So it finally happened.

dagnyt · Nov 14, 2009

Quote from OldTrader:

In my 40+ years of trading, I have never seen a successful premium seller.
OldTrader

Not one?

Do you trade in a closed room?

Mark

LTD4U · Nov 14, 2009

Quote from OldTrader:

Premium selling as an ongoing strategy is a losing strategy in the end.

OldTrader

Do you mean NAKED? Or do you include all net premium sellers like income strategies?

To me selling options is the only profitable strategy in the long term.

traderlux · Nov 14, 2009

Is it possible to gain over 100% with CCs in several months? If you did not see it would you believe it? If some one showed you the account would you believe it? Would you walk away with the money and say you were a successful premium seller? Or would you keep doing what you had been doing and continue to be a successful premium seller. Just because you never saw something doesnt mean it doesnt exist.

Quote from OldTrader:

Premium selling as an ongoing strategy is a losing strategy in the end. You're going to have a series of small wins, and a few large losses that wipe out all your wins. History is replete with guys going broke with this strategy, guys with more experience and more capital.

If you try to implement a strategy where you take a loss on a movement against you, it will also cause you to close out positions which would have ended favorably.

In my 40+ years of trading, I have never seen a successful premium seller. If there was one, he was well hidden. In fact, the only successful option traders in general I have seen were market makers. And their strategies were considerably more complicated than anything as simple as premium selling.

The people that I know who have used options successfully are those who had an idea about the direction of the stock or index, and then implemented an option strategy to take advance of their expected price movement of the stock.

OldTrader

nO0b · Nov 15, 2009

A 27% loss in your account on a reasonably random trading day probably means you're betting way over your head.

Having that much at risk would imply you're a heavy favorite in the bet (around 64%) even if we assume a 1:1 payout. I don't know what position you had on, but my guess is you had no where near that kind of expectancy...

Sorry you took such a loss, but you need to be able to identify and quantify your risks much more precisely, or you're just punching your ticket on a fast train to the poor house...

TraderSU · Nov 15, 2009

Quote from LTD4U:

Do you mean NAKED? Or do you include all net premium sellers like income strategies?

To me selling options is the only profitable strategy in the long term.

Cover CALL == Naked Short PUT

So, naked or not, options writers almost always have bigger risk/reward ratio than options buyer. And their single loss can easily wipe many winnings.

TheoHornsby · Nov 15, 2009

Quote from fbirdien:

I created a chart that depicts in detail what caused the problem. Well to summarize it , 3 adjustment in a month killed me . However next day after I wrote the first post I did some adjustment to reduce the loss to 19 %. Will know the outcome this Friday. I know that B2 is a risky venture as well but I had to do that this month.
Closed B due to sudden up-spike in VIX in short span. I kind of followed the cut loses approach and managed to eat 15 % loss. Then to offset it entered B1 that turned against me due to sudden down-spike in VIX. So closed B1 shortly after entry.

There was slight difference while closing B and closing B1. I waited little longer to close B1 (per the quote in item 5)

Now that I look back , while entering B1 adjustment, I had 3 choices-
1. Make bearish side adjustment (for credit) on the same day.
2. Make bullish adjustment on the same day.
3. Wait a day or two and then make a bearish or bullish adjustment.

This is a lot of gibburish. I think you're yanking our chains. You need to post actual positions not B/B1 stuff.

traderlux · Nov 15, 2009

Quote from TheoHornsby:

This is a lot of gibburish. I think you're yanking our chains. You need to post actual positions not B/B1 stuff.

I think he is trading with SPX as underly?

mike007 · Nov 15, 2009

Quote from TraderSU:

Cover CALL == Naked Short PUT

So, naked or not, options writers almost always have bigger risk/reward ratio than options buyer. And their single loss can easily wipe many winnings.

I think that many ppl have the wrong or misguided information on what premium sellers are. I dont even know, but when ppl ask me how I trade, i dont tell them i am a premium seller. I tell them i am a option spreader.

Not in ref. to CC, but I can sell options in a spread have have less risk than buying naked options with higher probabilities. Risk 1 to make 1.

TraderSU · Nov 15, 2009

Quote from traderlux:

I think he is trading with SPX as underly?

I think DIA is the underlying. LoL, stop guessing and wait for OP to respond.

MegaDeth · Nov 15, 2009

Quote from mike007:

I think that many ppl have the wrong or misguided information on what premium sellers are. I dont even know, but when ppl ask me how I trade, i dont tell them i am a premium seller. I tell them i am a option spreader.

Not in ref. to CC, but I can sell options in a spread have have less risk than buying naked options with higher probabilities. Risk 1 to make 1.

Curious how you have a risk/reward ratio of 1/1 with a higher probability of reward ...