Can you believe this?

[badlucktrades]

yeah youre absolutely right.

I guess im just banking on
1) its such a narrow range that the spy will move outside that area.
2) collecting premium over time will offset the 1.32 unrealized loss, which should happen im <10 weeks.

You'll receive a bit more for the put, but you can't structure a reversal (short put, long call) that will provide a risk-less return, or anything approaching it. There is no significant skew inside 40-deltas OTM, or there would be conversion arb potential.

 

[syswizard]

Since he hasn't lost on this trading strategy (yet), one would think this has great potential for other symbols as well.
What he is betting on here:
no news or political event that would move the market a lot.
For such a short period of time, I think it's a good one.

 

[destriero]

Since he hasn't lost on this trading strategy (yet), one would think this has great potential for other symbols as well.
What he is betting on here:
no news or political event that would move the market a lot.
For such a short period of time, I think it's a good one.

Selling naked for $30/contract on an stock index (SPY)? $300 in premium on $200,000 notional in SPX is a good idea?

 

[badlucktrades]

update - i carried out partial plan. sold a 195 put for 1.14. closed at 0.9.
closed short stock at 195.60
net 0.2.
so the loss is negligible.

imo the short call 195.50 shouldnt have been assigned because of the close of 195.45. had it not been, i wouldve been in the clear.

so between friday and today, I made profit. no loss. thats thanks to the market not rallying.

used the same strat since mid august. so its been about 100% win rate right now. hopefully i can keep this up.

dest is right about risk though. reward:risk isnt very appealing.

but for the future im going to try to do trades where I am not bordering the close within 5-10cents. the 195.50 was sold just before 4:00pm friday.

see attached if you dont believe me.

Selling naked for $30/contract on an stock index (SPY)? $300 in premium on $200,000 notional in SPX is a good idea?[/QUOTE

 

[destriero]

The hit rate (W/L%) is meaningless outside of the risk under say, two stddevs. Ronda Rousey beat Correia in 34 seconds, but who would want to take Rousey to win at -1500? The SPY bet is arguably far, far worse odds.

Hit-rate is only mentioned in hindsight. Sure, I'd take Rousey at -1500, but the fight is history. These strategies (nickels in front of steamrollers) only look good in hindsight.

What you're doing is essentially the same concept as the short iron condor. Sell the strangle and buy the strangle even further OTM. That is defined-risk, but also a horrible R/R

I don't think anyone should trade these. The premium is noise ($120/month). Don't trade short gamma if your strategy isn't profitable using (near)ATM options.

 

[badlucktrades]

So what do you think people should trade?

If something works, is it not best to use it until it no longer works? Provided you're not blowing your account up?

My strategy is to:
1) establish strangles by legging in based on whichever IV level it is at.

2) Do this strategy only on expiration days, near the end of the day, where there is little time for something big to come out.
*expect that receiving shares or being short shares is a big possibility.

3) plan for the scenario of having long/short stock.
i.e managing your position.

isn't this the foundation of what every option trader does?
1) pick a strategy that works for them
2) Pick a time frame for which their strategy generally has worked for them
3) plan for the worst case scenarios and some?

 

[destriero]

You want to be hand-fed. Nobody is going to hand you a profitable ruleset. The problem is that you cannot control a blowout with this strategy. Imagine someone approaching you with a "can't miss" strategy earning $300 a week, risking $900... You would think them nuts.

Hit rate is meaningless. It is absurd to talk about 100% wins unless it is arbitrage.

Imagine you had been assigned on puts yesterday and you wake up this morning with SPY $3.00 lower.... your thirty cent credit is now a two dollar debit. Seven weeks of these 0.30 credits are gone. What would you have done at the close with the futures up AH?

Do what you intend to do. You have no intention of listening to anyone here. At least post a farewell when you go debit.

 

[destriero]

So what do you think people should trade?

If something works, is it not best to use it until it no longer works? Provided you're not blowing your account up?

My strategy is to:
1) establish strangles by legging in based on whichever IV level it is at.

Stop there. You cannot derive a synthetic and you are now implying that you are earning from the edge in implieds on the strip (50D to 40D)?

"Something big to come out." What happens on Monday if you are assigned on calls(puts) and the market opens 3.00 higher(lower)? WTF do you do then?

 

[badlucktrades]

Why do you keep suggesting that I'm saying I have some sort of edge? you're reading too much into what I'm saying. My only belief is that, in 1 hour, at expiration, the likelihood of a really big event to happen, is unlikely and I hope that I don't get assigned. That is all. For this trade, selling the 195.50 call was just greed. Done last minute. Didn't have any other reason, than greed. That's what led to my short position.

For every trader, you assess the risk, and then make trades based off what your level of tolerance is. Isn't that right?

For some, they sell naked premium and try to capitalize on making lots of "pennies" for a higher probability of success. For others, they buy premium and have a lower probability of success. Others use spreads to cap their gains and losses. Who is to say who is right?

If you want to say some strategies are better (less risk) that's fine. I don't disagree with that.

To know whether your strategy is profitable, you'd have to execute it to find that out. So you'd never know unless you try.

No one is asking to be spoon fed. I'm telling you my strategy, with what I've done. If you want to add to it, by all means. If you want to say there are better ways, then usually its polite to offer suggestions or other ways.

At the end of the day, it doesn't matter what you do, as long as you win.

AND FTR. Monday, i was assigned. Nothing big came out. That's just my luck. my mitigating strategy was to sell a put and purchase a call to cap the loss. Ultimately a winning friday.

 

[destriero]

I am stating that if it had moved, equal to what we have moved everyday for weeks, you would have been up or down equal to seven weeks of PNL from this turd-strategy. It's nuts. Pleading your case on here is akin to arguing with the oncologist on the redox of cyclophosphamide.