options . . . very hard to make money

[atticus]

Quote from rew:

You'd have to sell a heck of a lot of premium to make 3300% in two years. When you sell an option short you must either set a substantial amount of money aside as margin or must hedge, which for most trades still requires some margin, and reduces your profits. It's not as though you can just sell $80,000 worth of OTM puts or calls in an account with $100,000 in it, no matter how confident you are that they're all going to expire worthless. Also if you don't hedge the day will come when you blow up, guaranteed. In 2008 a lot of put sellers blew up real good.

Retail traders who are very good at it do well if they consistently make 40% a year selling option premium. A truly exceptional trader might make 100% a year (although most of those 10%-a-month guys blow up). I just can't see any way anyone is going to make 3300% in two years selling option premium.

My guess is that the 3300% guy was long on some OTM options and was very, very lucky (or very, very astute at guessing market direction, in which case, he should start a hedge fund).

Well, I don't know how you arrive at long otm options when I stated he only went short gamma/vega. He was only in defined-risk; so no, he didn't trade any positions requiring variation margin.

I know a guy in Germany who turned a 10k account into 10 million over 6 years with zero outside funds or additions of any kind. He traded nothing but short gamma.

Short gamma (and vega) can obviously be traded defined-risk.

 

[sellindexvol66]

Quote from atticus:

Well, I don't know how you arrive at long otm options when I stated he only went short gamma/vega. He was only in defined-risk; so no, he didn't trade any positions requiring variation margin.

I know a guy in Germany who turned a 10k account into 10 million over 6 years with zero outside funds or additions of any kind. He traded nothing but short gamma.

Short gamma (and vega) can obviously be traded defined-risk.

you opened a can of worms here! he is correct in not explaining how he did it and continue's; but my 2 cents to add is... atticus was instrumental in making it happen. soon i think he will see how grateful that guy is.

 

[atticus]

Quote from sellindexvol66:

you opened a can of worms here! he is correct in not explaining how he did it and continue's; but my 2 cents to add is... atticus was instrumental in making it happen. soon i think he will see how grateful that guy is.

haha, you emptied the can by outing yourself!

 

[ammo]

Quote from rew:

You'd have to sell a heck of a lot of premium to make 3300% in two years. When you sell an option short you must either set a substantial amount of money aside as margin or must hedge, which for most trades still requires some margin, and reduces your profits. It's not as though you can just sell $80,000 worth of OTM puts or calls in an account with $100,000 in it, no matter how confident you are that they're all going to expire worthless. Also if you don't hedge the day will come when you blow up, guaranteed. In 2008 a lot of put sellers blew up real good.

Retail traders who are very good at it do well if they consistently make 40% a year selling option premium. A truly exceptional trader might make 100% a year (although most of those 10%-a-month guys blow up). I just can't see any way anyone is going to make 3300% in two years selling option premium.

My guess is that the 3300% guy was long on some OTM options and was very, very lucky (or very, very astute at guessing market direction, in which case, he should start a hedge fund).

at the moment you can sell the spy dec 110/70 call sprd for 35, $5 dollars risk for $35 profit

 

[kinggyppo]

looking at TLT 104/105/106 sep long butterfly thoughts, I am thinking we could see a touch of 105 in the next week.

 

[stoic]

Quote from ammo:

at the moment you can sell the spy dec 110/70 call sprd for 35, $5 dollars risk for $35 profit

That's "Potential" profit.

 

[ammo]

the risk is potential also......every trade starts off with zero profit, most with immediate loss unless your timing is perfect

 

[rew]

Quote from ammo:

at the moment you can sell the spy dec 110/70 call sprd for 35, $5 dollars risk for $35 profit

You get that $35 profit only of SPY is below 70 on the December expiration. SPY is just above 110 now so I wouldn't call that a forgone conclusion. You'll make money only if SPY is below 105, and I wouldn't call that a forgone conclusion either. Your position is synthetically equivalent to buying a debit put spread at 110/70. That will cost you about $5 and has the same risk/reward -- you lose $5 if SPY is above 110 and make at most $35 if SPY is below $70. When the trade is stated in terms of a put debit spread rather than a call credit spread it doesn't seem like such a sure thing anymore, does it?

I would like to point out that almost all of the "premium" you're selling in this example is intrinsic value, which you capture only if the market makes a large move in the right direction. When people talk about selling premium they usually mean selling time value.

 

[Outernationalgg]

Listen to atticus.

He is one of the best in the biz, and that's no joke, folks.

 

[rew]

Quote from Outernationalgg:

Listen to atticus.

He is one of the best in the biz, and that's no joke, folks.

I don't care how good he is. I want him to explain just how his friend made a fortune shorting vega and gamma when the rest of us just eke out small profits (or blow up) doing that.