probabilities of apple
collecting premium / cashing out
- Thread starter konviction
- Start date
I should clarify by saying that selling OTM (out-of-the-money) options is advantageous to buying OTM options, in my opinion.
This argument is based upon the thousands upon thousands of personal trades I've made on both buying and selling options, in addition to the thousands upon thousands of buy & sell trades I've seen others do.
In my opinion only, I just think it's too hard to make consistent option profits by buying OTM, near-term options as the trader is never correct enough on the direction, timing, and magnitude of the needed move of the stock.
I'd rather give up the long-shot, upside potential that OTM option buys can give and stick to the small singles and doubles that option selling can give.
Just my opinion, 2 cents, and what has worked for me over the years. Of course others will disagree, and many traders have created strategies that work for them, many of which include buying options. My book is all based on what I've found and seen to work for me.
This argument is based upon the thousands upon thousands of personal trades I've made on both buying and selling options, in addition to the thousands upon thousands of buy & sell trades I've seen others do.
In my opinion only, I just think it's too hard to make consistent option profits by buying OTM, near-term options as the trader is never correct enough on the direction, timing, and magnitude of the needed move of the stock.
I'd rather give up the long-shot, upside potential that OTM option buys can give and stick to the small singles and doubles that option selling can give.
Just my opinion, 2 cents, and what has worked for me over the years. Of course others will disagree, and many traders have created strategies that work for them, many of which include buying options. My book is all based on what I've found and seen to work for me.
Just my opinion for whatever it's worth.
You can't open this positions thinking "I wouldn't mind owning" because fact of the matter, is you probably do mind owning. The only way I feel you can be successful is with this is by thinking "I already happily own"
I feel the statement "I wouldn't mind owning" which is what almost EVERYONE that does covered calls or sell naked puts (same thing) says. They trick themselves into saying that and end up chasing premiums.
Just my 2 cents.."I already happily own"
Fair enough - but has it occurred to your experience is susceptible to survivorship bias? As in, had you blown out (like so many others) - you wouldn't have written a book. Because you didn't, you think it's a good strategy. But in expectation, it neither sucks nor is great?
Not that I disagree with the strategy. I also think it can be a profitable strategy.
Do you think the TOS probabilities are right?
Secondly, it's not delta that will kill you. It's gamma and a sell from 405 to 370 your delta won't be 90, it will be closer to 100.
And if Apple does sell off to 366, do you think that there will be a reason that will make you not want to own it? (Like iphones are proven to cause cancer).
Do this strategy with caution and extremely limited or no leverage.
From the questions you are asking, do shouldn't be doing this.
I'm trading sim so there is no risk and I'll only ever learn by doing and making my own mistakes.
Selling puts I'd think in many ways is like starting an insurance company. You bankroll it will your own millions, and a few years later a tornado rips though your town and puts you out of business. There is unlimited downside risk, but how often do you read about insurance companies going bankrupt?
Yiks... better be careful there: natural disasters, auto accidents, etc, are either stationary (a technical term) or at the very least very close to it. Stock prices are not.
Least we forget, AIG's thought process was similar to yours: why not sell insurance on the market? ... we know what happened there.
Least we forget, AIG's thought process was similar to yours: why not sell insurance on the market? ... we know what happened there.
no reason to sell puts naked... there is no "comfortable" price to own any stock. I think the past 11 years have taught us that (that is, taught the smart ones of "us"). I was around trading in 2000-2001. Any comfortable prices back then to own any stock? What about 2008-2009? Any quality stalwarts worth owning. Now, if you have a money tree in the back yard then you can hold until infinity and eventually earn a profit on the comfortable stocks you sold naked puts on!
what is the counter-argument to that assertion ?
If I can amass billions before going bankrupt, I could live happily ever after.
does the delta stay at 45 - LOL
(FYI it is now .488)
Uhhh... what about Gamma -- Or, what about imp. vola ?!! aw heck, that's not very important. On second thought don't even bother thinking about it.
The truth is: whether you win on this trade or not... sooner or later you will blow up. Particularly since you don't appear to have a clue.
But don't believe anyone else and remember this adage, someday: "the market is the best teacher."