Selling Premium - Strategy Never Discussed

taowave said:
On another note,there is no inherent mathematical edge to selling an option vs buying it.
That belief should get filed with "90 percent of options expire worthless"...

I did run a very simple backtest on buying the 30day SPY ATM call vs selling the 30 day ATM put,rolling both..

Over the last 10 years,selling the put returned apx 2x with significantly better risk measures.
Both strategies underperformed buying the SPY,with the short ATM put returning slightly over half of the long SPY return

For the record,it was a very simple backtest..
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that’s what you would expect.

Selling options has an edge but only a small one. The equilibrium is sellers trying to capture this edge and the buyers willing to pay it to protect greater returns from delta.
 
@robertSt

I understand that you do rolling instead of taking assignment and selling call on it.
is it better to do the rolling than getting assigned and sell call?
I might be missing some understanding on the rolling as I see it as losing originally received premium and then initiating a new sale to pick new premium, and if the stock happens to continue to go down , it will just be like kicking the bucket down the road. Until the stock finally recover
 
robertSt said:
Yep, still going strong. Been great since March, even better now, with increasing volatility and higher premiums. I love my job.
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if it works dont change it, BTW well done.

its an old thread, curious me asks, please pick & post just one trade before market opens for this coming week 28 Sept - 2 October, symbol, number contracts, money at risk - this way we can see the outcome?

second part of the question is how do you pick what you pick, where do you go to/look for the so called high volatility stocks that have a high probability of success?

last but not least - how many individual stocks per week are you selling puts on?
 
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I think I've laid out the strategy about as well as I can. Some of it is subjective - I enjoy the art of it. I don't decide what I'm going to do ahead of time. I might have an idea, but what is the market doing? How much premium is available? It's constantly changing.

One thing that might just be peculiar to me - I like to sell puts on things that are going down. I don't like to do it if it's at the top of a range or if it's broken through resistance to a new high. Some might say that puts the trend against me. Maybe so, but it's what I like. Sometimes it works, sometimes they keep falling.
 
robertSt said:
I don't decide what I'm going to do ahead of time. I might have an idea, but what is the market doing?

One thing that might just be peculiar to me - I like to sell puts on things that are going down. I don't like to do it if it's at the top of a range or if it's broken through resistance to a new high.
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let me do a pre market 28 Sept - 2 Oct expiry for you & ask which strike you'd do?

NKLA last at $19.45, in the past week it waffled $2

in the last 30 days its dropped 50%

for options expiring 2 October, had a trade been made close to EOD Friday

the $18 put last paid $1.70 at 3:59PM Friday

the $10 put last paid $0.19 at 3:59PM Friday

which of the two trades would you have made & why, or would you go with somewhere in between?

and, how many contracts would you have done?
 
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NKLA lost nearly 50% in the last week - previous Friday close was 34.19. So it's exceptionally dangerous right now. I don't think I'd initiate a Friday trade on this one because of the possible gap on Monday. I would want to limit my exposure on this to one or two days. But if I was going to do it, I might try 10 contracts at the 12 strike, which is paying about 3% at .37.
 
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