Option selling. Too good to continue?

[destriero]

I don't get the "you made 77% on the initial margin req". Sure, you can't make 77% without leverage... But 77% is 77%...

I think vol was quite low for an extended period during 2017. VIX was even below 10 if I recall. I don't remember ATM vol though

Meaningless.

VIX cash bottomed at 11.03 in April.

It's moronic to calc a yield on the haircut. I truly hope you blow up.

 

[draft730]

You did 77% on the initial req.

Short more. The idiocy of asking if it's "too much risk" is an outlier... even for ET. ATM vol is at 12. We've not had ATM vols under 10% for more than a month or two, historically.

Just checked, ATM vols were much lower for the first 3 quarters of 2017 compared to now

 

[drcruz]

I am a young trader...I have traded the last 3 years following a very simple strategy. Selling OOM puts in ES. Delta is between 0.10 and 0.14 with 50 days to expiration. Returns are exceptionally good (considering these years weren't the best for vol sellers. Specifically, +61%, -22% and +77% respectively. I don't want to brag about anything, I am just getting a little nervous. Do I take too much risk. Is the risk of blowing up, or sustaining a very big loss too great? Needless to say, I adjust the position if things turn out badly (roll over to a lower delta), but what about w/e? What about if anything quite unexpected strikes? I would appreciate any thoughts

How much BP are you risking? Is your account big enough for PM? Seems an awfully high ROI. I told my Pops I could set up a 50% ROI selling puts, but the leverage would be dangerous. Any market move against me, then I'd be in a world of $H!T.

Do a search for Victor Niederhoffer

 

[ET180]

I never cut back. I lost 30% percent during this period, but I was a bit lucky during the VIXplosion. I lost almost half of what I "should" back then, because I closed the position just before the options prices "dissappear" and was unable to roll over, as I surely would do. That helped a lot that day

Then you did a good job managing the position. If you are at maximum leverage, the market drops, 20% from top to bottom and you're only down 30%...that's impressive. Nice job.

 

[El OchoCinco]

you are selling puts in a bullish market which means you could have made more money simply going long and you strategy is working only because of the type of market, not any genius in selling options.

When market has its major correction you will give back all of those gains.

 

[draft730]

How much BP are you risking? Is your account big enough for PM? Seems an awfully high ROI. I told my Pops I could set up a 50% ROI selling puts, but the leverage would be dangerous. Any market move against me, then I'd be in a world of $H!T.

Sorry, I dont know what BP is. The account is getting close to be eligible for PM (I don't know if that will help in the case of put selling though). I use all the available margin. Currently, I am short 6 puts and I roll the position to maintain a minimum delta exposure

 

[draft730]

you are selling puts in a bullish market which means you could have made more money simply going long and you strategy is working only because of the type of market, not any genius in selling options.

When market has its major correction you will give back all of those gains.

I am certainly not a genius. However, I feel more comfortable selling puts compared to being long. I think in the case of a sideways markets, which is maybe the most likely scenario now, I will do a lot better. What worries me most is an event like February 2018. In any other case, I feel I can manage the situation

 

[El OchoCinco]

I am certainly not a genius. However, I feel more comfortable selling puts compared to being long. I think in the case of a sideways markets, which is maybe the most likely scenario now, I will do a lot better. What worries me most is an event like February 2018. In any other case, I feel I can manage the situation

Just dont get married to selling puts. It is a one sided limited reward significant risk strategy and no one gets rich engaging in limited reward significant risk strategies. They simply get over confident.

In all honesty I find it difficult to understand how being long via calls or bull call spreads makes you uncomfortable but holding naked outs keeps you warm and fuzzy at night.

We all have sold naked premium for profit but we dont ignore market conditions and get married to a strategy.

Markets take the stairs up but.come down jumping out a window. You need to be prepared, mix it up. Dont be fooled by erroneously calculating returns on risk or capital.

 

[El OchoCinco]

, I feel I can manage the situation

Said every person before their blowout ...

 

[gaussian]

Option selling works until it doesn't. If you're not making markets you are one bad market move away from going broke. It seems too good to be true because it absolutely is and tail risk is underestimated, and mostly ignored, by noobs and professionals alike.