New to Options

[hajimow]

Quote from SAA:

If you dont mind me asking, given your experience as a trader.

What caused those 10 losses to you?

Its a real pitty you had so many wins, yet those few losses wiped you out!

SAA

I have been in trading since 1995. Since 2003 I started to sell naked OTM Call and then sell OTM Put for the same stock to maximize my gain because the second trade did not need any more margin. I was successful and if I was assigned a stock, I would sell the stock in the market and sell OTM Call or PUT to keep the game going. I became cocky in my success and reduced OTM strike price to collect more premium and increased the number of contracts and still I was successful and then ....surprise came.
I was even so greedy that I was trading short straddle and I was successful on many instances.
I will still do shorting options but I will not do it in large number of contracts and I will do it in different stocks to reduce the risk.

 

[hajimow]

I had some occasions that a 5 cent naked Call or Put shot up to $2 just one day before expiration. So my suggestion would be to cover naked options that are at 5 cents.

 

[SAA]

Well it seems you are well in your way to success in the Wealth journey. Keep in mind it takes time! I know it well via another vehile Real estate.

I haven't started trading as yet, I'm still in the garage (so to speak) reading as many books as I can, so I go out to the street and put the bike to the test (with training wheels off course that is!)

Now that your mention selling naked calls and puts on stocks why not do it on Indexs instead? Is there a reason why you prefer stocks itself?

Isn't the risk greater on stocks itself with suprises that could spring up any given day? Earnings announcements/Stock analysists/Company Fraud by whoever in the Company, etc etc.

Appreciate all your comments everyone. I'm learning alot not only from the books but also from all of you!

Much appreciated.

Regards
SAA

 

[hajimow]

Quote from SAA:

Well it seems you are well in your way to success in the Wealth journey. Keep in mind it takes time! I know it well via another vehile Real estate.

I haven't started trading as yet, I'm still in the garage (so to speak) reading as many books as I can, so I go out to the street and put the bike to the test (with training wheels off course that is!)

Now that your mention selling naked calls and puts on stocks why not do it on Indexs instead? Is there a reason why you prefer stocks itself?

Isn't the risk greater on stocks itself with suprises that could spring up any given day? Earnings announcements/Stock analysists/Company Fraud by whoever in the Company, etc etc.

Appreciate all your comments everyone. I'm learning alot not only from the books but also from all of you!

Much appreciated.

Regards
SAA

Yes now that I look back, I would prefer Index over individual stocks. I used to sell naked options on about 10 stocks. Once I got huge money by shorting straddle on 27.5 on Xilinx. It just closed exactly at 27.5 and I got rich and also cocky.
Once I had 16 naked Puts on 27.5 on Xlinx and the stock dropped to 26.5 so I covered the option and shot it to the next month at lower strike price (25) and doubled the size (32 contracts) and next month it closed at 25.5 and I collected all the premiums.
My biggest advice would be at some points you feel so sure about a trade that you want even to sell your kidney and put on that trade. The profit is so clear and attractive that blinds you. Don't fall into that trap. Trade small. You can always find good trades later.