Showed up on my scanner before, but I didn't understand why. Love that it worked out, but couldn't have figured out why beforehand.
How legit is options selling?
- Thread starter nooby_mcnoob
- Start date
Dear trolls- stop trying to sell options. You are not an insurance company yet you are trying to sell insurance with the ignorance of a chimpanzee.You will get blown up. Please clear off and leave the market to traders
Can confirm
Sold CL strangles, condors etc for half of 2017 and most of 2018 not being overly leveraged, making about 1.000 USD return on 80k account. Then we all know what happened with CL at the end of the year and POOF. All profits lost in a month and then some.. I did not panic and doubled down on one "extreme" day so I recovered some of it, but it could have gone the other way too. Guess I was just lucky enough not to be overly leveraged and not to double down again. My margin was never over 30k on 80k account but still. What is even more "funny" is that I migrated from short monthly strangles to weeklies, thinking I can get more premium this way.. So I tried to earn about 250 USD per week (to get my 1.000 USD monthly target) and turned those 250 USD to 6.000 USD loss.. I was stubburn to take 500 USD loss thinking oh all those sell-off on CL eventually recovered. CL was at 75, I was thinkin it is not like CL will suddenly go to 60. Or 55.. And it did not... it went to 42....I made back a lot of that money selling puts on XOP in the past month when it ran up from 24 to 31, but I learned an important lesson. Markets are really irrational at time. And if anybody said CL can get down to 40 when it was 76 I think most people would just laugh. Prognoses was for CL to go to 80, 90 or 100.. And I can confirm everything JSOP says.. I was only looking at delta and some vega, but gamma is what kills you. And it get bigger and bigger and some 0.03 delta become 0.2, then 0.4, then ATM.. Yes you can have stop loss in place, but this just means that instead of having one big loss, you will have more smaller ones.. Taking the trade off sooner just means smaller but more frequent loss...
I still sell options, currently have bull put spread open on CL, but now I do it closer to the money like SLE and Destriero suggested in one thread if I am not mistaken. And it is a directional play. Instead of going long CL I sold some puts, bought some puts with lower strike and sold some with even lower strike. Now all that CL has to do is finish this year above 42 and I make money and if it finishes above 47 I make 12 % return which is my target. What changed is that before that I would just sell CL strangles without any view as to where oil is headed, I just sold 0.05 delta put and 0.05 delta call. I will not do that ever again. I will use option spreads but only on instruments where I have a directional bias. But I rather do it with options where I can be slightly wrong and still make decent money (as per my example from above, CL can finish 10 % lower than it is now, down to 48 and I still make my 12 % yearly return..
Thank you for posting your experience!
Actually, a lot of one-way flow like this is a good thing. We need liquidity anyway we can find it
You are welcome. And I hope you are not like me, I have read about other posting similar stories, but I am obviously the type of guys that has to learn by doing mistakes..
I can read a ton of stories about hedge funds blowing up etc and think huh, looser, cannot happen to me, only to be humbled a few months later.. As I review my first options on futures trades from 2017 and early 2018 I can tell you that I would be wiped out if this NG/CL thingy happened back then. I once sold 70 iron condors on CL with I think 60k account at that time. Talking about leverage hahaha. I did ok, but only because I sold NG at the high and it reversed and only because CL behaved at the time. I now know why they call NG a widow maker.. This shit if crazy volatile and so can be other commodities. 2-3 and SD moves happen almost weekly. Once time it is sugar, then next coffee or cocoa, then natural gas or crude oil, gold and silver sometimes have some crazy moves too.. Almost no volatility then BAM.. With stocks you have earnings surprises and other things to worry.. I think that the most "behaved" one is index options SPY, but even this shit gets crazy during the bear.. So yeah, choose wisely Actually, a lot of one-way flow like this is a good thing. We need liquidity anyway we can find it
There he goes again.
You are welcome. And I hope you are not like me, I have read about other posting similar stories, but I am obviously the type of guys that has to learn by doing mistakes..
I'm too paranoid to let any one trade tank my account, nor will I ever chase a trade. A friend of mine yesterday bought a weekly OTM call on TSLA (yes, expiring yesterday). I am nowhere close to that retarded.
Not saying that every option seller (retail or otherwise) is a loser or anything. It's the truth - less-sophisticated one-way flow like that is good for the sophisticated players, it creates opportunities that can be exploited. That sophistication can be in terms of time frames, cross-asset capabilities or ability to play more complex relative value games.
PS. As a more general note, in some markets this truth has been made pretty explicit. Why do you think market makers are willing to pay for the retail order flow?