Best covered option strategies for premium decay

Trading Education Buyer

Trading Education Buyer

Can any option guru suggest the best timing to sell options on indices , the best risk reward strategies and the best hedging to cover risk?

Some suggested monthly strangles with 1 month to expiry , but risk is high in extreme volatility breakouts .Premiums received are low and risk is high.10 premiums received = 1 loss

Another suggested calendar spreads example short monthly straddle is 400 but 2 month straddle is 600 , risk 200 .Monthly option is priced fairly , but 450 is average open to expiry

How about a combination of synthetic trades including futures , short positions , calendar spreads and short options?Any clues?
 
Shorter term index strangles will give you the best R/R, in my opinion. Check out tastytrade they've done a lot of studies on this. but at the same time you are being compensated for the risk. The gamma is really high towards the end of an options life so things can turn bad quickly.
 
Kurt_From_RVA said:
Shorter term index strangles will give you the best R/R, in my opinion. Check out tastytrade they've done a lot of studies on this. but at the same time you are being compensated for the risk. The gamma is really high towards the end of an options life so things can turn bad quickly.
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Thank you

I saw their site , but I felt their strategies could lead to severe drawdowns , in extreme periods .I don't disgree with your/their advice on strangles .

I am looking at bearish butterflies /bullish butterflies (distant two months calls /puts short with at the money calls puts one month to expiry) , This offers covered /low risk selling and maybe consistent returns.
 

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Yes their strategies can lead to severe drawdowns, but also outsized returns when the market allows, because of margin. I think you are on the right track though if small and consistent returns are what you're after. Consider all high probability, defined risk, low reward structured setups. Definitely keep an eye on volitility too! Even though you can always make the trade a lot of times volatility is so low it's not advantageous for you to do so. And check out iron condors with short strikes 1 standard deviation out (delta ~.17) they make a great income trade.
 
Kurt_From_RVA said:
Yes their strategies can lead to severe drawdowns, but also outsized returns when the market allows, because of margin. I think you are on the right track though if small and consistent returns are what you're after. Consider all high probability, defined risk, low reward structured setups. Definitely keep an eye on volitility too! Even though you can always make the trade a lot of times volatility is so low it's not advantageous for you to do so. And check out iron condors with short strikes 1 standard deviation out (delta ~.17) they make a great income trade.
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Condors are un profitable

I don't follow greeks , just risk reward
 
Kurt_From_RVA said:
And check out iron condors with short strikes 1 standard deviation out (delta ~.17) they make a great income trade.
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sorry about last response , using same month for all is bit risky

There is an advantage on using different months , premium decay on 2 months 100 points

This short condor is quite good , if using different months upper and lower .Here I am using october , 1 month upper and lower and 2 month middle

Thank you for your time
condors.jpg
 

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