Actually I have an EE undergrad and run a software company, I came into finance much later and had an experience similar to yours. It's a bit like working with your kids, it's hard when you've experienced something and see how useful it can be but they refuse to engage out of what often seems like pure stubbornness. As a bit of an Aspie myself, I find that generally explains a lot when it comes to people like this guy. I just tell myself that the sometimes baffling insults aren't really their fault and try my best not to respond in kind and hope that I can learn a little about how they're wired in the process.
Quitting day job to collect weekly premiums - realistic?
- Thread starter mdwreader
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Yes. And I am curious: why do you call this a Skill profile?
Yes, kind of a narrow view, as you said.
Also, people don't always buy options to make money. When I sell a bullish put spread, I'm basically planning to lose money on the long option, and that's fine with me. And it may be that whoever is selling it (what is that supertrader woman's name) thinks I am an idiot. It's all in the trader's point of view.
Well...the harder it is to win the options strategy (or whatever you're trading) ...the more Skill you need:
Some people prefer to sell options for the instant insurance premium collected, which is relatively easy and safe.
Others may prefer to buy and/or sell different strikes to slightly offset things conservatively.
While others may prefer to buy straight calls and/or puts on direction...which is harder, but potentially more rewarding.
Like I said, everything in the market...more or less...is all priced accordingly to the Risk/Reward profile -- or I personally like to refer to it as a Skill profile
Whatever you decide to do..May the Farce Be With You -- and Mazal tov,
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1 thing I don't think I've ever heard of is selling less when vols are low and more when vols are high to better manage the mean reversion of vol. Most of the literature and funds seem to say arbitrarily we are selling x amount of puts to make x% return. The biggest size comes when vols are lowest and hence the biggest exposure to a magnitude jump(vol/vol, vomma?)
I realize they have to lever up more to hit a return target at this point, but it seems to be at the point where the steamroller is at its closest. I'm not against selling puts per say, but I suppose I'm looking at it from an annual capital return standpoint vs monthly yield return.
I realize they have to lever up more to hit a return target at this point, but it seems to be at the point where the steamroller is at its closest. I'm not against selling puts per say, but I suppose I'm looking at it from an annual capital return standpoint vs monthly yield return.
Or leveraging up if you have a longer time horizon?
Just be aware that selling premium is like trying to capture dividends. You have to ignore what happens to the underlying and just keep collecting that small income. think about questions like:
"What if the underlying moves against your short premium position for a long time"
I think a while back, I came across a site that focuses primarily on theta positive options plays : www.thetatrades.com if you're interested
"What if the underlying moves against your short premium position for a long time"
I think a while back, I came across a site that focuses primarily on theta positive options plays : www.thetatrades.com if you're interested
Selling premium on individual stocks requires stock picking skills and market timing skills. Doing it relentlessly and mindlessly will not work in the long run. Larry McMillan has said that selling covered calls this way works out to a T-bill-like rate of return. My few backtests, although not extensive, indicate this view is correct. He suggests using some simple technical analysis to avoid bad times and bad stocks (stock above the 20-day MA is the example he used, although it may not be the best approach).
Subscribing to someone else's stock picking and market timing skills also will not work in the long run, because no method works well all the time, and when things go poorly, the follower will lose trust in the leader. You may end up abandoning the method at a nadir and find yourself owning a bunch of stocks for which no option can be sold that is above your cost basis.
I would suggest that first, you might learn to pick stocks and time the market yourself. For simply selling premium, it is not that hard. You don't have to be able to pick the next AMZN or FB. Instead of trying to identify the best stocks, identify the worst ones. Develop some simple rules to keep you out of bad markets, bad sectors, bad industries, bad companies. Just avoiding the worst 10% or 20% of issues and the worst equity bear markets (think 2002 and 2008) will go a long way toward profitability. Once you can do that, you can sell premium, thoughtfully and at opportune times. You can trust yourself.
McMillan's extensive chapter on covered calls also touches on an issue I think is important: are you a stock investor, or a seller of premium? In my mind, it's important to declare yourself. If you're a long term stock investor, it makes no sense to cut off your upside or lose your stock when it's rallying. On the other hand, if you're conducting a covered call/short put program, there is no reason for you to have loyalty toward any underlying stock. Any issue that isn't behaving as expected should be cut, without excuses. Buy in your put or sell the stock, take your loss, and find a better underlying.
Subscribing to someone else's stock picking and market timing skills also will not work in the long run, because no method works well all the time, and when things go poorly, the follower will lose trust in the leader. You may end up abandoning the method at a nadir and find yourself owning a bunch of stocks for which no option can be sold that is above your cost basis.
I would suggest that first, you might learn to pick stocks and time the market yourself. For simply selling premium, it is not that hard. You don't have to be able to pick the next AMZN or FB. Instead of trying to identify the best stocks, identify the worst ones. Develop some simple rules to keep you out of bad markets, bad sectors, bad industries, bad companies. Just avoiding the worst 10% or 20% of issues and the worst equity bear markets (think 2002 and 2008) will go a long way toward profitability. Once you can do that, you can sell premium, thoughtfully and at opportune times. You can trust yourself.
McMillan's extensive chapter on covered calls also touches on an issue I think is important: are you a stock investor, or a seller of premium? In my mind, it's important to declare yourself. If you're a long term stock investor, it makes no sense to cut off your upside or lose your stock when it's rallying. On the other hand, if you're conducting a covered call/short put program, there is no reason for you to have loyalty toward any underlying stock. Any issue that isn't behaving as expected should be cut, without excuses. Buy in your put or sell the stock, take your loss, and find a better underlying.