ES Journal Archive (2006 - 2008)

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Quote from Buy1Sell2:

Well, if I am long, then selling call premium is necessarily considered a hedge. Yes, I do sell naked premium in that every call in excess of the total number of longs is a naked call. Also, at the time when I sell my longs and go short, then all calls become naked. Yes, naked calls have a higher return when used properly.
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ah ok, so you don't have a strict strategy

do you hold the calls until expiration?

how many times a year on average are they in the money on expiration day?

sorry if i ask too much. Have always been trading long calls/ puts
Never put much thought into call writing. Find it interesting now though

What if the call gets exercised, and you're long the underlaying position, but still bullish. when do you buy the underlaying back?

or do you never hold em that long?

thanks,

Chuck
 
Quote from Chuck Krug:

ah ok, so you don't have a strict strategy

do you hold the calls until expiration?

how many times a year on average are they in the money on expiration day?

sorry if i ask too much. Have always been trading long calls/ puts
Never put much thought into call writing. Find it interesting now though

What if the call gets exercised, and you're long the underlaying position, but still bullish. when do you buy the underlaying back?

or do you never hold em that long?

thanks,

Chuck
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I generally hold them until 75 percent of the premium is gone. I would say that about 10 percent end up in the money ,but it's always when I have a long position, so the automatic exercise just offsets my profitable long position. I have never had a naked call go against my position more than the profit that I have had on my underlying. For example, let's say that I am long at 1300 and when price rises to 1350, I start scaling in the sale of 1400 calls. The price would have to go to 1500 before the loss on the one naked 1400 would get me to breakeven point. This has never happened to me. Why? Because I start the scaling in sale of calls after the market has already made a run. In this manner, I am able to get a better premium for the calls and also the market is less likely to continue up on and on. The key is to not sell calls at the bottom. There were folks who were trying this strategy when the market was 1240 and they were selling 1250's-- not a real good strategy.:)

Note:I am usually not still bullish by the time calls creep into the money.
 
Quote from Chuck Krug:

. Have always been trading long calls/ puts
Never put much thought into call writing. Find it interesting now though
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Trading long options, unless part of a net credit spread, or as a profit protecting stop, is a losing game in the long term.
 
why?

Quote from Buy1Sell2:

Trading long options, unless part of a net credit spread, or as a profit protecting stop, is a losing game in the long term.
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Quote from m4a1:

why?
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There are three ways to win with a short option as opposed to one way to win with a long option. Take a short call--let's say a 1300 ES Call. If the market moves down, you win, if the market does nothing, you win, if the market moves up , you will still win as long as the market doesn't move enough where your collected premium is negated. If you went long on that 1300 call, you only have one way to win and that's if the market moves in your favor. The allure of the long option is that it has limited downside potential. Unless you are way overextended, that allure is not very attractive as part of the speculator's approach. Time decay will kill you. Of course, if your buying insurance such as a farmer wanting to lock in his corn price, or a person hedging their stock portfolio. then that's different. But as a tool for a speculator to make consistent big gains--no way.
 
isn't there a tradeoff though? you are winning more frequently, but your gain on each win is less.

seems to me that there is a tradeoff between win% and gain/loss. how have you determined that one way is better than the other?

Edit: hmm...wait a sec. unless at the time that you short the call, your strategy says that the payoff will most likely end up near your entry price and there are rarely any outliers.

Quote from Buy1Sell2:

There are three ways to win with a short option as opposed to one way to win with a long option. Take a short call--let's say a 1300 ES Call. If the market moves down, you win, if the market does nothing, you win, if the market moves up , you will still win as long as the market doesn't move enough where your collected premium is negated. If you went long on that 1300 call, you only have one way to win and that's if the market moves in your favor. The allure of the long option is that it has limited downside potential. Unless you are way overextended, that allure is not very attractive as part of the speculator's approach. Time decay will kill you. Of course, if your buying insurance such as a farmer wanting to lock in his corn price, or a person hedging their stock portfolio. then that's different. But as a tool for a speculator to make consistent big gains--no way.
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yes

Quote from LondonUSTrader:

Actually, I would say the answer is based on your own trade research. You should know from extensive research what your drawdown stats are on any strategy and thus where the stop loss should be.

But, I know the point you are trying to make. Don't jump down someone's throat so quickly when they are only asking a question? Right or right?

Point taken. :)
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Quote from m4a1:

isn't there a tradeoff though? you are winning more frequently, but your gain on each win is less.

seems to me that there is a tradeoff between win% and gain/loss. how have you determined that one way is better than the other?
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The tradeoff is negated by the extreme high winning percentage of using the upper ends of a market to do the selling--Coupled with another factor-- The consistency of wins in the selling side, instill a stable mindset. The continued attempts at finding the big winner on the long option side foster feelings of desperation and that "I need to hit it big now" --and so the trader takes unneccessary risks, increasing positions etc.. This is generally in order to show some profit to the wife or family so that they will get off the trader's back. It sounds silly, but this is the way traders, especially newbies think.

As regards the question of how I determined that one way is better? --Many years of experience and I'm not kidding. :)
 
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