A Fortune in Selling Naked Call Options (w/Martingale)

Quote from atticus:

Do you consider 1.5% a suitable return for unlimited risk?
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Hello jones

Can you provide an answer for this question, please?

By the way, you mentioned that it's anathema to mention Martingale. Why do you suppose that is? This is a serious question, because it would force you to explain why Martingale should not be anathema in your play. This would force you to explain why it is not possible that after your first double down, the market continues to go against you. If you admit that it's possible and would require another double down, then you would be forced to reveal your account size so that we could figure out how many double downs you could make before you were ruined. Then you would be forced to explain why you think that that many double downs would not be possibly necessray.

Thanks
 
I was about to post the MO example, and that was just off the top of my head.

Surprise rate cuts would affect "mega caps" also. Look back at the period a few years back that caused the Nasdaq to pop 8% in one day. CSCO, MSFT, were all spiked.
 
I appreciate the constructive critique. Please be reminded that I only enter a position after the stock has surged upward. After the upward surge of at least 10% (i.e. after a strong earnings report), then I would sell the call. I look for overbought positions as the indicator for getting into a position.

The premium I receive needs to be at least 12% - 20% of my margin requirement. Therefore, for an example such as XOM (current market price - 84.58), I would not sell a call unless there was a surge of at least 10%; thereafter I would demand a premium of about $2.50 per share or better for an $85 call with Feb expir.

Walt
 
Quote from jones247:

After the upward surge of at least 10% (i.e. after a strong earnings report), then I would sell the call.
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This is spooky. "Megacaps" tend to be momentum plays. Selling a call after a 10% up move is only asking for trouble (Look at that MO chart as an example). One other thought--big up moves (especially after earnings) typically cause volatility to get crushed. You'll be selling volatility at probably the worst possible time.

But, you don't have to convince us, try it out for yourself.
 
Quote from jones247:

I appreciate the constructive critique. Please be reminded that I only enter a position after the stock has surged upward. After the upward surge of at least 10% (i.e. after a strong earnings report), then I would sell the call. I look for overbought positions as the indicator for getting into a position.

The premium I receive needs to be at least 12% - 20% of my margin requirement. Therefore, for an example such as XOM (current market price - 84.58), I would not sell a call unless there was a surge of at least 10%; thereafter I would demand a premium of about $2.50 per share or better for an $85 call with Feb expir.

Walt
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Where is XOM spot in your 85C example?
 
Quote from traderNik:

Hello jones

Can you provide an answer for this question, please?

By the way, you mentioned that it's anathema to mention Martingale. Why do you suppose that is? This is a serious question, because it would force you to explain why Martingale should not be anathema in your play. This would force you to explain why it is not possible that after your first double down, the market continues to go against you. If you admit that it's possible and would require another double down, then you would be forced to reveal your account size so that we could figure out how many double downs you could make before you were ruined. Then you would be forced to explain why you think that that many double downs would not be possibly necessray.

Thanks
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“Martingale” ( or simply said an increase in position ) works very well for CERTAIN
option’s strategies, when edge ( user defined) becomes even better than initial entry.
It’s comes from non-linear nature of PnL curve ( and some other conditions)
 
Quote from FullyArticulate:

This is spooky. "Megacaps" tend to be momentum plays. Selling a call after a 10% up move is only asking for trouble (Look at that MO chart as an example). One other thought--big up moves (especially after earnings) typically cause volatility to get crushed. You'll be selling volatility at probably the worst possible time.

But, you don't have to convince us, try it out for yourself.
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FullyArticulate,

You're absolutely correct about MO. However, that's the exception, not the rule. Even with such an occurence as MO, my loss would be managable, even without the martingale infusion. I'm o.k. with a the opton price doubling or even quadroupling against me once in a while. Even if the price quadrouples against me after the 2nd progression of a martingale, I would be able to recover after six to eight positive trades. The martingale strategy coupled with overbought entries, especially if with a stock index provides an 80%+ win rate. Nonetheless, that's why selling calls on the indices would be preferred.

Walt
 
Quote from commiebat:

When you're picking up pennies in front of a steamroller, the steamroller only has to win once.
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LOL! I've never heard that one. A PERFECT metaphor for selling naked. :p
 
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