Feedback on Put selling strategy

Hi All,

Not sure where to post this, but I have a pile of cash that I'd like to keep as cash, but put to work and I don't mind risking a little of it.

My thought is to sell a spread of puts in two uncorrelated assets. I'm aiming at SPY and TLT. I'm thinking of selling putts at just OOM and then buying puts say 10% OOM as reinsurance.

So, example, let's say SPY is at 200. I sell 1 month puts at 198 and buy an equal number of contracts at 188. Max loss is $1000 per vertical spread. I do this for SPY and equivalent for TLT.

Let's say I put up $20k to cash secure the trades. This would let me be sell roughly 20 of these combos a month (10 for each SPY and TLT). I'm conservatively guessing about $150 profit per vertical spread (this fluctuates of course) and thus bring in about $3k/month with a max realistic loss of $10k in a given month (I could reload a few times if needed, could put up another $50k, but hoping profits will build a cushion over time).

Has anyone done this? Are any of my assumptions faulty? Are their hidden fees that would eat my lunch? Thoughts?

Submitted May 25, 2016 at 10:37AM by TDual http://ift.tt/20Bqmpm