any option sellers

Quote from Rationalize:

It doesn't matter whether you're "on the cautious side" and "only selling $X in premium" .. There is no default edge generated by writing options. It's a directional vol trade, whether you know it or not.
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This is true but many still find it a good way to trade.
 
Quote from phil413:

MJ

Hopefully your Met fan as well, apppreciate your posts your knowledege on selling options is far superior to mine. I've been trading about 10 years but only selling options the last 3 as you say not the holy grail but it certainly provides a steady income I try and sell 3 to 4k a month in premium I certainly could sell more but I tend to er to the cautious side.

thanks again for your posts
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I'm a Met and Jet fan....It adds to my resolve.
 
Quote from MJ888:

I have been a so called "net seller" of option premium for many years. I have been profitable every year since 2003. The key is managing the losing trades, the winners will take care of themselves. Decide on how much you are willing to risk on your trade and no matter what do not deviate from your stop loss point. Of course, each trader's risk tolerance and account size is different so how much you are willing to risk per trade is up to you. If you are not sleeping well at night then you are risking too much.

I usually stay away from front month options. Yes yes, all the books say that options with 30 days or less until expiration has the best chances of time decay. While this is true, you would have to select strikes that are dangerously close to the money. Any rally or sell off will cause the premium to explode higher and you will probably be exiting for a large loss only to see the premium deflate in a day or two when the underlying goes back to normal levels.

I like to sell far out of the money strikes using farther months (60, 90, or even more days until expiration).

When I started selling options, I sold a lot of far out of the money, farther month ES ratio credit spreads. Sounds boring? Yes, usually they are very boring but profitable. Because of sky high margin requirements on ES these days, I have decided to trade something else to give me a better return on margin used.

I did very well recently writing August CL strangle. Back in early March when the media hyped the Iran threat and crude oil was trading at $110, I sold three August CL 140 calls for 1.21 ($3,630) and I also sold three August 80 puts for 1.11 ($3,330). My stop loss on this trade is if either premium doubles. The margin required for this trade was about $6,000 at the time. I exited this trade May 2 and booked a profit of $5,972.16. The premiums on both sides decayed so much that there was no reason to hold this trade until expiration.

In general these are the type of option writing opportunities I look for. I am fine with trading farther out months that offer higher time premiums. And I usually do not need to hold the position until expiration. A lot of times I can exit and book profits early.

Is this the "holy grail" of options trading? Absolutely not. I have suffered my share of losses trading this way especially when I do not follow my own stop loss parameters. But that is part of the learning experience.

Just my two cents worth. Hope this helps. And yes I will be there for the option sellers dinner or party or whatever you folks have planned.
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Very nicely done by playing on the "tells" so to speak. How much cushion do you give yourself in case margin doubles and forces you to liquidate when you know that holding might serve you better. OR the flash crash of May 2010 when because of the severity and suddenness of the drop you can't necessarily get out of your position but if you don't have sufficient cash you could be auto liquidated. How much reserve (per contract or %) do you try to keep in your trading account?
 
Quote from phil413:

Hey Lux

I appreciate you jumping into the thread I was hoping to find a fellow option seller. I have a Bull Put spread on AAPL currently the May 515 / 500 net credit of .44 tempted to buy back the 500's early in the week to get a little more juice it seems to be holding the 560 area nicely. I have sold some weeklies but not a lot of them I find you have to get to close to the action to get any desent premium. I have not looked at the FSLR for a long time what strikes are you looking at.

Thanks again for posting
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looking at bear call spreads, jun 18/20c, .43cr, (1.53max loss)
 
Which commodity option markets are electronic and available via ib? I have found cme are electronic, es, cl, gc, si, zw,zs,zc but ice/nybot markets are still on the floor? Is this still correct?
 
Quote from just21:

Which commodity option markets are electronic and available via ib? I have found cme are electronic, es, cl, gc, si, zw,zs,zc but ice/nybot markets are still on the floor? Is this still correct?
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No - all of them are available with a few exceptions.


But IB has started charging $75 a month for ICE quotes. ICE is trying to make this charge stick but other brokers have not started charging it yet.
 
Just21: NYBOt softs are electronic on IB in addition to floor.

Swag & RMorse: Bills fan here, Looks like we almost have the entire AFC East division covered. Wonder if anyone is silly enough to admit being a Puketriot fan?? :D
 
Quote from rmorse:

I'm a Met and Jet fan....It adds to my resolve.
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That would do it Robert lol, Met / Giant fan here was a Jet fan back in the 60's my dad was huge Giant fan and I got rebelious and jumped on the joe willy bandwagon for a few years long hair and women you know what I mean came back under dad's wing in the 70's
 
Quote from phil413:

That would do it Robert lol, Met / Giant fan here was a Jet fan back in the 60's my dad was huge Giant fan and I got rebelious and jumped on the joe willy bandwagon for a few years long hair and women you know what I mean came back under dad's wing in the 70's
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I'll stick with the Jets/mets, but i'm not a Yankees/giants hater. I root for all the local teams. To make my pain worse, I've been an Islander fan since the good old days.

With reguard to the thread, I'm a believer in only selling premium. If I want to get long, I sell OTM put spreads or do over writes on the calls vs stock. I've gotten short by buying puts, but never with an outlook of more than a few days.

I've known many premium buyers. They buy cheap OTM puts or calls and hit one home run. It's the worst thing that can happen. Then they throw away $0.25 options every month looking for another lottery ticket. The math doesn't work. It's also a lazy strategy. One great trader I knew told me to never buy these cheap options. I asked why. He told me the vast majority of the $0.10 to $0.25 options expire worthless. The few times they are a winner, your most likely going to sell out at a double and never see a home run unless there is an large move in your favor at the open. Does not make money over time.

bob
 
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