Selling fairly far out of the money calls and puts is an excellent way to make extra money. I do it every month. I have done VERY well for years doing this. I think it is the easiest way to make consistent profits. You do need a fairly substantial amount of capital for the margin requirements, but if you have the $ you can make alot of $ with little risk (if you sell far enough out of the money).
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Selling premium
- Thread starter NKNY
- Start date
Quote from Maverick74:
I suggest anyone who is interested in selling premium to visit the graveyard in Chicago on 440 South LaSalle St. It is full of dead floor traders who made their living selling premium.
Of course most of the guys on this board are smarter then those dumb guys on the floor right. What the hell do they know. Good luck in your pursuit of selling premium and may no black swans be in your future. Remember it only takes one.
Maverick, you are obviously quite biased and ill-informed as to the profitable trading of options and the many ways to safely make money doing so while making your portfolio bullet-proof.
I can only tell you that I have been doing this for quite a few years very successfully and always survive "events", whether broad market based or more narrowly based.
As for your reference to the graveyard of traders, there are many reasons they might be there and each will have their own story, including not having good methods, taking lopsided positions, being poor traders, etc. After all, they are/were no different from the rest of us, except they traded on the floor, which does not make them superior traders.
The way I trade options is basically risk-free and much safer than trading stocks or futures; those are truly naked positions. I am able to consistently earn between 200% and 300% annual return on the money in my brokerage accounts, including the reserves I keep for safety purposes. At no time is my portfolio subject to the hazards of an "event", or a "black swan" as you call it. I can assure you that "it only takes one" as you contend, is untrue.
However, it is not my goal to convince anyone that options are a good venue for profitable trading. I just don't like to see inaccurate information posted as factual for digesting by students of the market.
Good luck trading to all,
Bob on whidbey Island
"Don't confuse effort with results."
Quote from dreamer:
Quite right, metooxx, it's not that simple, however that is the start and where one goes from there is according to their methods and plan.
Good luck trading to all,
Bob on Whidbey Island
"Don't confuse effort with results"
Dreamer, You Join ET and in 3 days you have 14 posts on the wonders of selling options and how easy it is and how much money you are making. Every post sounds like an infomercial. At one point are you going to give everyone on here your 800 number, your website, or sales pitch.
You know whats funny is there are over 1,000 get rich quick schemes on the internet that deal with selling options. Any countless and countless of other infomercials on late night tv talking about the virtue of selling options. Now why do you think that is? And why do a majorty of them get shut down?
You know Wade Cook made a nice dime espousing selling options before they sent him to prison. I guess it really is that easy afterall. I mean if a former cab driver from NYC can find the secrets to selling options and making 15% to 20% a month, then I guess anyone can do it. Hell, it's like writing a blank check right. You write the check and then collect the cash. And the beauty of it is that you can just keep writing them. I think you just found the secrets to wealth my friend, I would keep that gem to yourself.
Quote from dreamer:
Maverick, you are obviously quite biased and ill-informed as to the profitable trading of options and the many ways to safely make money doing so while making your portfolio bullet-proof.
I can only tell you that I have been doing this for quite a few years very successfully and always survive "events", whether broad market based or more narrowly based.
As for your reference to the graveyard of traders, there are many reasons they might be there and each will have their own story, including not having good methods, taking lopsided positions, being poor traders, etc. After all, they are/were no different from the rest of us, except they traded on the floor, which does not make them superior traders.
The way I trade options is basically risk-free and much safer than trading stocks or futures; those are truly naked positions. I am able to consistently earn between 200% and 300% annual return on the money in my brokerage accounts, including the reserves I keep for safety purposes. At no time is my portfolio subject to the hazards of an "event", or a "black swan" as you call it. I can assure you that "it only takes one" as you contend, is untrue.
However, it is not my goal to convince anyone that options are a good venue for profitable trading. I just don't like to see inaccurate information posted as factual for digesting by students of the market.
Good luck trading to all,
Bob on whidbey Island
"Don't confuse effort with results."
Dreamer,
I traded on the floor, and you can't manage risk with negative gamma ok buddy. You can hedge it at any point in time but when the market gaps up or gaps down, the negative gamma will eat you alive. You can't hedge that because you won't be given the opportunity to. When I was on the floor, the first rule I was told, If upstairs traders saw I carried any net naked calls or puts I was told to find a new job. If we sold premium on the floor we did it with backspreads and we made a killing on it. We also did a lot off butterflys and calender spreads. But for you to come on here and tell me you have a portfolio of naked options that is bullet proof and then to take it even a step further and say rare events don't hurt you and then on top of that say you can manage the risk with a naked portfolio is a joke. You obviously don't know what your talking about.
Quote from dreamer:
I prefer to put on a short straddle at the money. That way, one hedges the other. Otherwise, you either give up too much time premium or give away too much ITM.
