High IV trade

the “roll down and out as far as necessary” part is where this falls apart. that’s not a strategy IMO. Its more refusing to take a loss while your notional exposure quietly balloons. works until it doesn’t, and 100 IV names make moves that don’t give you time to react. one gap down 40% on a catalyst and rolling isn’t an option anymore.

those stocks are sitting at 100 IV for a reason. the premium feels like free money but it’s just compensation for the tail risk you’re clearly not respecting. you can collect cash every day for six months and one position gone wrong erases all of it. “serious portfolio swings” is doing a lot of work in that post and you don’t seem to notice.

being well capitalized isn’t a risk framework. it just means you survive longer before finding out.

Can you explain the protection part?

Are you hedging the spread in some way?

What you’re describing is a put credit spread campaign with active downside rolling, and it works right up until the one time it doesn’t. I want to be straight with you about where the risk actually lives, because the “even on bad days I bring in cash” line is the part that usually precedes the blowup story.

First, the mechanics as I read them: you’re selling spreads on beaten-down high IV names, legging into the short side as the stock drops, and rolling down (and out when needed) to keep collecting credit and stay below price. That’s a legitimate approach. High IV means fat premium, and rolling down and out is the standard defensive move. Nothing wrong with the toolkit.

Here’s the issue. Rolling down and out for a credit feels like you’re winning every time because cash keeps hitting the account. But what you’re often really doing is financing a losing position by extending duration and taking on more risk further out. The credit you collect on the roll can be smaller than the loss you locked in on the leg you closed. If you’re not tracking the net P&L of the entire rolled chain as one position from inception, the per-roll credits can mask a position that’s quietly underwater. A lot of people who “always bring in cash” are actually accumulating a bigger and bigger short put spread position that just hasn’t been tested by a real move yet.

The thing that kills this strategy isn’t the slow grind down that you roll against. It’s the gap. A high IV name that’s already down is exactly the kind of stock that gaps another 25% on bad news, a guidance cut, a fraud headline, whatever. When that happens, your spread blows straight through both strikes to max loss instantly, and there’s no rolling out of a spread that’s already pinned at max loss except for a debit. Your defined risk on a single spread caps that, which is good, but if you’ve been rolling down and adding size to “keep it profitable,” your effective position can be much larger than you think. The selloff that takes you out takes out the whole chain at once.

The other quiet risk: rolling out in time to collect credit means you’re extending your exposure window right when the position is most stressed. You’re choosing to stay in the trade longer precisely when the trade is going against you. That’s the opposite of cutting a loser. It works in choppy and recovering markets, which describes most of the last stretch, and it works until you hit a sustained trend down where every roll just delays a loss that keeps growing.

None of this means stop. It means measure it honestly:

Track each rolled position as a single cumulative trade from the first credit to the final close. Net all the credits and debits. That’s your real P&L, not the sum of the happy individual rolls. I’d bet your win rate is high and your average winner is small, which is fine, as long as you actually know how big the rare loser is.

Know your max loss on the full position at any moment, assuming a gap to zero overnight, with no chance to roll. If that number is comfortable relative to your account, you’re genuinely fine and well capitalized as you say. If it’s scary, you’re more exposed than the cash flow suggests.

Be honest about whether you’re rolling because the thesis still holds, or just to avoid booking a loss. The first is trading. The second is hope with extra steps, and it’s how defined-risk traders turn a string of small wins into one account-denting loss.

The strategy is real and your edge (high IV, mean reversion on beaten-down names, theta) is real. The portfolio swings you mention are the tell that you’re carrying meaningful directional risk, not running a riskless cash machine. As long as you size for the gap that eventually comes and you’re measuring the full chain rather than the individual rolls, you’re playing a legitimate game well. Just don’t let the steady cash flow convince you the tail risk isn’t there. It’s there. It’s just waiting.

The cash basis tracking is the part worth a second look. Collecting a credit on every roll feels like income, but a position you rolled out to 2027 to dodge assignment is not closed, it is a live mark to market liability your cash ledger never shows. You can run a positive cash tally for a year while the open book quietly carries a loss that only surfaces the day you finally close.

Nothing wrong with the mechanics if the underlyings recover, and on names you genuinely want to own long term that is a reasonable bet. The risk is that cash collected becomes the only scoreboard, and it hides exactly the exposure TradeVue flagged above. The honest number is total return including the current value of every open roll, not the premium you have banked.

When you size, are you looking at notional across all the rolled positions together, or just the per trade margin? That is usually where this style catches people, not the individual trade.

Just because implieds are considered "high" doesn't mean they're expensive and you should sell them.

What can i say ... More power to you . All the best but this is not something i would do .

Been there done that several times in fact still alive and still making a living. The last blow up was in February lost half my value on paper but still kept my income going and I've not only fully recovered but on the upward side once again on paper.

Correlations go to 1 in a crisis. You are not diversified. You are just continually ramping up leverage and selling different flavors of crash risk. Ignoring the swings and saying “eventually they’ll all be positive,” is not a risk management strategy. It’s a death sentence. More than that, this is not at all the structure to express, “I think the stock is going up, eventually.”