Quitting day job to collect weekly premiums - realistic?

ironchef · Feb 5, 2017

sle said:
I think intuitively you already doing some risk-adjustment so it's just a question of formalizing that process.

Thank you for your encouragement. Intuition can only go so far. For example by trial and error I learned that if a short call went against me, it was better to exit instead of hoping for a turn around (or rolling) but it was gut feel instead of a quantitative calculation that said I should close it out and I don't have any quantitative data to prove it.

Options are really complex instruments making adjustments very difficult to quantify and so it is hard for me to formalize. Are there classes I can take? Coursera classes?

Best wishes.

systematictrader · Feb 6, 2017

mdwreader said:
Hi All

Suppose you have a working capital of about 800k. Now you do weekly cash secured puts on stocks you are confident to own if assigned, and if assigned sell calls until the stocks are called away. Of course this only works if the market does not crash like in 2000, 2008, etc. Is it realistic to think this can become a primary source of income?

Building on this, what is the equivalent strategy in a total bear market for the above? I don't want to sell any call spreads.

Thanks for your help.

index or diversify in many many stocks, then more work to keep up with

Sig · Feb 6, 2017

ironchef said:
Your posts are very insightful. Thank you.

Here is a one person example:

My investment account is 100% in individual stocks and I judge my success/failure against SPY.

Second, I only trade options on those stocks. I judge my trading success/failure against the returns of the individual stocks.

Frankly I don't know how to deal with risk profile, sharpe ratios... etc. so I simply ignore them figuring that over a long period total return is what counts? I am probably wrong so do you have any suggestions for me?

Thanks.

ironchef,
Based on your posts I think you'd really enjoy a finance 101/202 course. They offer MOOCs for free at many great schools (this one is taught by Robert Schiller, for example https://www.coursera.org/learn/financial-markets). Like you I had backed into the concepts from my math/engineering background, but seeing it all laid out and clarified in a finance course was eye opening to say the least. It was one of the most interesting classes I took, and I highly recommend it for someone like you who is interested and already has an intuitive feel for it. Because of that you'll get far more out of it than a typical MBA student.

ironchef · Feb 6, 2017

Sig said:
ironchef,
Based on your posts I think you'd really enjoy a finance 101/202 course. They offer MOOCs for free at many great schools (this one is taught by Robert Schiller, for example https://www.coursera.org/learn/financial-markets). Like you I had backed into the concepts from my math/engineering background, but seeing it all laid out and clarified in a finance course was eye opening to say the least. It was one of the most interesting classes I took, and I highly recommend it for someone like you who is interested and already has an intuitive feel for it. Because of that you'll get far more out of it than a typical MBA student.

Thanks. I need to look into that as I am a fan of Prof Schiller. Finance is maddeningly vague and uncertain for an old, over the hill, ex-engineer.

Best wishes.

Sig · Feb 6, 2017

ironchef said:
Thanks. I need to look into that as I am a fan of Prof Schiller. Finance is maddeningly vague and uncertain for an old, over the hill, ex-engineer.

Best wishes.

I'm one of those also and I love it. I think you'll actually like the stuff in finance classes a lot more than you may think, in fact if I have any gripes it's that the finance class paints everything as too deterministic (those of us trained as engineers like that!), and there's actually more uncertainty in reality than they let on in the classes. I.E. they tell you that we know the distribution of returns isn't normal, but then proceed to use a normal distribution anyway for simplicity and you forget the initial disclaimer. You then realize you have to take a class specifically on finance distributions to find out what the best one to use is in a given situation.
Good luck and have fun!

Llxa · Feb 11, 2017

If you can make enough premiums to live off it, yeah sure, WHY not?

Butterball · Feb 11, 2017

mdwreader said:
realistic to think this can become a primary source of income?

#1 losing trader mistake: consider premium from selling calls or puts as "income"

newwurldmn · Feb 11, 2017

Butterball said:
#1 losing trader mistake: consider premium from selling calls or puts as "income"

Yeah. It's like considering the cash you receive from shorting a stock as a salary

Stymie · Feb 18, 2017

Pekelo said:
I highly doubt this. Would you mind giving us an example? Maybe up to 20%, but not 40....

NLNK - Stock at 15 and 15 Straddle at 10 dollars for Jan 2018. 335 days so about 70% return on capital. You own more stock at 5 dollars if drifts down. Your cap is 25 dollars.

BAC - stock at 25 and 25 Straddle at $5 for Jan 18. 20 % return. Own more stock at 20 or cap at 30.

It's boring and generates little commission but your sailing skills improve.

️

ironchef · Feb 18, 2017

Stymie said:
BAC - stock at 25 and 25 Straddle at $5 for Jan 18. 20 % return. Own more stock at 20 or cap at 30.

What if I buy BAC Jan 18 calls strike $30 for $0.69 per share instead? I can use the cash secured fund to buy 30 yr treasury and the interest will be $0.755 per share equivalent for a net credit of $0.0065 per share. So, net credit and unlimited upside? The risk? Bond devalues due to interest rate going up, but in such case, BAC income will go up and stock price will go up with it, so the calls will be profitable.

What am I missing?

Regards,