One leg of a short straddle doesn't "hedge" the other. The premium from one leg might partly offset the risk of the other, but it's not really a "hedge" - anymore than you could classify selling a covered call a "hedge" for the long equity leg.
If you've sold a short ATM straddle @ 50 for let's say a total of 5, then if the stock gaps above 55 or below 45 you're immediately in the red.
So how is selling a short straddle risk free?
Do you have an example of how anyone can manage a portfolio of naked short options risk free? Reduced risk I could see. But it's the risk free that I'm having trouble with.
If you guys keep firing these shots over dreamer's bow, he will never share the secrets to selling Naked Options with us. Just when I thought it was getting easy...
Quote from Maverick74:
Dreamer,
I traded on the floor, and you can't manage risk with negative gamma ok buddy. You can hedge it at any point in time but when the market gaps up or gaps down, the negative gamma will eat you alive. You can't hedge that because you won't be given the opportunity to. When I was on the floor, the first rule I was told, If upstairs traders saw I carried any net naked calls or puts I was told to find a new job. If we sold premium on the floor we did it with backspreads and we made a killing on it. We also did a lot off butterflys and calender spreads. But for you to come on here and tell me you have a portfolio of naked options that is bullet proof and then to take it even a step further and say rare events don't hurt you and then on top of that say you can manage the risk with a naked portfolio is a joke. You obviously don't know what your talking about.
Maverick,
First of all, I'm not your "buddy", however I don't think you meant it in a friendly sense.
You obviously think you know all there is to know about selling naked options to earn the premium, and since I am not here to teach anyone anything, I'll let you continue thinking you are that smart.
In the first place, I never said my portfolio consisted of all naked options, only that it was the initial position I take. You yourself have stated that you made a lot of money selling premium, so what is your problem???
You seem like the type of guy that has a closed mind because you think you know "all". The fact that you traded on the floor along with about 75 cents may get you a cup of coffee in a diner, but it does not make you an expert.
While it is true that unhedged positions where a gap up or down goes against my position may hurt me on that position, it does not threaten my portfolio nor is it catastrophic for me.
Now I admit you may possess some knowledge and experience, but I am equally convinced that it is limited.
One more thing, I am not here to sell anything to anyone or to teach anyone anything. I happened across this site while doing some research for an idea I have for something new and enjoyed some of the posts. I have also learned some interesting things, although not from you. As I said before, I just don't like to see inaccurate information posted as factual.
Good luck trading to all,
Bob on Whidbey Island
"Don't confuse effort with results."
Quote from ArchAngel:
One leg of a short straddle doesn't "hedge" the other. The premium from one leg might partly offset the risk of the other, but it's not really a "hedge" - anymore than you could classify selling a covered call a "hedge" for the long equity leg.
If you've sold a short ATM straddle @ 50 for let's say a total of 5, then if the stock gaps above 55 or below 45 you're immediately in the red.
So how is selling a short straddle risk free?
Do you have an example of how anyone can manage a portfolio of naked short options risk free? Reduced risk I could see. But it's the risk free that I'm having trouble with.
You are correct in that one leg does not "fully" hedge the other, but it does partially hedge it.
When I first posted on this subject, I had no idea that it would invite such acrimony and inaccurate summarizations of what I have said here and in other threads.
As I have said, I am not here to teach or sell anyone anything. I guess the safest thing to do here is to just read and not participate.
Good luck trading to all,
Bob on Whidbey Island
"Don't confuse effort with results."
Quote from Maverick74:
Dreamer, You Join ET and in 3 days you have 14 posts on the wonders of selling options and how easy it is and how much money you are making. Every post sounds like an infomercial. At one point are you going to give everyone on here your 800 number, your website, or sales pitch.
You know whats funny is there are over 1,000 get rich quick schemes on the internet that deal with selling options. Any countless and countless of other infomercials on late night tv talking about the virtue of selling options. Now why do you think that is? And why do a majorty of them get shut down?
You know Wade Cook made a nice dime espousing selling options before they sent him to prison. I guess it really is that easy afterall. I mean if a former cab driver from NYC can find the secrets to selling options and making 15% to 20% a month, then I guess anyone can do it. Hell, it's like writing a blank check right. You write the check and then collect the cash. And the beauty of it is that you can just keep writing them. I think you just found the secrets to wealth my friend, I would keep that gem to yourself.
Maverick,
I guess the above quote is just another example of you not doing your homework before you start slinging around your knowledge.
Had you looked at my profile, you would see that I joined on November 2, not 3 days ago. The rate at which I have posted falls far short of many others here, however, I make no apologies for that degree of participation. It seems to me that you have done so at an equal or greater rate.
Perhaps you should take some time off and learn to manage your anger and hostility. You might be a happier guy for it. You would certainly be more pleasant to be around.
Good luck trading to all,
Bob on Whidbey Island
"Don't confuse effort with results."