Sold Naked 20 Large SP500 1130 Call Index Options

[psytrade]

Actually I think that estimate was wrong... I was hoping you had that info and were just engaging the ET readership...

Try this out -

1130X100X.15X20= 339K - their last bit is hard to calculate, not sure how that works... either way its a lot of money parked for a 3% or so return..

Margin:
Purchases of puts or calls with 9 months or less until expiration must be paid for in full. Writers of uncovered puts or calls must deposit / maintain 100% of the option proceeds* plus 15% of the aggregate contract value (current index level x $100) minus the amount by which the option is out-of-the-money, if any, subject to a minimum for calls of option proceeds* plus 10% of the aggregate contract value and a minimum for puts of option proceeds* plus 10% of the aggregate exercise price amount. (*For calculating maintenance margin, use option current market value instead of option proceeds.) Additional margin may be required pursuant to Exchange Rule 12.10.

http://www.cboe.com/products/indexopts/spx_spec.aspx

See also:

http://wiki.answers.com/Q/Are_requirements_of_margin_in_put_options_writing

 

[brocklanders]

Quote from increasenow:

thanks very much...man, I wish I had that to make $11k in one week...hmmm

I'm probably wasting my time even writing this but how about thinking how much you could lose also? 11k is only collecting an insurance premium against a catastrophic loss. You can make this trade many times successfully and still not have enough money to cover 1 big loss. Still sound like a good strategy to you? Maybe, maybe not but you'd need a lot more capital than $300K to last any length of time.

Selling options = limited gain, unlimited loss. One big hit and you give back all your profits plus your principal plus anything else you might own of value! BANG BANG BANG

99% probability that this thread is heading for Chit-Chat! Those are odds I would place money on.

 

[increasenow]

Quote from brocklanders:

I'm probably wasting my time even writing this but how about thinking how much you could lose also? 11k is only collecting an insurance premium against a catastrophic loss. You can make this trade many times successfully and still not have enough money to cover 1 big loss. Still sound like a good strategy to you? Maybe, maybe not but you'd need a lot more capital than $300K to last any length of time.

Selling options = limited gain, unlimited loss. One big hit and you give back all your profits plus your principal plus anything else you might own of value! BANG BANG BANG

99% probability that this thread is heading for Chit-Chat! Those are odds I would place money on.

you may be right...probably better to throw 10 cars at the ES with a really small daytrade margin and go for 10 points or so

 

[RangeBar]

Quote from psytrade:

Actually I think that estimate was wrong... I was hoping you had that info and were just engaging the ET readership...

Try this out -

1130X100X.15X20= 339K - their last bit is hard to calculate, not sure how that works... either way its a lot of money parked for a 3% or so return..

I think a whole lot of people would be very happy with a 3% return in 4 days. Even if held for one week, $11,000 per week would be an annual return of 174%...without compounding.

 

[Emini Maestro]

Quote from RangeBar:

I think a whole lot of people would be very happy with a 3% return in 4 days. Even if held for one week, $11,000 per week would be an annual return of 174%...without compounding.

174% per year would not even lift my eyebrow. Think about the risk.

 

[brocklanders]

Quote from RangeBar:

I think a whole lot of people would be very happy with a 3% return in 4 days. Even if held for one week, $11,000 per week would be an annual return of 174%...without compounding.

go ahead and try it for awhile and let us know how it turns out. you probably have just stumbled onto the holy grail of trading thanks to increasenow and this thread. i'm sure the 3% is free money right?

 

[donnap]

Quote from Emini Maestro:

Think about the risk.

Think about thinking about the risk. Yeah, if you've got a few million to play with - no biggie.

But if you've barely got the margin - well - to carry this trade over a few days would be hell.

 

[scriabinop23]

Quote from RangeBar:

I think a whole lot of people would be very happy with a 3% return in 4 days. Even if held for one week, $11,000 per week would be an annual return of 174%...without compounding.

That's not a 3% return. You have to adjust for expected value of the loss as well as the gain.

ie, 70% chance of keeping all of the money (3%) + 30% of losing a lot more....

ie:

.7 * 11000 + .3 * -110000 = 7700 - 33000 = Expected gain = -25300.

Fill in the blanks with proper probabilities and returns.

 

[Gmoyer3292]

I have been doing this for 6 months. You need alot of margin maint money to make this woth your time. The returns are small.