Option selling for premium

One of the learned IMO members here posted a strategy a while back for selling SPX options. He/she would only do it weeklys on Friday, expiring next week. So 7 day hold.

He/she would look for the furthest out option that was bid .05 or.10 and hit the bid. Some of those option were waaaaaaay out. I don't think they would ever get hit.
Why was somebody buying them? A compliance issue of sorts required them to have some crazy far out protection.

I never backtested it but whenever I did look at it, it seemed like the closest thing I've seen to free money.
 
DTB2 said:
One of the learned IMO members here posted a strategy a while back for selling SPX options. He/she would only do it weeklys on Friday, expiring next week. So 7 day hold.

He/she would look for the furthest out option that was bid .05 or.10 and hit the bid. Some of those option were waaaaaaay out. I don't think they would ever get hit.
Why was somebody buying them? A compliance issue of sorts required them to have some crazy far out protection.

I never backtested it but whenever I did look at it, it seemed like the closest thing I've seen to free money.
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Free money? You mean like this one?

upload_2018-3-4_22-38-21.png


Or maybe this one?

upload_2018-3-4_22-39-45.png


Sure, it is free money 80-90% of the time. Till it isn't. And when it isn't, it erases all the previous gains and then some.

 
I have no idea how your post relates to what I posted.

1. You are selling mostly calls in a huge bull market, what did you think might happen.
2. You are selling the much closer to the money that what I referenced.
3. I referenced it was only Friday entry, you're all over the board.
4. I referenced mandated protection, i.e. they need to buy PUTS, how does a call protect a portfolio?

I'll try to find the original post to make it clearer.
 
Sweet Bobby said:
The options chain gives you the probabilities. If I sell a 10 delta strangle, I have in excess of a 90% probability of profit. If I manage my winner at 50% of the maximum profit, I give myself around 98% probability of making a profit. Now, that 2% can be a big loser. So far this year, my trades are 94.4% profitable.

As to size, make sure when you trade that no one trade is in excess of 2% of your net liq. As for the portfolio, I never use more than 50% of my buying power and I usually try to keep it around 35%. All these people that you hear about blowing lout their accounts are using much more of their capital in these naked trades. I like having around 65% of my portfolio in cash on the sideline.
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man, this reads very interestingly.

¿do you do this for individual stocks? ¿for etf's like spy? ¿would this work on options on futures as well?

also, most brokers for retail traders seriously limit or don't allow their clients to sell options naked. ¿which brokers do allow this that you would recommend?

¿where could i find further references to learn this style you trade? ¿are there any recommendable materials?
 
DTB2 said:
I have no idea how your post relates to what I posted.

1. You are selling mostly calls in a huge bull market, what did you think might happen.
2. You are selling the much closer to the money that what I referenced.
3. I referenced it was only Friday entry, you're all over the board.
4. I referenced mandated protection, i.e. they need to buy PUTS, how does a call protect a portfolio?

I'll try to find the original post to make it clearer.
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It is not me. Those screenshots are taken from two trading services (there are more, those are just two examples). They sell both puts and calls. They sell weekly options expiring in a week or less.

Sure, you can sell puts only. Until February 2018 comes and wipes you out.

The details are not very important. It's the general idea of selling cheap options with short expiration. Everyone would claim that they do it differently, but the idea is the same. just google trading services like Spread the trend, Avant Options, Bullogic, Booking Alpha. All of them implemented similar strategies. All of them went out of business after blowing their clients accounts.
 
1 week in Feb 2018 dropped 110 SPX points Fri-Fri, next week dropped 230 points. How does that relate to what I and the original poster are saying.

HE/SHE WAS 900 POINTS BELOW THE MARKET.
 
DTB2 said:
Here you go post # 148. He/she talks of selling puts 900 points below market SPX with 1 week to expiry. Think that's similar to what you posted?

https://www.elitetrader.com/et/threads/selling-delta-3-5-es-puts-with-40-57-days-left.300053/page-15
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Okay. I get it. He is talking about selling naked puts for 0.10 credit on SPX. Each naked put will require around 15k of margin. That's a whopping 0.07% return on margin. And if you get a 100-150 points decline, you are almost guaranteed to get a margin call.

You are right. It is not similar to what I posted. It is much much more stupid.
 
Kim Klaiman said:
It's not after expiration date. Feb4 refers to Feb week4 options.

But you missed the point. They are making 4-6% most of the weeks, but at least 2-3 times every year they have a catastrophic loss of 60-80%.
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Presumably that is because they are selling uncovered puts? could also share stock short to avoid those huge losses correct?
 
Kim Klaiman said:
naked

whopping 0.07%
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You guys should just hone your ability to predict/trade/manage the future...instead of doing these weird, complex option strategies that at-best, only, seem to break-even o_O, :banghead:

Sure, it's much more difficult/risky just doing simple basic option buys on directional calls/puts...but also potentially much more rewarding.

2018 ET, be bright Kim Klaiman...and make a bundle of money.
That's what the market is...all it is is just balls, and being right.

Strategize and trade like a Ferrari 458 Speciale, not a 1991 Toyota Camry.
You can be a gorilla in the marketplace, or a sloth. -- Your fate and destiny is of your own choosing.
All the best, Kim Klaiman,...Genius.
 
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