ATM options for premium decay

[drcha]

The equity indexes have two nice built-in features:

1. A long-term upward bias
2. Overpriced puts

Therefore, if you do income trades only when there is no major fiasco going on, you may be able to make a bit of income. You'll still have plenty of losers, so it's important to manage your money, do this with a small portion of your account, and avoid trading naked. To screen out major fiascoes, you can use some long-term moving averages. Here is a site that uses the 5-month and 12-month moving averages to exit equity markets (click on Hurricane Warning): http://retirementoptimizer.com/

 

[lawrence-lugar]

This concept of "doing the same thing every week" or as the many videos out there call it "income trading" is really fool's gold.
You simply cannot blindly do any of this stuff and expect to beat the market.

Trading is truly an art, And science -- each new trading day is a unique ratio of the two
Unless you're a bank or trading institution where you're proud/happy to play it safe for systematic measly peanut profits.

Art = rumors, market sentiment, noise, etc misc forces.
Science = if the market moves directly in proportion to economic reports, company information, natural or man-made disasters, political climate.

(this random list is made in no particular order of perceived importance)

 

[W.J. Feathermaker III]

Trading is truly an art, And science -- each new trading day is a unique ratio of the two
Unless you're a bank or trading institution where you're proud/happy to play it safe for systematic measly peanut profits.

Art = rumors, market sentiment, noise, etc misc forces.
Science = if the market moves directly in proportion to economic reports, company information, natural or man-made disasters, political climate.

(this random list is made in no particular order of perceived importance)

Yes, but you are making my point for me. Blindly following the same strategy without respect for the volatility (implied/actual), technical conditions, economic reports, etc, etc...is just not going to cut it. drcha makes some very good points though...the indicies DO have an upward bias (over a longer time horizon AND the market prices OTM puts at a premium), which I believe does attract more traders to indicies, as opposed to let's say crude oil or precious metals...which can trade far more cyclically between extreme high's and low's without the same level of "price support" during episodes of extreme downside selling.

 

[galvinlee888]

Thank you. How do I figure out what is low and what is high? I can look at Historical Volatility vs Actual Volatility?

Historical Vol data only serve as reference. No different as you look at any price chart in a stock and say the stock is in the high or low range, and believe or not, you are wrong most of the time.

To win in this game, you have to do better than this.

 

[Trading Education Buyer]

The equity indexes have two nice built-in features:

1. A long-term upward bias
2. Overpriced puts

Therefore, if you do income trades only when there is no major fiasco going on, you may be able to make a bit of income. You'll still have plenty of losers, so it's important to manage your money, do this with a small portion of your account, and avoid trading naked. To screen out major fiascoes, you can use some long-term moving averages. Here is a site that uses the 5-month and 12-month moving averages to exit equity markets (click on Hurricane Warning): http://retirementoptimizer.com/

Very intelligent observations

https://www.elitetrader.com/et/threads/edge-of-buying-the-stock-market-dip.304496/

Take for example february calls and puts ,800 points away , put is 72 and call is 22 ,
monthly open to close average is 400 points , monthly average premium is 400.
Those puts are damn expensive , within 30 days they will go to 22 on the put .

Think along these and you will get a nice strategy , and I regularly trade these on calendars.

 

[Trading Education Buyer]

You will not get any edge by long or short premium blindly. Market will even up in long term, your long premium strategies will loss money in low volatility period and gain in elevated volatility, short premium strategies will loss money in elevated volatility period and gain in low volatility period. When you ADD them all in long period, you are break even (market are quite efficient this day for long term prediction) but if you include the commission and slippage. You are SURE losing money. Again, broker and bucket are the winners in this regards.

All the new options traders went through this stage of learning curve, thinking by selling and long premium will give you edge and make you money.

PM me if you want to discuss more.

It is quite profitable to buy weekly straddles , except it is difficult going through the drawdowns .I am not looking for an edge trade , but a trade that makes points when there is no volatility on weeklies.Even a breakeven strategy would help or a overall small loss weekly/monthly strategy , would negate the the tough emotional period.

The stockmarket is upward biased , so I could use put butterflies (4 spreads) or put reverse calendar.Maybe I want to buy the instrument lower , so I will look at writing a put reverse calendar or butterfly with a 100 point risk of loss , on expiry lower.

DEFINITION of 'Reverse Calendar Spread'
An options or futures spread established by purchasing a position in a nearby month and selling a position in a more distant month. The two positions must be purchased in the same underlying market and must have the same strike price. The goal of a reverse calendar spread is to capitalize on major price fluctuations.

 

[Trading Education Buyer]

Dax German 30 weekly straddle 11400 to buy 176 to buy , price index value now 11394

11600 otm straddle prices 240

Any comments?Difference 64


https://www.thealertinvestor.com/santa-claus-rally-explaining-wall-streets-christmas-cheer/

 

[Trading Education Buyer]

Bought weekly 11450 call 61.3 for the santa rally in support of wall street crooks.

https://www.thealertinvestor.com/santa-claus-rally-explaining-wall-streets-christmas-cheer/

https://www.google.co.uk/webhp?sour...n=1&espv=2&ie=UTF-8#q=wall+street+santa+rally

What is a 'Santa Claus Rally'
A santa claus rally is a surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations for the Santa Claus Rally phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.

 

[ironchef]

The stock market is upward biased, so I could use put butterflies (4 spreads) or put reverse calendar.Maybe I want to buy the instrument lower, so I will look at writing a put reverse calendar or butterfly with a 100 point risk of loss, on expiry lower.

But my counter parties and the MMs are not dummies, they don't just hand me their hard earn $ willingly. Perhaps that is why there is a "risk premium" to take care of the upward bias? So I think in the grand scheme of things, galvinlee888 is quite correct.

I do like your logic and thinking.

Best wishes to you.

 

[ironchef]

Historical Vol data only serve as reference. No different as you look at any price chart in a stock and say the stock is in the high or low range, and believe or not, you are wrong most of the time.

To win in this game, you have to do better than this.

How can I be better?