Options PnL

Averaged 5.2% per month over the last couple of years trading RUT. Some trades bullish, some neutral.

But only using 4.5% of my account for options. Options trades can go to zero. Need to stay small with these things.
 
drcha said:
Averaged 5.2% per month over the last couple of years trading RUT. Some trades bullish, some neutral.

But only using 4.5% of my account for options. Options trades can go to zero. Need to stay small with these things.
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Great returns! Have you calculated your Sharpe and Kelly?

Since 2013, my aggregated trades returned better than SPY but Sharpe is the same, so the reality is I have no skill, it was just leverage and luck? :(
 
drcha said:
I have not calculated Sharpe yet. Kelly says I should use 8% of my account but I have no intention of doing that.
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So you use ~ 1/2 Kelly, consistent with what Ed Thorp said, used 1/4 to 1/2 Kelly to significantly reduce risk of ruin without significant reduction in gains. :thumbsup:
 
darcymac said:
Here's a graph of my closed PnL over about 13 months (since I started trading this particular strategy).

In this account I sell vertical spreads on stocks I like. They are $5 or $10 wide spreads centered ATM, 45 or 60 DTE.

Unrealized $ (22,795)
Realized $ 101,610
Avg Return 8.13%
Avg Days in Trade 24.45
Current margin $ 75,822
Positions Open 14

Total Trades 226
Pct Wins 78.76%
Pct Losers 21.24%
Avg Win 22.61%
Avg Loss -45.55%
Avg Return 8.13%


View attachment 187935

I'm probably not what you're looking for though. I'm just using option delta to leverage stock picks. I think that when most people talk about successful options trades, they're thinking about non-directional stuff, like these guys that buy straddles into earnings or the guys selling volatility premium or the like. Not my game, but I know plenty of guys that succeed there.
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You seem to have a distinct strategy. Can you please elaborate on "sell vertical spreads on stocks you like" ?

You are selling 5-10 spreads on average. What is your average selling price?

When do you enter the trade? Timing is important.

Also Why ATM? Why not OTM?
 
ironchef said:
Since 2013, my aggregated trades returned better than SPY but Sharpe is the same, so the reality is I have no skill, it was just leverage and luck? :(
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If you are net long, that would be indeed so. Someone who is market neutral should not compare themselves to the broad market for risk adjusted returns.
 
Secret Santa said:
If you are net long, that would be indeed so. Someone who is market neutral should not compare themselves to the broad market for risk adjusted returns.
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Yes, basically net long, no big hidden edge, simply use options as leverage.

I have been trying to trade market (delta?) neutral (volatility, spreads...), so far :thumbsdown::thumbsdown::thumbsdown:. Any advice for me?
 
drcha said:
Averaged 5.2% per month over the last couple of years trading RUT. Some trades bullish, some neutral.

But only using 4.5% of my account for options. Options trades can go to zero. Need to stay small with these things.
More...
I want to believe you but I don't believe you. How do your neutral trades lead to this much return?
 
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