end of its yearly range ($17.40-$23.42), offering a favorable risk-reward entry point.
- High correlation (0.85) with SPY exposes the position to broad market downturns despite stock-specific fundamentals.
- Selling puts caps upside potential while retaining full downside risk if the stock breaks below the $12 strike significantly.
Found ARCC with descent IV, good dividend and ok liquidity.
Sold 12 put for in July for 0.35
39 days to expiration.
Delta -0.22
Theta -0.69
RoC 5 (estimated yearly return)
P50 88 (estimated probability for half of profit)
Days to P50 9 (estimated days to 50% profit)
This is the reasoning from the automated trade platform
Open the 18 put. Elevated relative volatility drove the decision, with IV rank at 56% and the July chain priced above recent realized volatility.
The put matches the positive view without using a naked call against the stock. The premium pays enough for a cash-secured IRA trade, and the half-profit estimate favors an early exit window rather than a long hold.
Risks center on price location and correlation. The stock trades at $18.77 inside a $17.40 to $23.42 yearly range, closer to the lower end, and correlation to SPY is 0.85. Liquidity does not block the trade. The 10.2% dividend yield helps the short-put setup, and puts carry no dividend assignment risk
All checks out, I think it's a descent trade. Thoughts?
RoC 5 (estimated yearly return)
What is this and where does it come from? I can't figure it out.
Platform calculates it, with a bunch of params and extrapolates them for a time range
It tries to assess return “floor” for a trade
What do you mean return floor. How do you calculate the last two numbers. Some equation or formulaI don’t know?
Last two are probabilities metrics calculated by the brokerage
nice find on ARCC, those dividends definitely make it appealing for short puts. 0.35 for 39 DTE with a 0.22 delta is a pretty decent credit for a 18 strike. I typically look for similar setups with high IV and a good theta per day. I usually use the options heatmap on ThetaPal to visualize the best strikes with fat premiums and where the theta decay is juiciest. do you usually target a specific RoC or P50 when you're screening for these?
I got this name while looking for dividend stocks to trade, with high IV and tradable options spreads.
I did this specific lookup manually, as the screenshot shows. I’m making this process automated and mechanical, part of the app I have. It’s pretty annoying process to check options spreads and liquidity.
As for trade parameters, strikes pick up, the execution - all automated with AI. I don’t do manual management of trades any more.