Alternative strategy to selling naked?

I trade the weeklies, but with a slightly different approach.

Without getting into strategies - because everyone has their own feelings about what works for them and what they're comfortable with...

Before there were weeklies, we only had the monthlies then EOM rolled into the picture. If you feel that you have an edge, you would get one or two opportunities per month to run a series of contracts and make a dollar or percentage amount. With weeklies, now you get about five opportunities per month to do the same thing. If your trading of ES options has a positive expectation, you can see the benefits of the improved scenario.

Having said that, I treat them all like monthlies. I start my positions three to five weeks from expiry and do everything just like it's a monthly.
 
Quote from ktm:

I trade the weeklies, but with a slightly different approach.

Without getting into strategies - because everyone has their own feelings about what works for them and what they're comfortable with...

Before there were weeklies, we only had the monthlies then EOM rolled into the picture. If you feel that you have an edge, you would get one or two opportunities per month to run a series of contracts and make a dollar or percentage amount. With weeklies, now you get about five opportunities per month to do the same thing. If your trading of ES options has a positive expectation, you can see the benefits of the improved scenario.

Having said that, I treat them all like monthlies. I start my positions three to five weeks from expiry and do everything just like it's a monthly.
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I have started trading Spreads on the Weeklies... Executing 4-5 days before expiration. Been very successful.... Use the same criteria as on the Monthly's. Monthly's are executed 25-45 days before expiration.
By the way, I do not trade Spreads on stocks... RUT, SPX and NDX only.
 
Quote from Put_Master:


In reality, there will be many trading pauses along the way, and the pauses will vary in length from trade to trade, and the pauses will occur for many different reasons.
You can attempt to compensate for the trading pauses, via the use of margin leverage. But that's another discussion for another day. [/B]
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Can you elaborate on why there would be many trading pause along the way ? Why for instance one wouldn't be able to sell puts every week of the year ?
 
Quote from luisHK:

Can you elaborate on why there would be many trading pause along the way ? Why for instance one wouldn't be able to sell puts every week of the year ?
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I will look for Put M. response.... For me, I wait for the trades to come to me.... If I don't see one that meets my criteria, I do not trade.

If you are trading options on individual stocks, there are many other things that come into play. Put M. does a rather detailed analysis of the equity... for any any one, be sure the underlying is worthy of the option trades you are contemplating. Then there is whether you want to play the earning releases or avoid them.

With my indexes, these items do not impact me so much.
 
Quote from Put_Master:

Imagine a post where diaoption doesn't say something ridiculous.
Imagine a post where diaoption actually shares something useful.
Imagine a post where diaoption says something thought provoking.
Imagine a post where we aren't asked to visualize diaoption semi naked.
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Not going to happen. As you know, diaoptions is a liar, a fraud and a tool.
 
Quote from luisHK:

Can you elaborate on why there would be many trading pause along the way ? Why for instance one wouldn't be able to sell puts every week of the year ?
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You are assuming as one trade ends, you simply initiate a new trade with the released funds.
I'm assuming there will be times it's not that easy to find a trade one likes well enough to get into right away.
Hence the pauses.
However, if traders are not particulalrly picky about the stocks and prices they get into, then i would agree there should not be trading pauses along the way.

However, I think my scenario is more likely.
There will be times the market is dropping, and so you pause to wait for things to settle down.
Afterall, you will NOT be investing with any kind of significant otm cushion.
There will be times the market is rising, and so you pause for a better investing opportunity on a pull back.
And there will be times the "world news" of the day makes you nervous, and so you pause see how the market reacts.

The problem with "pause trading" the weeklies is, pausing just a couple of days will eat away at your premiums pretty quick.
Next thing you know, that weekly has turned into a 1.5 - 2 week trade, as the credit on the weekly is just too puny to mess with.
Not to mention that your commissions will be a sig % of those puny weekly credits at this point.... if you paused a couple of days.

And I'm assuming some losses along the way.
Thus I'm assuming there will be times you pause after a loss, just to get your head back on straight..... before getting back into the game.
 
Quote from luisHK:

Thanks for both sensible replies, I will look further into the issue
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I just want to make it clear I'm NOT saying you'll probably only invest 26 weeks out of 52 during the year.
That was just an example.
In that example, if you earned an average of 20% on those trades, you'll end up earning 10% on your accounts cash at year end.
Why?
Because you spend 50% of the year sitting in cash.

The point being, if you are going to use a weekly strategy, you need to be mostly invested during the year, with not too many pauses,... or your year end % results will be lower than your average trade yielded during the year.
How much lower, depends on how much time your account was sitting in cash between trades vs being invested.

Thus, you now have the added risk of perhaps rushing to find another trade, to avoid being in cash for too long between trades.
And not taking your time to find another trade with an acceptable "risk/reward/probability" ratio, may not be a good place to be, if you pick the wrong week to be fully invested.

There is nothing wrong with investing in weeklies.
But you'd better have the discipline to do it wisely.
And that can be difficult to do, as each day theta is working against you pretty quick.
Hence the tendency to perhaps rush into a trade that perhaps you should have watched and evaluated a bit more.

None of this is much of an issue if you are just doing the occasional weekly.
But to base your entire portfolio strategy around the concept, is another matter.
 
Quote from Put_Master:

I just want to make it clear I'm NOT saying you'll probably only invest 26 weeks out of 52 during the year.
That was just an example.
In that example, if you earned an average of 20% on those trades, you'll end up earning 10% on your accounts cash at year end.
Why?
Because you spend 50% of the year sitting in cash.

The point being, if you are going to use a weekly strategy, you need to be mostly invested during the year, with not too many pauses,... or your year end % results will be lower than your average trade yielded during the year.
How much lower, depends on how much time your account was sitting in cash between trades vs being invested.

Thus, you now have the added risk of perhaps rushing to find another trade, to avoid being in cash for too long between trades.
And not taking your time to find another trade with an acceptable "risk/reward/probability" ratio, may not be a good place to be, if you pick the wrong week to be fully invested.

There is nothing wrong with investing in weeklies.
But you'd better have the discipline to do it wisely.
And that can be difficult to do, as each day theta is working against you pretty quick.
Hence the tendency to perhaps rush into a trade that perhaps you should have watched and evaluated a bit more.

None of this is much of an issue if you are just doing the occasional weekly.
But to base your entire portfolio strategy around the concept, is another matter.
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I think it's worth mentioning that much depends on the strategy being used by each trader. For some methods, you can systemically move from trade to trade, others may benefit from Theta decay etc...
 
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