any option sellers

Quote from cactiman:

Hi. You won't get any wiseass/sewer talk from me. Don't believe in it!
Anyway, after years of Buying/Shorting Stocks & Buying Calls & Puts (with only streaks of success at best), I came across some YouTube videos about Vertical Spreads.
I looked into it a bit further, and now all I do is sell Credit Spreads.
I don't care for short term Spreads much. Don't like risking $90 to make $10, and if it goes the wrong way early on there's no time to catch up.
I tend to go out 6-9 months and risk $65-$45 to make $35-$55 and let the Stock's Trend do the work.
At 45-30 days prior to Expiration (before the Rapid Time Decay really gets going) I make a decision whether to close for a loss, adjust the trade, or hang on till the end.
Trying to set up monthly income so I can retire in a few years. i.e. Option Selling Income + Social Security = Current Salary! We'll see how it goes.
Also, I especially like the concept of making money 24/7/365 off the other guy's Time Decay!
:cool:
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Nice idea if you can withstand the drawdowns. I personally think you can make 5-6% pretty easily in an options selling strategy. It allows you enough cushion to survive drawdowns without having to decrease your size (and making the clawback effectively twice as large).
 
Quote from newwurldmn:

Nice idea if you can withstand the drawdowns. I personally think you can make 5-6% pretty easily in an options selling strategy. It allows you enough cushion to survive drawdowns without having to decrease your size (and making the clawback effectively twice as large).
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So you'd Sell a SPY Jun 120/119 Put @.05 LMT, figuring there's no way SPY would go below 120 in a month.
Yeah, that makes sense. Good point.
The problem for me there is account size.
For instance, one of the AAPL Jan 13 555/550 Credit Spreads I opened yesterday cost me roughly $250 to make $250.
But if I'm not mistaken, to make $250 on the SPY Jun 120/119 I'd have to put up $4750!
Is there anyway around that?
:)
 
Quote from cactiman:

So you'd Sell a SPY Jun 120/119 Put @.05 LMT, figuring there's no way SPY would go below 120 in a month.
Yeah, that makes sense. Good point.
The problem for me there is account size.
For instance, one of the AAPL Jan 13 555/550 Credit Spreads I opened yesterday cost me roughly $250 to make $250.
But if I'm not mistaken, to make $250 on the SPY Jun 120/119 I'd have to put up $4750!
Is there anyway around that?
:)
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I meant 5-6%/year.

If I had 130,000 in cash. I would sell 10 puts on the spy every month that's 50bps in premium: so the june 123 put. I haven't done any test on this strategy. But it seems to me that historically a short vol strategy is worth 5% return with managable risk. If you do credit spreads and lever up, it's true your loss is limited but the volatility of your pnl is too large (because you are levering on the volatility of the underlying). Here you are aren't levering on that. Additionally you could sell 5 puts for 1% premium a month and then you have delevered your position more.

If you don't have the capital to do this, then you probably can't do your strategy consistently because you will have a drawdown at somepoint. No vol seller gets away clean and the only way to survive is to have fewer chips on the table so you have more chips for the next hand.
 
Quote from newwurldmn:

I meant 5-6%/year.

If I had 130,000 in cash. I would sell 10 puts on the spy every month that's 50bps in premium: so the june 123 put. I haven't done any test on this strategy. But it seems to me that historically a short vol strategy is worth 5% return with managable risk. If you do credit spreads and lever up, it's true your loss is limited but the volatility of your pnl is too large (because you are levering on the volatility of the underlying). Here you are aren't levering on that. Additionally you could sell 5 puts for 1% premium a month and then you have delevered your position more.

If you don't have the capital to do this, then you probably can't do your strategy consistently because you will have a drawdown at somepoint. No vol seller gets away clean and the only way to survive is to have fewer chips on the table so you have more chips for the next hand.
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Why only puts. Why not sell a similar OTM calls in SPY too.
 
Quote from newwurldmn:

I meant 5-6%/year.

