How legit is options selling?

Is option selling legit

  • Total voters
    19
  • Poll closed .
smallfil said:
That is the thing. If I were just outright buying puts and calls, I probably, will lose 4 times out of 7 and still end up profitable with the 3 winning trades. It is a poor use of capital to risk too much to earn a little. I would rather risk a fixed limited amount on a worst case scenario at that with the chance to make multiples of the amount in profit. Way better in terms of risk versus reward. With rewards for buying calls and puts way, way larger. Sometimes 5-10 times your risked capital. More often 2-4 times your capital.
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This is a legit point, and I agree with you that it may not be for you for that reason. May I assume that you are achieving your desired win % in your naked call/put purchases?
 
nooby_mcnoob said:
This is a legit point, and I agree with you that it may not be for you for that reason. May I assume that you are achieving your desired win % in your naked call/put purchases?
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It is not naked call and put purchases because it is backed with cash. Getting 40% winners and 60% losers is part of it over hundreds of trades. I am fine with that. As long as the losses are small, it should not even be an issue. Risk management and position size is built in the trade.
 
ironchef said:
IMHO, market, even the insurance market, often underestimates tail risks. Not all insurance companies are profitable, some did go belly up or lost a ton, look at those that insured MBS (e.g. The Big Short) or long term cares (e.g. GE).
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And that's when insurance companies can even refuse to pay up by retroactively re-examining your insurance coverage and pick bones with it or re-defining the terms. We the option sellers can't even do that. We can't go to OCC and refuse to get assigned by questioning the exercise eligibility of option buyers. Imagine all insurance companies must pay up according to exactly the policy terms like us option sellers...
 
smallfil said:
It is not naked call and put purchases because it is backed with cash. Getting 40% winners and 60% losers is part of it over hundreds of trades. I am fine with that. As long as the losses are small, it should not even be an issue. Risk management and position size is built in the trade.
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I don't understand why you're willing to try hundreds of trades here but not elsewhere though I'm happy that you're making money!
 
JSOP said:
And that's when insurance companies can even refuse to pay up by retroactively re-examining your insurance coverage and pick bones with it or re-defining the terms. We the option sellers can't even do that. We can't go to OCC and refuse to get assigned by questioning the exercise eligibility of option buyers. Imagine all insurance companies must pay up according to exactly the policy terms like us option sellers...
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Haha yes step 1 of a major claim is hiring a lawyer to make sure the insurance company doesn't pull and shenanigans. I had them try once.
 
smallfil said:
It is not naked call and put purchases because it is backed with cash. Getting 40% winners and 60% losers is part of it over hundreds of trades. I am fine with that. As long as the losses are small, it should not even be an issue. Risk management and position size is built in the trade.
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You have to take into consideration that your 7 trades could be very correlated. Could you tell me how to buy options? I usually tend to sell but that is just a bias that I have and what I'm used to executing. I don't buy because it is rare that I get a signal strong enough to justify buying. It only happened recently during Powell speech.
 
traider said:
You have to take into consideration that your 7 trades could be very correlated. Could you tell me how to buy options? I usually tend to sell but that is just a bias that I have and what I'm used to executing. I don't buy because it is rare that I get a signal strong enough to justify buying. It only happened recently during Powell speech.
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Not only that, but his 80% probability could be wrong especially if it's purely going off of market IV and not his own.
 
nooby_mcnoob said:
Not only that, but his 80% probability could be wrong especially if it's purely going off of market IV and not his own.
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I will summarize this entire thread by repeating the advice that was given to me years ago when I started a program of selling puts. A software vendor had put me in touch with an experienced floor trader in Chicago.

I carefully explained my plans, my studies, and my recent successes. I asked him why this wasn't a perfectly good program for generating income.

Because, he said...SHIT HAPPENS.
 
lindq said:
I will summarize this entire thread by repeating the advice that was given to me years ago when I started a program of selling puts. A software vendor had put me in touch with an experienced floor trader in Chicago.

I carefully explained my plans, my studies, and my recent successes. I asked him why this wasn't a perfectly good program for generating income.

Because, he said...SHIT HAPPENS.
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Haha, very good advice. What do you do now?
 
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