consistent income

[darwin666]

Quote from Profitaker:

If you are selling Puts your monthly P/L maybe something like this +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k -$55k.

If you are buying Puts your monthly P/L maybe something like this -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k +$ 55k.

In the example both strategies sum to zero and my point is that consistent or sporadic matters not. Selling Puts is like going up an escalator and down the shoot, opposite for buying them.

Yup, I have to agree that this is exactly what I encountered doing in the last 10 months... I tried 10 naked puts.. and some times 10 naked calls..

each one. ONE of them would WIPE out the profits from the remaning 9.. I dont know how.. but methodically, one would come back to BITE me real hard.

I tried to convince myself for example, if I am assigned the stock, I am fine as I will hold it till it appreciates. back.
. my last victim, was BAC June expiry... it was 34 range, I sold 30. thinking it will hold.. got measly 40 cents.. got assigned the stock and now am down 1800 on the 3 contracts. I had. ie. 300 shares.


U may get lucky. for some time. but in the long RUN, IT is a ZERO SUM game. your same strategy which works for you, will work against you.

 

[dmo]

Quote from Profitaker:

If you are selling Puts your monthly P/L maybe something like this +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k -$55k.

If you are buying Puts your monthly P/L maybe something like this -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k +$ 55k.

In the example both strategies sum to zero and my point is that consistent or sporadic matters not. Selling Puts is like going up an escalator and down the shoot, opposite for buying them.

Well said - that's pretty much the short-premium and long-premium games in a nutshell. Not that it's impossible to improve those odds, but it requires that you find an edge somewhere. It's not easy. Don't believe you can just routinely buy premium or sell premium over time and make money.

 

[dmo]

To add to my previous post - I used to trade next to a guy named Darrell who had a backer, and their deal was that every month they would split the profits of his trading. But if there was a loss Darrell would not participate, and wouldn't have to give money back. So he just sold gobs of premium. He would make money every month until something happened and he gave it all back - but only the backer took the hit. After he blew out he would incredibly find another gullible backer, and the cycle would begin anew.

This was in the eighties. So I guess Darrell figured this game out some 15 years before the bigshots at the investment banks did. This time you and me are the backers and we're all paying, but the execs aren't giving back any of what they took home over the past 4 years.

Darrell went on the perpetrate the biggest Brazil Trade scam in the history of the CBOT. Those of you who were around there in 1992 or 1993 remember I'm sure.

 

[mark trader]

Quote from Profitaker:

If you are selling Puts your monthly P/L maybe something like this +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k +$5k +$ 5k -$55k.

If you are buying Puts your monthly P/L maybe something like this -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k - $5k -$ 5k +$ 55k.

In the example both strategies sum to zero and my point is that consistent or sporadic matters not. Selling Puts is like going up an escalator and down the shoot, opposite for buying them.

I don't understand your point, are you saying don't trade at all, since selling nor buying will make any money in the end?

 

[IV_Trader]

Quote from mark trader:

I don't understand your point, are you saying don't trade at all, since selling nor buying will make any money in the end?

He is saying ( I think) that you (or anyone that uses “consistent income”) shouldn’t trade

 

[darwin666]

Quote from mark trader:

I don't understand your point, are you saying don't trade at all, since selling nor buying will make any money in the end?

Yes. if we know that we dont win in the CASINO , why do we keep returning.. HA HA to satisfy some primal instinct.

same way here, we all have our reasons. to return, may be its the thrill of pure speculation.

My reason to keep on trading Puts and calls is pure gambling. I research or trade on news, bet on some hunch/pattern, opinion..

thats is all there is to it for me.
I used to visit VEGAS twice a year, but now I get my high, 12 times a year.. ha ha. each third friday of the month @4pm.

Bottom line is : NO ONE REALLY HAS AN EDGE to do it CONSISTENTLY.

 

[exQQQQseme]

Here's my take on it:

1. Take the $50,000 and purchase a good mutual bond fund. Look for good management and a good track record. You may, or may not, wish to do the dividend reinvestment election.

2. Sell covered Puts. That is short stocks and sell Puts against them. I look for non-dividend paying stocks generally in the $50 to $100 range (if I don’t like certain fundamental features, I’ll go higher). The sold puts will be in the first month beyond the current month, and the strike price will be At The Money. When the stocks move either $5 or $10 in either direction, I’ll consider rolling the Puts back to The Money, and if time has elapsed where the option is now at the current month, I will also consider moving out in time again.

3. With the profits from #2 above, I look to write covered calls. Here I look for stocks in the $10 to $20 range, and once again write ATM Calls two months out.

There is much more I could say on this. However, for the time being, I’ll stop here.

 

[atticus]

Quote from exQQQQseme:

Here's my take on it:

1. Take the $50,000 and purchase a good mutual bond fund. Look for good management and a good track record. You may, or may not, wish to do the dividend reinvestment election.

2. Sell covered Puts. That is short stocks and sell Puts against them. I look for non-dividend paying stocks generally in the $50 to $100 range (if I don’t like certain fundamental features, I’ll go higher). The sold puts will be in the first month beyond the current month, and the strike price will be At The Money. When the stocks move either $5 or $10 in either direction, I’ll consider rolling the Puts back to The Money, and if time has elapsed where the option is now at the current month, I will also consider moving out in time again.

3. With the profits from #2 above, I look to write covered calls. Here I look for stocks in the $10 to $20 range, and once again write ATM Calls two months out.

There is much more I could say on this. However, for the time being, I’ll stop here.

Do you trade #2 and #3 positions concurrently?

 

[Nanook]

Quote from atticus:

Do you trade #2 and #3 positions concurrently?

More info found here: Bo
"My favorite strategy is to do a covered put write on a stock in the $50 to $100 range. I short the stock and write an ATM put two months out. Generally, I roll the put to the money when the stock moves to a strike price $5 to $10 away.

So, how does one combine doing covered call and covered writes at the same time? The way I do it is to some of my profits from covered put writing and purchase a stock under $20, and write a second month ATM call against it."

 

[Profitaker]

Quote from mark trader:

I don't understand your point, are you saying don't trade at all, since selling nor buying will make any money in the end?

Hi Mark. First of all my post was in response to your original Q below:-

Quote from mark trader:

Would anyone mind sharing what has been the most profitable and consistent strategy to generate monthly income? and what level of monthly income can I expect using $50K?

The words that caught my attention here were profitable / consistent / monthly income. Words (for the uninitiated) that are normally associated with selling Puts. My point… by way of example…is that what at first appears to be consistent monthly income, may not, in the long run, turn out to be so profitable after all.

Don’t be fooled by consistency, or for that matter, the degree of random chance in everybody’s trading results. Good luck.