If I had 130,000 in cash. I would sell 10 puts on the spy every month that's 50bps in premium: so the june 123 put. I haven't done any test on this strategy. But it seems to me that historically a short vol strategy is worth 5% return with managable risk. If you do credit spreads and lever up, it's true your loss is limited but the volatility of your pnl is too large (because you are levering on the volatility of the underlying). Here you are aren't levering on that. Additionally you could sell 5 puts for 1% premium a month and then you have delevered your position more.

If you don't have the capital to do this, then you probably can't do your strategy consistently because you will have a drawdown at somepoint. No vol seller gets away clean and the only way to survive is to have fewer chips on the table so you have more chips for the next hand.
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Sorry, I don't understand some of your terminology and abreviations. Just a Retail Trader!
Will need to ask some (possibly stupid) questions, if you can stand it!
Here's the first 3. Whenever you have time....

1. 50bps means 50 basis points to me, but I don't see that number by the June 123 Put. (?)
2. Short Vol. Strategy?
3. Levering on the Volatility of the Underlying? I figure a 1:1 bet on AAPL going down a little to 555 or higher than 555 over the next 8 months is pretty safe. Plus, I can get out early for most of the profit if it goes to 700, or out with only a partial loss in December if it's at 400.
:confused:
 
Just saw your 5/6% per year note.
So you're talking .5% per month?
Not simpler just to get a Dividend Stock in a long term uptrend?

I need to make much more than that. We'll see if I can do it.
If I can't, I'll just be working until I drop.
It's Do or Die time for me....
:D
 
Quote from cactiman:

Sorry, I don't understand some of your terminology and abreviations. Just a Retail Trader!
Will need to ask some (possibly stupid) questions, if you can stand it!
Here's the first 3. Whenever you have time....

1. 50bps means 50 basis points to me, but I don't see that number by the June 123 Put. (?)
2. Short Vol. Strategy?
3. Levering on the Volatility of the Underlying? I figure a 1:1 bet on AAPL going down a little to 555 or higher than 555 over the next 8 months is pretty safe. Plus, I can get out early for most of the profit if it goes to 700, or out with only a partial loss in December if it's at 400.
:confused:
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1. Yup. 50 basis points (as a percentage of the spot price). So approximately 65 cents on the SPY.
2. Short volatility (loosely, selling options) credit spreads, buywrites, etc. If you are profiting from theta decay, you are generally selling volatlity
3. Say you have $130,000 and you are selling credit spreads in the SPY. The SPY moves about 1% /day. You should look at your pnl volatility compared to the volatility in the underlying. If you put 100% of your money on a credit spread then if the underlying moves 5% over a week, which is 2 standard deviation event, you might be down 30 or 40% in your account. That magnification of returns is what i mean by levering on the volatility of the underlying. It's about your percentage returns vs the underlying percentage move. If you are selling for premium this ratio must be as low as possible.
 
Quote from cactiman:

Just saw your 5/6% per year note.
So you're talking .5% per month?
Not simpler just to get a Dividend Stock in a long term uptrend?

I need to make much more than that. We'll see if I can do it.
If I can't, I'll just be working until I drop.
It's Do or Die time for me....
:D
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Yeah. You might be right about the dividend stock. But if you need money to live, then you need a high margin of safety. If you are trading with excess capital, then it's not as big of a deal.
 
I thank you for starting this thread.

I am new to options... started in March. Expected to start by purchasing high dividend stocks and selling Covered Calls...
Well, I quickly learned about Naked Puts, so I started selling on the stocks I considered buying... seemed much easier then purchasing the stocks and if I got unlucky and got one exercised, I would switch to Cover Calls on that one... been working Ok.

Found a Screener at CallPix and liked it....

Now I have found Credit Spreads and I think this is where I will settle for awhile... IWM, NDX & RUT

Still selling Puts on FAS (weeklys), but I had a couple contracts exercised on me last week... Even the Coverd calls on these are good.

Thanks
 
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