Strategy: Selling Put Options: The Best Income Method?

Help in understanting the concepts is welcome, but I haven't asked anybody for advice, nor do I need any advice.

Be suspicious of people trying to give you an unwanted advice.

Be suspicious of "experts" ;-)

This is a journey everybody should do himself only, without letting other types bring you from your road that you need to go first.
 
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destriero said:
Twit, a short put is a synthetic covered call. Yeah, you've just invented the wheel.
More...
I know that it is a synthetic call. But it is irrelevant for the topic of this discussion, cf. the title...

I would suggest to open a new thread if you need to discuss synthetics...
 
Someone here said that if one likes the stock, but follows this strategy of selling puts (as opposed to straight buying the stock),
then one would not participate in possible tanking of the stock upwards.
Hmm... I'm not sure if that is correct. I think it is very well possible as the following article indicates:
http://www.great-option-trading-strategies.com/closing-options-early.html
"Closing Options Early
Question - Closing Options Early
When writing puts (naked puts), do you ever close a profitable trade early? Or is it better to allow the options to expire worthless?
If you do buy back a naked put early, what criteria do you use?
[...]"

In that scenario one closes the position before the expiration date,
and by this action increases the yield by shorting the timeframe of the investment...
 
botpro said:
I know that it is a synthetic call. But it is irrelevant for the topic of this discussion, cf. the title...

I would suggest to open a new thread if you need to discuss synthetics...
More...


No, it is a synthetic covered call.
 
botpro said:
I would say this example is just distracting/distorting from what is mainly discussed here, ie. the recent PEP example.
Why do you do that all the time in your postings? Ie. you also tried to bring in synthetics etc...
I need to concentrate myself on just the most basic variant of this plus the application of margin.
But yours is IMO yet another different and hard to understand variant, so I don't get it,
because at spot=90 there should no loss happen for a strike of 90...
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I don't know if you're joking or microcephalic. You won't have a loss in a month with the shares at $90? The July 97.5P is 3.60 here. So where do you think the July 90P will be trading if ATM? No loss because you state it is so?

This thread is a cautionary tale. I truly hope that you borrow money and trade vol.
 
destriero said:
I don't know if you're joking or microcephalic. You won't have a loss in a month with the shares at $90? The July 97.5P is 3.60 here. So where do you think the July 90P will be trading if ATM? No loss because you state it is so?

This thread is a cautionary tale. I truly hope that you borrow money and trade vol.
More...
As said:
Be suspicious of people trying to give you an unwanted advice.
Be suspicious of "experts" ;-)

The example just shows that there is some more work to do to add into the trading system before one can go live.
I'll develop a trading system around put selling. It is the most complicated system I had to do with yet.
Yes, I have already one good long-only options system, but it is a "brute force" system that needs trading a basket of at least 10 uncorrelated instruments
and doing many trades per day, and requiring a relatively big acct.
This new system will be an "intelligent" system doing as few trades as necessary and with much less capital requirement.
Oh, btw, I'm a programmer, I just need to code everything, need to automate it... ;-)
I don't like monotone/discrete/manual/emotional trading... AutoTrading with intelligent bots is the way to go...
 
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Todo:
The main problem that remains to be solved is when the stock falls towards close the strike,
or goes even lower, while there is still much time till expiration of the option...
Hmm. what possibilities do I have in such a scenario?...
Ok, selling even more puts would reduce my average...
Or selling a call as a protective measure to lock-in the status-quo (ie. hedging) and wait till the stock rebounds, and then close the short call... or whichever of the two is more promising...
Any other alternative?...

(just thinking aloud... ;-)
 
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Do you even know what vega and gamma are? Let me tell you what they are: they're the things that are going to tear you a new one because you refuse to listen to those who've been there before you.

I can't tell if we're being trolled here or you're really that hard headed/unwilling to listen - critical SINS of any trader. No you actually shouldn't be suspicious of people who know this shit in and out and have seen every Joe Blow come along and proclaim how much "income" they're going to make selling covered calls or naked puts. It's not a grail and it's not new.
 
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