Want to make 1k / month on 100k, selling options.

Making 14% a year on options is a pedestrian task...I'm pretty sure a monkey with position sizing software could do it. Keeping those gains in a fully compounded account when it hits the fan is the difficult part. Black swans swim along a lot more than their name implies when you're constantly exposed to the market's machinations. And the problem is, when these positions go bad on you, they do so I the worst possible way. You get hit with the delta move at a time when volatility is rocketing away from you and liquidity dries up while all those people you wrote the contract to decide to hunker down and weather the storm under your protection. If you're lucky in that instance, the call comes from the margin desk; for the unlucky it comes from a debt collector.
 
Tomaz26 said:
Do you think this is doable with limited risk, or should I look elsewhere to get that return? Trading futures, etc..? I had quite a success in 5 months selling iron condors and strangles on commodity options, but I think I was taking too much risk. I managed 70 yearly ROI by selling far OTM calls on natural gas before it tanked and on some crude oil futures options. But I was lucky not to experience any dramatic moves. I learned a lot during those 5 months and found out that my strategy is just disaster waiting to happen. I can collect 1k usd per month in premiums until some dramatic move in the underlaying happens and I loose all my gains and then some..

I want to be able to live off of about 150.000 USD in 5 years (currently at 100k). Before thinking if I am crazy, let me explain that I live in Slovenia and that our average salary is about 1500 USD. I was also thinking about moving to Asia or some other even cheaper location.

So should I continue with selling options on commodities but diversify more, not to take too much risk in any one of them? Should I do this each and every month or wait for huge moves when IV get really high and take advantage of it? Until now, I just sold another strangle when previous one expired and did not wait for any IV increase, but this last time I was a week to fast, so when CL tanked my position was hugely underwater (sold strangle with 76 and 51 legs). I had a feeling CL will bounce back so I just waited keeping fingers crossed and I exited my position last week with some small profit.. I figured if I only waited one week more I could sell hugely inflated puts after this move down and take some nice cash. But on the other hand, those moves are rare so if you wait only for those, you sit mostly in cash.. Not sure I can make enough returns this way..

Also I was selling only 25 to 40 DTE and deltas of 0.02 to 0.03.. I see most guys that do this successfully rather sell further out like 90 to 120 days and with bigger deltas, where you can then close the trade with 50 % profits after 30 to 60 days. The way I way doing it I almost had to wait until expiration, because commissions were huge.
Just for example, I did one trade where I sold CL spread for 0.02, took in 1.200 USD in premium and paid 550 USD commissions on IB :)))).. I do not want to think what would happen if CL would increase dramatically that time.. I used 20 % of capital, but still..

So how would you go about it if you wanted to make about 1.000 USD on 100.000 USD capital. Stick to options where you do not need to guess which was the underlaying will move and still make money or do more directional plays with futures etc..

thanks for help guys

best regards

Tomaz
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very interesting post, i will send you a couple of links by private message.
 
beerntrading said:
Making 14% a year on options is a pedestrian task...I'm pretty sure a monkey with position sizing software could do it. Keeping those gains in a fully compounded account when it hits the fan is the difficult part. Black swans swim along a lot more than their name implies when you're constantly exposed to the market's machinations. And the problem is, when these positions go bad on you, they do so I the worst possible way. You get hit with the delta move at a time when volatility is rocketing away from you and liquidity dries up while all those people you wrote the contract to decide to hunker down and weather the storm under your protection. If you're lucky in that instance, the call comes from the margin desk; for the unlucky it comes from a debt collector.
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Exactly.. That is what I wrote few posts earlier. It is not hard to do it, but you would have to keep portfolio size fixed. So that if disaster strikes after a few years, you still keep gains from previous years.. But then again you miss on all the compounded gains and get behind after 30 years.. :)
 
ironchef said:
OK,
where can I find that monkey? :D
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Try the Zoo;
Observe both the animals, and humans o_O, :confused:
zoo.jpg
 
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