How legit is options selling?
- Thread starter nooby_mcnoob
- Start date
Does the ex colleague you are talking about trade options based on direction or other factors?
I can't imagine these places will have the detail you need.
This game has asymmetric payout so I expect in a bull market I should get a higher payout than buy and hold the underlying?
But on second thought, you are probably right, the market is efficient so will account for the bull run and I would be lucky to match buy and hold in the long run.
The 10 year average yearly return on the Vanguard S&P 500 index (ticker: VFINX) is 12.97% as of 12/31/18. It's closer to 8% for 15 years, which includes the market crash years of 2008 & 2009. It's a lot less work than trading and safer.
And the shit are the drawdowns. Even profitable systems have losing periods. One needs to do research, through backtesting, to have an idea of how often they occur, how deep they are and how long they last. You can also see if you can think of ways of reducing drawdowns, such as determining the conditions where it would be wise to temporarily stop trading. And the most difficult part of drawdowns is dealing with them mentally. You need the confidence that your system is going through a normal losing run and is not broken.
Can confirmSold 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..
OMG!!! You sold strangles on CL??!! You are so brave. Strangles is so dangerous that you lose one way or another literally. Strangles only work when the underlying is extremely stable with no volatility but then you won't get the premiums you will just end up donating money to the broker. There only very rarely that selling strangles work due to a drastic reduction of volatility. I've only sold 2 strangles in my life, both during earnings. One of them was on NVDA, at that time everybody was expecting major earnings beat with stellar guidance so IV was totally hyped up and I sold into the IV but it turns out it was just an average beat and the guidance was just ok and the stock didn't move much luckily for me. Come to think of it, it was quite scary. The stock could've gone just like the expectation and I would've been totally screwed. I never sold strangles ever again.
Been lurking on ET for months, this thread is the best I've seen the whole time, good enough to make me actually create an account here.
Something I'm curious about--with everyone talking about how commissions/assignment risks destroy potential profits on small trades, does no one feel like the commissions-free aspect of Robinhood makes such strategies more viable?
Case in point, I sell weekly covered calls and naked puts for pennies on high-vol, low mark underlyings in great quantity because I pay exactly zero dollars and zero cents for each transaction. This has worked out very well, mostly because getting assigned is the best possible outcome, and in the case of the the underlying crashing, I can just buy more of the underlying and sell more calls (i.e., GE from October-December) without getting nickel & dimed to death.
Yes, I know Robinhood trades against its own investors and sells orders to MMs and that's sleazy. My general thought, though, is that because of the platform (no commissions), a vast majority of the accounts on RH are owned and operated by true n00bz, and this is how RH butters its bread.
So, in the words of nooby, is this bullshit/am I missing something?
P.S. I almost never buy/sell spreads anymore. Too easy to get crushed by tail risk. Only exception is I'll buy the occasional >1SD Double Diagonal across earnings on a super-low IV equity if the prices look good and cash it out the moment the front-end expires (did this on NKE in November on December>>January options and it worked out).
Good to meet you all!
Something I'm curious about--with everyone talking about how commissions/assignment risks destroy potential profits on small trades, does no one feel like the commissions-free aspect of Robinhood makes such strategies more viable?
Case in point, I sell weekly covered calls and naked puts for pennies on high-vol, low mark underlyings in great quantity because I pay exactly zero dollars and zero cents for each transaction. This has worked out very well, mostly because getting assigned is the best possible outcome, and in the case of the the underlying crashing, I can just buy more of the underlying and sell more calls (i.e., GE from October-December) without getting nickel & dimed to death.
Yes, I know Robinhood trades against its own investors and sells orders to MMs and that's sleazy. My general thought, though, is that because of the platform (no commissions), a vast majority of the accounts on RH are owned and operated by true n00bz, and this is how RH butters its bread.
So, in the words of nooby, is this bullshit/am I missing something?
P.S. I almost never buy/sell spreads anymore. Too easy to get crushed by tail risk. Only exception is I'll buy the occasional >1SD Double Diagonal across earnings on a super-low IV equity if the prices look good and cash it out the moment the front-end expires (did this on NKE in November on December>>January options and it worked out).
Good to meet you all!
I'm confused..You sell naked puts for pennies in great quantity and feel getting assigned or having the stock crater is the best possible outcome??The reason being you can "buy more stock'or sell calls against your long position???
How exactly do you stay in business under these scenarios??
And wouldn't trading spreads from the short side somewhat mitigate tail risk??
How exactly do you stay in business under these scenarios??
And wouldn't trading spreads from the short side somewhat mitigate tail risk??
Commissions charged by broker and exchange should be low in comparison with the spread you are paying. For example, if the quote is 0.03 to 0.04, you just lost a huge amount of edge when you trade. You are assuming GE will not go bankrupt but there is no way that you can know it.