The #1 Skill In Selling Options

I’ve been trading from the short vol side for 15 years. I only lost money in 3. And all those losses were less than 10percent.

Short vol doesn’t blow you up. Leverage does.


TheDawn said:
Just because everybody is flocking to something doesn't mean that thing is necessarily good. Everybody loves Krispy Kream donuts does that mean donuts is good for you?

Judging from your post, you are either a retail trader who's on a profit streak and thinks you've found the holy grail or a market maker dealer who's been using us retail traders as fodders and is afraid that my posts about the reality of options trading are going to scare the retail traders off. LOL

If you are the former, congratulations but don't think it's because of your skill it's because you've been lucky that you haven't encountered the big blow-up yet but don't think you will be able to avoid it forever. One of those days, it will come. So some advice to you: don't spend too much when you are making money because they are all borrowed funds and one day you will be giving them back hopefully not all of them back. That's not your fault that's just how the options game is structured. Save some money now so when the big blow-up happens you will still have some left to pay the mortgage and the bills. With the high inflation that's happening right now, you are going to need it.

If you are the latter, too bad I just called your game. Seeing how angry your post is, I think I hit the nail on the head. But don't worry you are not going to run out of fodders. As long as there is one cent of profit to be made, people will stick flock to it especially when the money comes so easily. The odds of winning are so low in casinos and lottery buying and people still flock to them. I understand that trading is competition and we retail traders are basically competing against the best of the best and the most experienced but I just wanted to point out that the options game, with how it's structured is not as fair and equitable as what people think.
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87 had to be put selling...What else could it be???

VOL exploded to 200 plus and clearing firms forced traders to close short put positions in the hole as they had 10 bucks in their account...

The opening fills to cover puts were so insanely priced,the exchanges tried to get market makers to adjust pricing well after the trade..if I remember correctly,days later









ETJ said:
"Making good money" - that's great. Former MMs at CBOE would come upstairs and complain that they made $ 5 million for the team and still get fired. They couldn't understand why.

You would see the lead MM and ask them if the story was true and it almost always was. Ask them why they fired the trader and the answer was always the same "They made $5 with $12 million at risk. The extreme negative assumption would, as another poster mentioned, eventually would kill them. Nickname for the trade was akin to unprotected sex in a third-world country. The most likely result would be fun. A very small percentage of death.
Trick question - what strategy lost the most money in 1987? Hint it wasn't index put selling.

It is a free country and 87,89 and 08 were rare events in the broad market. In single-name equities, you get them frequently.

First question you ask when interviewing a candidate is what the trade should have potentially earned.

You can't eliminate all risks - even spread trades can have a negative assumption, but if you underestimate risk you will eventually have a bad event.
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Overnight said:
VIX has been hovering around 30 for weeks, and the ES has been ranging hundreds of points a week! Just, you know how you tell a story! You are just so funny!
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It's been, what, just over a week since SPX realized like 5% in one day with VIX implying well under 2% (<30 / 16) for the month???

How quickly people forget.
 
Buying puts after the sell off was a permanent impairment of capital. L

taowave said:
87 had to be put selling...What else could it be???

VOL exploded to 200 plus and clearing firms forced traders to close short put positions in the hole as they had 10 bucks in their account...

The opening fills to cover puts were so insanely priced,the exchanges tried to get market makers to adjust pricing well after the trade..if I remember correctly,days later
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Try again. Think parity. Ironically, J P M pre-Bear Sterns ran the benchmarks. 87 was pre-Glass Steagall. So limited Institutional participation. The world evolved around the OEX. The funny part of this - the OCC was unable to risk calculate for options priced over $99. Their systems could not carry an option over $99. If you were a MM and sold an option for $3 and it last traded at $102 - it showed on your sheets (yes sheets back then) at a profit.

What strategy lost the most money?
 
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Still not sure where you are going..I traded OEX and XMI. I knowxhow much I sold puts for( long conversions) on the opening.Cant imagine anyone losing more money than naked put sellers..
 
newwurldmn said:
I’ve been trading from the short vol side for 15 years. I only lost money in 3. And all those losses were less than 10percent.

Short vol doesn’t blow you up. Leverage does.
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less than 10%? That's like what? 9.95%?? That's still a lot. On a $100K portfolio let's say, you would've lost close to $10K, that's 6 months of mortgage payments for somebody. Remember we are talking about retail traders here not some big-shot institutions that have trillions of dollars of assets. Even if you shrink that portfolio to $10K, 10% is still $1K, that's still 5 weeks of grocery for a family. So basically one loss, that entire family doesn't get to eat for 5 weeks assuming the trader is playing with only $10K of their savings.
 
If you ever read Ron Insana's book he has some great stories about 87. He was in the CBOE classroom and when classes were canceled, he just roamed the floor for the week.
"Trader's Tales." It may be hard to find.
 
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