How to trade volatility?
- Thread starter ssp729
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You say you are a newbie..well if your account has some resource try my method, see if it works for you.
This is what I do...again, & again & again...I make money very consistently selling naked Puts...watch & trade only what's trending up when the trend is up. We are in one hell of a bull market but like markets do up's & down's are included!
Example you might try: tomorrow...sell APPL 217.50 puts.. expiration date 28th..."near" the money but below trading price! Use volatility to your advantage when selling. Option prices with APPL & SPY move quickly up & down in-tra-day.. and don't have wide spreads..don't use a Market order!..limit orders work to your advantage trading options...you would be surprised how often you can get a fill to your advantage...by placing an waiting a few minutes. I do this by selling a few units throughout the week. I would suggest you never sell any more units than you can cover..with cash!!..that way what you are trading takes a turn south getting close to Friday and you want to let the shares be Put to you. Next week should be better. You can also use this method trading SPY...it has 3 expiration days each week..be careful..start small & see how it works for you. I have found it's a cash cow...Especially the more margin value your account has.
See an upload screenshot of one of my accounts..I include this just to prove I am not bullsh*ting you..Ooops forgot to add when selling Put options using margin you pay NO interest I keep my margin balance at zero 95% of the time...I am borrowing money from the option buyer at no charge
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Robert Morse
Sponsor
silver182,
ssp729 start with "Hello everyone. I am a newbie trader." I'm sorry, but no newbie (I hate that word) trader should be selling naked puts.
ssp729 start with "Hello everyone. I am a newbie trader." I'm sorry, but no newbie (I hate that word) trader should be selling naked puts.
Hello Robert..
I am a Contrarian..and a risk taker..my methods were built upon failures trying more conventional methods...don't get me wrong I don't always bank wining weeks..just most of them...are winners.
To prove that I'll show you some losers I've had to accept...same account this year....try sleeping in this kind of RED...something I've learned to live with..& recover from..
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You have to work your way into this style of trading..learn to live with Green weeks & Red ones....the biggest problem I've found trading options is Pre-& after market gaps..something you can't control or predict..
Remember always trade within your means...only use this method selling small numbers of contracts..something you can cover..
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Robert Morse
Sponsor
I did not say you should not sell naked puts. I said a trader new to the markets and options should not. There is nothing wrong with your process as long as you can handle the dips and know it is part of the strategy that you will take losses from time to time. I can't do it myself so I have invested in a hedge fund that sells OTM RUT puts. I know that about every 15 to 16 months they will have a day they lose 10%, but they still make more than 12%/year. A new trader does not understand the risk or have a process to limit losses.
Very good thoughts...Wow 12% a year is amazing..great system! I was giving my advise so as to led that person in what I believe is the correct direction...as you know 95% of traders lose money consistently... I will only give advice on what I know works..the truth & no bull..
OP why do you want to trade the VIX specifically? is it the get rich quick bug or do you have a vision and a strategy? I have traded options as a private investor since I was 22 (I am 52 now) with varying intensity and would not randomly enter a trade into something so ephemeral as the VIX.
Its an extremely interesting instrument but being a derivative of a derivative its not so easy to understand as a simple call or put option or spreads. I have traded in VIX or related products for a few years now but I started very basically using it to hedge my general portfolio at a moment the market made me nervous. This was a use of the VIX I understood and other trades - probably simplistic ones in the view of some of the hot shots on here - are all trades where I feel I know what I am getting into. This doesnt mean things work out as I hope/want in all cases but I wasnt out of the ball park - can you say the same for what you want to do with your 1000$?
Its an extremely interesting instrument but being a derivative of a derivative its not so easy to understand as a simple call or put option or spreads. I have traded in VIX or related products for a few years now but I started very basically using it to hedge my general portfolio at a moment the market made me nervous. This was a use of the VIX I understood and other trades - probably simplistic ones in the view of some of the hot shots on here - are all trades where I feel I know what I am getting into. This doesnt mean things work out as I hope/want in all cases but I wasnt out of the ball park - can you say the same for what you want to do with your 1000$?
selling puts in a bull market is not being a contrarian, selling calls in a bull market now that would be a contrarian. i know a guy who has been selling calls on the sp for over 20 years and just managing the risk by rolling and hedging with long futures.
the volume of calls sold reflected a percentage of the huge long stock(s) positions he had. i know this method works because i was there the day he bought a 16 million dollar jet. if you have the capital to back your play this is the way to make money pretty risk free.
the volume of calls sold reflected a percentage of the huge long stock(s) positions he had. i know this method works because i was there the day he bought a 16 million dollar jet. if you have the capital to back your play this is the way to make money pretty risk free.