Selling premium

Quote from maglia rosa:





You are not teaching anything here, professor.
I like to think in volatility terms when buying and selling options, not in terms of some kind of 'yield'.

What happens to the put price when volatility goes to infinity, sherlock? - Say, for the 15 put, when stock is at 15? The put will be worth $15. Wow, how is that for a 100% return on your strike?
It's great, but only until the next stock tick, when stock goes to 100, how do you like your put sale then?

Of course, you can say, this is all too theoretical, but my point is the option is trading where it's trading because of the market's perception of what vol is.

If you divide everything by 100 in your example you get the S&P trading at $9.00 and the value of the option $0.27. Now you're saying you like to sell an option on another stock that's trading at $9 better, just because it's $1.25 bid for.
So you'd probably also rather buy junk bonds than t-bonds, because they have a greater return, right?

This much for oranges and apples, and good idea refraining from teaching, as your lesson has not taught me anything yet.

Keep dreaming on the island and go back to preaching, professor.
It might prevent the island from sinking one day.

I don't want to be rude, but don't ever assume you're smarter than anybody else.
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I would never presume to be smarter than anyone else, would you?

I also try not to be rude unless provoked.

You provoke me, so I will choose to ignore you.
 
Quote from stokhack:

trajan and metooxx,
obviously you guys know options, i do not think dreamer has a clue. Seriously, salibas books on options are complicated, easy to write puts/calls or a calendar spread, but condors or butterflies are another story, and they never make sense until you try them..
So with SPX at 900, market no trend, what would you guys write.
Thanx.
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This was fun for a while, but with so many rude posts, I will pass.

An exchange of ideas and a few challenges are one thing, but when people post concepts they do not understand, it gets ugly and I don't need that.
 
Good choice, that's understandable.
I nevertheless congratulate you on your successful strategy selling options. It would be nice to keep that up, so be aware that higher return comes from higher risk. You seem to be able to manage your risks, and so far so good.
 
Quote from maglia rosa:





You are not teaching anything here, professor.
I like to think in volatility terms when buying and selling options, not in terms of some kind of 'yield'.

What happens to the put price when volatility goes to infinity, sherlock? - Say, for the 15 put, when stock is at 15? The put will be worth $15. Wow, how is that for a 100% return on your strike?
It's great, but only until the next stock tick, when stock goes to 100, how do you like your put sale then?

Of course, you can say, this is all too theoretical, but my point is the option is trading where it's trading because of the market's perception of what vol is.

If you divide everything by 100 in your example you get the S&P trading at $9.00 and the value of the option $0.27. Now you're saying you like to sell an option on another stock that's trading at $9 better, just because it's $1.25 bid for.
So you'd probably also rather buy junk bonds than t-bonds, because they have a greater return, right?

This much for oranges and apples, and good idea refraining from teaching, as your lesson has not taught me anything yet.

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When the puts go to 100 in your example, the puts I sold will be almost worthless. That I like.

You really need to stop and think about what you are saying, Rosa.
 
metooxx i think you type too much:)

since no one wanted to actually answer this question i looked in the option books, could not find salibas but found jon najarian,
these examples are from his book:

broad market movement: iron butterfly or condor
spx trading at $900, sell $930 calls and sell $870 puts,
buy $940 calls and buy $860 puts

market oversold and possibly due for correction
spx at $900, buy $880 puts, sell $860 puts

looks like good stuff, but i have never tried index options
FWIW
 
Quote from dreamer:



When the puts go to 100 in your example, the puts I sold will be almost worthless. That I like.

You really need to stop and think about what you are saying, Rosa.
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Could you restate that for someone that is overtired?
 
It's getting too easy to attack this Dreamer guy so I'll give a rest to it. For those of you that want to sell premium, don't use naked options. Do what the guys on the floor do. Put on backspreads. You can put them on for a credit initially have a postion with positive theta and negative vega and collect the premium. If the stock takes off you will then have a position with unlimted upside as you will now have a long gamma and long vega postion. This strategy is 10 times better then the dream your way to millions by selling options by the dream man. Why? Because you give yourself so many options. Your position can profit in many ways. either by lack of movement or sharp movement. Depending on where you sell the strike and how you pivot the slope on the backspread will determine if you want the position to provide a better return by earning the time decay or on the possiblity of a big move. Either way, backspreads are unlimted reward and limited risk. Naked options are limited reward and unlimited risk. This spread will also allow you to sleep at night. And when that ten sigma event comes, instead of filling for bankruptcy, you'll be buying your neighbor's house who sold the naked options.
 
Quote from metooxx:



Could you restate that for someone that is overtired?
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Sorry, metooxx, meant the underlying, not the put. Kind of late for me here.
 
Quote from dreamer:



Sorry, metooxx, meant the underlying, not the put. Kind of late for me here.
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Thank you.

I was trying to add that up on my fingers and toes and I was running out of them ...
 
so maverick help me out here
by backspread assume X trades at 100,
i sell the 120 calls, buy the 150 calls, same month?
or different months,
i assume vice versa for downtrends.
thanks
 
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