Quote from Put_Master:
One should assume there will always be breaks between trades.
But the shorter the trades, and thus the more frequent the breaks between trades, the more trading day gaps will result.
And the more gaps there are, the less accurate the "blend" of your annualized returns will turn out to be at year end.
If you are earning 20% with each trade, and each trade only last 2 weeks, and there are 7 days gap between those 20% return trades,.... don't expect to have earned 20% on your account value at year end,.... even though you earned 20% on each trade.
On the other hand of your trades last 2 months, with the same 20% return per trade, with the same 7 day gap between trades, you will earn extremely close to 20% at year end.
Do a one year LEAPS that earns 20% and you will have earned 20% on your account cash at year end.
And of course, being on margin, which I am, also helps to fill in those trading day gaps.
Hence the reason i earned over 22% last year, even though most of my trades paid 13 - 19%.
I'm shocked that you don't annualize or have some kind of "benchmark" you use to evaluate the R/R of your trades.
Everyone should have some kind of "standard minimum benchmark", to evaluate whether the trade risk is worth the potential reward.
There are plenty of trades I pass up, because they pay below my minimum benchmark of 12%.
(When the VIX rises, I'll then raise my minimum benchmark).
I think you are just putting us on.Quote from newwurldmn:
risk, reward, and correlation to the rest of the book is all I care about.
I don't look at selling puts as generating income. I look at it as selling risk. So the yield isn't important. If I get a high enough price to justify selling that risk then that's enough.
Quote from Put_Master:
I think you are just putting us on.
There are only 3 reasons to sell puts.
Either to generate income, or as a method to buy a stock long at a specific desired price.
Or a combination of the two.
Hence, given your 4th reason,.... you are clearly just having fun with the board.
Not true. He is using short puts as a way to offset other risks in his book. Imagine that you are long volatility/short carry or even simply short the market in other ways, selling puts might be a prudent way to reduce the risk of the overall position.Quote from Put_Master:
I think you are just putting us on.
There are only 3 reasons to sell puts.
Either to generate income, or as a method to buy a stock long at a specific desired price.
Or a combination of the two.
Hence, given your 4th reason,.... you are clearly just having fun with the board.
But isn't he reducing risk by generating income?Quote from sle:
Not true. He is using short puts as a way to offset other risks in his book. Imagine that you are long volatility/short carry or even simply short the market in other ways, selling puts might be a prudent way to reduce the risk of the overall position.
Aren't you saying it's used to generate income?Quote from atticus:
You don't think puts (index, single-name) are shorted all the time as a directional vol-bet? If you're right on both you can earn more than the outright.
Quote from ferrycorsten:
Sorry PM, you lost me on step two. I never actually gave a strike, just said the underlying was at 50. Do you use the strike of the put, or the underlying price for the calculation?
cd, i take it you are not a fan of naked puts?