Near-strike weekly puts and unfunded assignment risk

One contract and cash reserved

Hesitant option use was framed as starting with one contract at a time. The closing note still favored trading small while keeping cash reserved.

TradersWeek labels that bound as fixed-contract sizing: hold new option exposure to a small, constant lot size, often a single contract, until the loss path is understood.

Near-strike credit raised assignment odds

On the 14 May 2018 chain, a share quoted at 27 showed a 0.64 bid at the 27 strike versus a 0.10 bid at the 25 strike, so the nearer strike paid a larger credit per contract. Choosing that nearer strike was treated as a greed error because it raised the chance the shares would be assigned at week-end.

The 27-strike credit implied a 26.36 net share cost, but a further drop was still an open loss. A nearby band low near 26.61 was not treated as a guaranteed floor.

Editorial reading: that larger premium is near-strike credit. It raises effective leverage after the credit is booked because assignment is more likely and the net share cost is not a closed loss.

Cash first, then wheel rotation

The wheel sequence was written to start only after cash was already available to buy 200 shares of the chosen name. Selling puts inside a margin account was listed as a way to stretch buying power, which sits in tension with the same text's cash-secured 200-share reserve.

A cash-secured put, as used here, is a short put written only after the account already holds the cash to buy the underlying shares if assigned. TradersWeek calls the cash-first sequence wheel rotation: sell a secured put, then covered calls after assignment, and add a second put only if cash for another hundred shares remains.

Editorial reading: margin management means reserving cash or buying power for assignment before a short put or wheel step is sold, instead of funding the share book after the fact.

Spreads, far strikes, and stops

A credit put spread, short one put and long a lower-strike put, was described as a pair that caps loss while also reducing the collected credit versus a standalone short put.

Far out-of-the-money short puts were placed in a 20% to 50% band, with a price-volatility-expiry check used so the chance of the share reaching the strike stayed under 10%. If a stop was used on a short put, it was placed 25% to 30% below the strike.

Editorial reading: leverage control limits strike distance, contract count, and spread width so a short-premium trade cannot expand into an unplanned full-share loss.

Assignment inventory still needs a size bound

A January 2018 assignment near 35 later sat near 27, and weekly option credits were not applied to reduce that leftover share inventory. Assignment inventory is the share book received when a short put finishes in the money. It converts option risk into a long-stock book that still needs a size bound.