The Put Seller's Journal

Here I explained (for a simplified case) the calculation of the "CostBasis" when shortselling a Put.
https://www.elitetrader.com/et/thre...ents-w-r-t-options-sales.370425/#post-5698950

Ie. this formula usually gets used in CashAcct when shortselling a Put:
CostBasis = Strike - Premium

Using that result and available cash one can calculate how many contracts one can open.
Of course in reality one has to multiply by 100 b/c each contract means usually 100 shares (exceptions possible, depending on the underlying).
 
Robert Morse said:
You lose your customer priority status on the option books, lose access to most option smart routes and are then subject to higher option exchange fees more in line with market makers and broker dealers. As an example, if a trading month has 21 trading days, that is 8190 option orders you want to stay under. Every order counts.
More...

@Robert Morse , thanks for the info. I got a similar message from IBKR telling me that I have exceeded the 390 limit. This is a real pain for me cos I do a lot of cancel/re-submit of orders on a daily basis and my limit will easily be exceeded every day. I'm now on the 'naughty step' for this quarter and have to suffer the consequences, that you mentioned. I don't even mind the higher fees; but the idea that my fills will worsen is just outrageous.

As someone who works in the industry, what is the reason for this rule by the exchange?
Why are they penalising the customers who bring in THE most volume and trades into the markets? Surely, we are generating a lot of business for the brokers/exchanges as opposed to someone who puts in 1 order a month?

Is there any way to deal with these measures?
 
@ffs1001, I think the rule is on a per account basis... so you could use multiple accounts, IMO.
To be on the safe side, you should give a "role" to each acct, in case someone asks... :)
For example "bot1", "bot2", ... :D
 
earth_imperator said:
In case you wondered what "rolling an option" practically means:

It's mostly used with calendar and diagonal spreads (ie. where 2 (or even more) different DTEs gets used):
When the shorter DTE expires then you will be left with the other leg, ie. the longer DTE.
You now have 3 choices you could undertake:
1) Just keep the remaining leg, ie. do nothing.
2) Close the remaning leg.
3) Replace the just expired one with a new similar one in functionality, so that the other remaining leg continues its intended initial function (as a supporting leg for the other main leg). This replacement itself is called "rolling an option" :)

The more general definition is:
Any replacement of an option by a similar one, but of course with a new expiration date, is called rolling.
Ie. one renews/"extends" the remaining time of the option.
Usually done with shortselling to sell a new, similar option to collect new (additional) premium.
More...
Here a guy who made some videos about his options rolling:
https://www.elitetrader.com/et/threads/the-1-skill-in-selling-options.370521/

Unfortunately too many ads in it... Barf! :-)
 
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How I use the PnL diagram for calculating a PositiveArea% that can be used as the probability for success:
https://www.elitetrader.com/et/threads/is-there-a-tool-to-pick-the-best-option.370791/#post-5708727


Instead of using "-3SD to +3SD" I'm using "-3SD to +150%" :
https://www.elitetrader.com/et/thre...-stddev-in-last-20-years.370854/#post-5709670


How to calculate (cumulate) the Greeks (Delta, Vega, Gamma, Theta, Rho etc.) for a multi-leg position:
https://www.elitetrader.com/et/threads/counting-the-greeks.370842/


How to simulate option trades using the optioncreator web tool:
https://www.elitetrader.com/et/thre...-term-and-iv-change-risk.370740/#post-5707737


Another thread about "IV risk", ie. the undesired rise of the IV, especially when shortselling,
(or undesired fall of the IV when position is long):
https://www.elitetrader.com/et/thre...-term-and-iv-change-risk.370740/#post-5707359


Why one needs to use an options scanner (options screener) for finding good trade candidates:
https://www.elitetrader.com/et/threads/is-there-a-tool-to-pick-the-best-option.370791/#post-5708722
https://www.elitetrader.com/et/thre...ck-the-best-option.370791/page-2#post-5708788
 
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