I agree.
On a civil and professional forum, when a member calls another member an idiot, he is banned immediately with no warning. But here personal attacks and insults became normal.
Option selling for premium
- Thread starter John9999
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On a civil and professional forum, when a member calls another member an idiot, he is banned immediately with no warning. But here personal attacks and insults became normal.
Unfortunately most novice (and not only novice) traders have no idea about the risks of those strategies. They realize it when it's too late.
I found out the hard way in 2015 during the correction luckily I had a few long put further out in expiration and it just so happened we keep going down so I ended up making even more money than I lost on the short puts that expired Thursday night I had over 25k in loses on 3 puts I sold for $5. How many puts can you sell way OTM to make $25k?
QUOTE="Kim Klaiman, post: 4618307, member: 321924"]Unfortunately most novice (and not only novice) traders have no idea about the risks of those strategies. They realize it when it's too late.[/QUOTE]
QUOTE="Kim Klaiman, post: 4618307, member: 321924"]Unfortunately most novice (and not only novice) traders have no idea about the risks of those strategies. They realize it when it's too late.[/QUOTE]
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I was headed out of town that weekend, and had to spend ~$1000 to buy back existing down-side positions. My sweetheart thought I was nuts.
4 days after this picture was taken, I found out about the Chinese de-valuation, and crapped my shorts at my good luck. (And it was luck.)
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Not trying to argue with you, I am mom and pop retail, but I always wonder, most corrections are short live, usually bounced back and then some, if you do a Martingale, doubling down, you will be back?
Tell it to Victor Niederhoffer, Karen Supertrade and LJM fund managers.
Sweet Bobby did OK.
We camped for a few days at SPX 2850, with vol at more of those "historic lows".... Let's be bold and just assume you were 40 points out, at 2810, and that you doubled/rolled when the market got within 10 points (initially, 2820) of your position. (This idea ignores the idea of rolling out in time, but the benefits of that roll diminish in a ~5 weeks anyway.)
So! You're at 2810, market goes to 2820, you roll&double to 40pts lower, at 2770.
Market hits 2780, you roll&double another 40pts to 2730.
Market hits 2740, you roll&double to 2690.
Market hits 2700, you roll&double to 2650.
Market hits 2660, you roll&double to 2610.
Market hits 2620, you roll&double to 2570.
Market hits 2580, you roll&double to 2530.
Market hits 2540 (this is now February 9th), you roll&double to 2490.
If you were initially working $1,000 of capital, you have now doubled eight times.
That's $1,000 x2, x2, x2, x2, x2, x2, x2, x2.
"2^^8" == 256 times.
You're now kissing a quarter-Mil, not counting thousands in commissions (no matter *who* your broker is...).....
These are very rough numbers, and do not take into account the vacuities of volatility, mud-bound frightened-ass markets, any roll-outs in time, or any split/rolls that use the other (call) side of the market (which could well set you up for being Whip-sawed).
Bottom line?
Rolls are two trades, not a modification of a single trade.
The first trade is the recognition that the initial position has failed.
The second is a brand-new trade, and needs to be based always on the same sorts of criteria as any other initial trade. That may *look* like a Martingale, or it may look like something else.
Mr. Klaiman,Sweet Bobby did OK.
I am referring to sweet Bobby not in disrespect but to make a point.
What I learned over the past 5 years trading options is that there are more than on way to trade profitably. None of us have that cornered. To argue otherwise is like arguing about religions.
The fellow who taught me how to trade options only writes straight options (with margins), only on one stock and makes a nice living doing it full time for over a decade, through the 2008-9 drawdown.
I used to believe, from reading McMillan that day trading options are ill advised. Now I know it can be very profitable if you know how.
Many professionals trade volatility and doing well, other professionals only trade spreads, like you, or condors...
Personally, I do both longs and shorts but simple directional bets. I do this full time since 2013 and I admit the drawdown this Feb is actually very minor, hardly a test of my skills/luck and I will not be tested until another 2008 hits.
So, IMHO, to categorically dismiss a method showed ignorance.
Thank you tommcginnis.
Your post is very very helpful and educational to me. This is exactly what I needed to answer my curiosity.
Another question: As long as my margins and assets can stand it, if I stood firm, not act, could I just waited it out?
Best regards professor,