Any logic to the 1% .. or just indicative that taking on too much gamma risk?
Paranoid about selling Options?
- Thread starter CashDelivery
- Start date
Any logic to the 1% .. or just indicative that taking on too much gamma risk?
It's akin to a mental stop... you have to be mental to carry more risk than what equates to a (linear) 30% monthly ROC due to theta.
wtf are u guys talking about, im clueless 
I have the same risk limit too.
Risk limits are meant to be broken but ONLY in unusual circumstances.
95percent of the time I am well under the 1perxent.
Risk limits are meant to be broken but ONLY in unusual circumstances.
95percent of the time I am well under the 1perxent.
wtf are u guys talking about, im clueless
Try to keep your aggregate theta < 1% of your portfolio as a sanity check on the risk you're taking.
That's great....if you have a $500k account size or greater.
Us smaller guys need to be pushed to 5% min.
FTW!
I am up 10% on client money in a TOS account for the month of June and I never took the account over 0.3%. Keeping a reasonable lid on theta allows you to stick with the position. I don't consider 1% terribly conservative.
Your risk limits should be agnostic to your account size.
If you have to "push the limit" then you don't have enough capital.
Edit: take that back. At best agnostic, in reality the less capital you have the less risk you should be taking.
wtf are u guys talking about, im clueless
Posts 2 and 3 are very good and understandable. Also Downprufs constant use of flies finally sunk in and was educational about limited risk positions.
I sell options naked, or more often ratio writes/spreads (same kind of risk) - but yeah I try to limit that risk ASAP.
We all have short memories. Those of us who were around 9/11/2001 found no market. There was a great amount of confusion and even talk of extending option expiry. No one knew what was going to happen for a while.
It's something that we ignore most of the time. As terrible as 911 was, something as bad or worse could shut down the market. Imagine waking up to no market.
It's always a good thing to be reminded about limiting risk.