Option selling. Too good to continue?

[draft730]

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.

Getting out when VIX goes above 25 prevents your account from blowing up. You will sustain losses but you won't blow up

 

[drcruz]

Make sure to do the search for "Victor Niederhoffer"

BP = Buying Power. How much percentage are you risking per position?

 

[El OchoCinco]

Getting out when VIX goes above 25 prevents your account from blowing up. You will sustain losses but you won't blow up

Everyone say it with me now together..

WTF?

 

[El OchoCinco]

When VIX hits 25 your puts will be so far up your ass in the red and blown up you will choke on them.

 

[Wheezooo]

Getting out when VIX goes above 25 prevents your account from blowing up. You will sustain losses but you won't blow up

Me. I learned a long time ago telling people making easy money to stop making easy money just ain't easy. You come here asking a question, and the most experienced people are giving you an identical answer, and you don't want to listen. The fact they are 10 delta options, in a low vol environment that you are selling, just makes this all the more tragic.

So I'll say it once. Stop making easy money. This won't end well.

 

[smallfil]

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

Looks like you are betting the farm. Option sellers had like $100 or $200 million under its control and managed to bankrupt everyone with just one bad trade. Risk management applies to everyone whether you have $1,000 or $1,000,000 or even $100,000,000. Ignore it at your peril. Selling options works like 90% of the time which is why it is enticing. The 10% of the time if you do not pay attention is what will blow up your account. It just takes one.

 

[Wheezooo]

When VIX hits 25 your puts will be so far up your ass in the red and blown up you will choke on them.

Who says it hits 25. Might just wake up with it at 35.

 

[draft730]

When VIX hits 25 your puts will be so far up your ass in the red and blown up you will choke on them.

They won't. It happened last December. Rolling your puts to reduce your overrall delta is the key

 

[draft730]

Who says it hits 25. Might just wake up with it at 35.

This is the only thing I am really scared about. If you could give me any guarantee that there will be no plane hitting the White House, no nuclear war and no biological weapons attack, I am almost ready to retire and trade full time

 

[drcruz]

Also, do the search for the dude who lost 4 mil betting on volatility.

And I'm a premium seller