Profitable Options Traders - Long Term

So back to my original post.

Are there traders out there making greater than 20% per year selling options, and not taking abnormal amounts of risk?

I can see it being done if you trade directionally IF you can time the underlying very well but not just selling premium.


Someone mentioned, "Hey sell butterflies!" but if you have a ton of butterflies on trying to achieve a yearly return of 50%... your going to get blown out eventually right?
 
TheBigShort said:
I can not reply on behalf of Des, But 231 P flys on global indexes when skew is steep have been amazing for me. It allows you to trade higher moments and be bi-modal to certain greeks (long theta and gamma). When you trade OTM 231 P flies you need a better model than BS to figure out your hedge ratio as I have learned this the hard way. Maybe Des can share his insight on that.
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Thank you.

I assume you and Des do butterflies by going long, i.e., collect a premium?

And why do you have to hedge? Flies are essentially non directional?
 
ironchef said:
Thank you.
I assume you and Des do butterflies by going long, i.e., collect a premium?
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Minor point here, but "long" flys are put on at a debit -- i.e. you pay the premim (long wings, short middle). Long credit flys are an arb and went out with linkage.
 
Kevin Schmit said:
Minor point here, but "long" flys are put on at a debit -- i.e. you pay the premim (long wings, short middle). Long credit flys are an arb and went out with linkage.
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It made no sense as the singles were cleaner, but I once had a five wide in COMS in the front month for a small credit; 50x.
 
ironchef said:
And why do you have to hedge? Flies are essentially non directional?
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Well he's not only talking about 321/123 flys but he's putting them on away from the money. A lot of these flies have a directional component. Even an ATM fly can accumulate delta as the market moves away from the strike.
 
Palindrome said:
So back to my original post.

Are there traders out there making greater than 20% per year selling options, and not taking abnormal amounts of risk?
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LOL. This was definitely not the original question.

I thought you were an unreal futures trader? What kind of question is this? I sell options all the time. I also buy a lot of options. Do you mean is there someone making 20% a year short gamma- without over leveraging? Then yes I could name 4 posters on this site. If you are smart (mathematically, programatically, economically), have access to a good broker/good technology and trade under 1 mil, you should have no problem making 20% per year being short gamma.
 
Palindrome said:
So back to my original post.

Are there traders out there making greater than 20% per year selling options, and not taking abnormal amounts of risk?
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There's nothing special about doing 20% a year in options (except that you probably left a hell of a lot of profit on the table only taking 20%). I opened a Schwab account recently and just got everything approved today. I kamakazed the account (just no blowout protection, not stupid positions) and did 11% today, and it wouldn't surprise me if the account triples up on Tuesday (or blows-out--though honestly, after today's close, I'll be disappointed if it doesn't double up). But the point is, this isn't good option trading, it's unreasonable risk management.

Which brings us to...your trading needs to be tailored to risk, but expose you to gains. That means you cannot target gains because you can only adjust risk to get there. So figure out how to keep risk in check and afterwards make incremental improvements on cost and profit.
 
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