Option selling for premium

DTB2 said:
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.
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Right.. To be 900 points below the market, he wouldn't get more than nickel for those options. That's before commissions and fees. So you get less than $4 net credit and tie 15k in margin.

But you are right, it's as close as it gets to free money. A free $4 in one week on 15k margin. A whopping 1.4% annualized return (assuming all options expire worthless and you don't get a margin call).

Absolutely genius.
 
Kim Klaiman said:
Naked put selling is not the holy grail. No strategy is. But it has been proven over years that it provides better risk adjusted returns than buying the stock. This is true for indexes, and some stocks, but of course there ar exceptions.

The reason why most retail investors lose money has nothing to do with strategies they use. It is related 90% to human psychology and emotions.

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Retailers - cover your risk and sleep better at night. It does wonders for the emotions and psychology :)
 
rtw said:
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?
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Yes this works on options for stocks and ETFs. Check out thinkorswim or tastyworks.

As for education check out tastytrade. It’s free and they present quality information.
 
Kim Klaiman said:
Right.. To be 900 points below the market, he wouldn't get more than nickel for those options. That's before commissions and fees. So you get less than $4 net credit and tie 15k in margin.

But you are right, it's as close as it gets to free money. A free $4 in one week on 15k margin. A whopping 1.4% annualized return (assuming all options expire worthless and you don't get a margin call).

Absolutely genius.
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I suggest you lose some of your arrogance. In that specific topic, some regulators, including the ECB, require banks to protect themselves against ~35% down in equities.

I know some banks who constantly buy the cheapest (5 cents) options on the chain for that. DTB2 is correct. And I find it "stupid" to evaluate selling these puts by themselves. In a portfolio as a whole, they can make sense, without the 15k margin that you mentioned.
 
samuel11 said:
I suggest you lose some of your arrogance. In that specific topic, some regulators, including the ECB, require banks to protect themselves against ~35% down in equities.

I know some banks who constantly buy the cheapest (5 cents) options on the chain for that. DTB2 is correct. And I find it "stupid" to evaluate selling these puts by themselves. In a portfolio as a whole, they can make sense, without the 15k margin that you mentioned.
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To pay $5 to insure a $250 portfolio makes perfect sense. To get a $5 credit and tie $15k in the process doesn't. You are right, it's not stupid. To call it stupid is a complement. I'm sure those banks are very surprised when they see some idiots actually hitting their bid.

btw, during the last February correction, those 5 cents options were worth around $20 at some point. Not bad for those who bought them. And those who sold them probably got a margin call and had to cover their $5 trade at $2,000

So much for free money.
 
Kim Klaiman said:
To pay $5 to insure a $250 portfolio makes perfect sense. To get a $5 credit and tie $15k in the process doesn't. You are right, it's not stupid. To call it stupid is a complement. I'm sure those banks are very surprised when they see some idiots actually hitting their bid.

btw, during the last February correction, those 5 cents options were worth around $20 at some point. Not bad for those who bought them. And those who sold them probably got a margin call and had to cover their $5 trade at $2,000

So much for free money.
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You still don't get it. It is NOT for a credit...

I said: And I find it "stupid" to evaluate selling these puts by themselves. In a portfolio as a whole, they can make sense, without the 15k margin that you mentioned.
 
samuel11 said:
You still don't get it. It is NOT for a credit...

I said: And I find it "stupid" to evaluate selling these puts by themselves. In a portfolio as a whole, they can make sense, without the 15k margin that you mentioned.
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I was referring to the post that was linked few posts ago:

So here is a theoretical strategy. Every Friday you wake up and load the full option chain for the next week SPX/SPYs (depending on your preference). Now, through the day, check where the lowest-strike nickel and dime bids are - if they are above some reasonable threshold, you should hit that bid. Usually you will find that you are selling some silly strikes - I think last Friday lowest nickel bid was 1250 at some point during the day (that's for 1 week expiration).

Could you please clarify what do you mean by "It is NOT for a credit..." and "without the 15k margin"? You are selling puts on a $2700 stock, how can you do it without 15k margin and not for a credit?
 
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Sweet Bobby said:
Yes this works on options for stocks and ETFs. Check out thinkorswim or tastyworks.

As for education check out tastytrade. It’s free and they present quality information.
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I would be very careful with tastyworks. It can provide very misleading and one sided information. Anyone who claims that selling premium is the only way to make money with options is a huge red flag.

Here is an example of one of their "quality" studies:
Buying Premium Prior To Earnings - Does It Work?
 
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