I don't think I have ever come across an options strategy (which is multi leg and requires adjustments none the less), where understanding of Greeks would be optional! Why would a respectable prop firm advertise it this way? SMB University
What are some low risk to reward ratio strategies?
- Thread starter rabbitsfoot
- Start date
That is what I used too when I traded options spreads. It did not help me for the application to tell me the options I sold had an 88% probability of being OTM at options expiration. When it went ITM and wiped me out before I can even close the trade, I knew as a strategy, this was just too much risk for very little gain!
Thanks are you buying calls and puts only or do you sell options too?
No. I buy calls and puts only and trade directionally. Do not sell any options. Too much trouble for the little you make. Just my 2 cents.
Just fyi - the standard approach in this situation is to roll the side that where the underlying moved away closer to the new price and collect some credit. As for the ITM, the recommendation is to roll (technically close the trade and open the same position) to a later month and also collect more credit. The reason is that probability of touch works both ways. With Dis you could be ITM today but next week the stock could easily go down 5 points.
By collecting the additional credit, you widen your break-even points, however by tightening the spread you lower your POP. It's a trade-off and a gamble, but if it moves in your favor you can get a scratch.
Those probabilities are complete BS. In fact most, if not all, probability measurements are BS. There is a 100% chance of whatever will happen happening, and a 0% chance of everything else. If I roll a regular, fair six sided die there is a 100% probability that it will land on a particular number based on the physics of how the die was thrown (angle, force applied etc.) but since we can't calculate all of those things exactly we use a 1/6 probability of landing in any number as a usable guesstimate. If you're relying on those mathematically generated probabilities you have nothing, human behavior is not explained by mathematical functions, only past data where 100% of the information is known and then mathematical models can be created to describe that data and are then applied to the future.
They work until too much new data enters the data set and then they don't work anymore. If it was "correct" in the first place it wouldn't become outdated when new data is added.
BS as in Black Scholes?
Just thought I would share this ...
Answer to Are there more profit opportunities by options selling strategies or options buying strategies? by Aaron Brown https://www.quora.com/Are-there-mor...ron-Brown-165?ch=99&share=2bb711c8&srid=3zJ4G
Answer to Are there more profit opportunities by options selling strategies or options buying strategies? by Aaron Brown https://www.quora.com/Are-there-mor...ron-Brown-165?ch=99&share=2bb711c8&srid=3zJ4G
BS as in bullsh!t
Selling options always puts you in the position of collecting the money that comes from time decay. This is known as Theta (or "premium") and for many options traders their entire strategy is about selling options and collecting premium.
A typical iron condor sells the puts strangle at the standard deviation (sell 1 call and 1 put, both OTM, each at about a 30 delta - then add the wings (buys even further out than the center strangle) in order to decrease your buying power reduction (and also to protect you from extreme moves).
Non directional bias premium collection Example:
XYZ stock trading at $100
buy call at $140
sell call at $130
--------------------- XYZ at $100 -----
sell put at $70
buy put at $60
You collect more premium for the inside trades (the sells) than you spend buying the wings. So if you are lucky the stock does not move much over time and you collect more premium every day as the options lose value.
If the underlying moves in any one direction, roll the UNTESTED side closer to the middle. For example, if XYZ goes up, then you buy the put back at $70 and pay a little but you get more credit by also selling the $80 put. Then also sell $60 and use some of the credit from the previous trade to buy the $70 put.
New positions below:
buy call at $140
sell call at $130
--------------------- XYZ at $105 -----
sell put at $80
buy put at $70
This keeps you in the game without costing you money. However, it is best NOT to do this every day. Ideally you should only do this when your position (XYZ) moves way ITM (general rule: when it is down double the credit you received for it).
By managing less you save on commissions, it is also easier to track all your moves AND you should not adjust when there is still enough time for the underlying to go back to where it was originally.
My fave directional play - Bullish: sell deep OTM puts. (bullish put credit spread)
XYZ at 100
sell naked $75 puts - or
sell $90 puts for credit but also buy $75 puts to reduce buying power reduction and to reduce risk of stock dropping too far.
A typical iron condor sells the puts strangle at the standard deviation (sell 1 call and 1 put, both OTM, each at about a 30 delta - then add the wings (buys even further out than the center strangle) in order to decrease your buying power reduction (and also to protect you from extreme moves).
Non directional bias premium collection Example:
XYZ stock trading at $100
buy call at $140
sell call at $130
--------------------- XYZ at $100 -----
sell put at $70
buy put at $60
You collect more premium for the inside trades (the sells) than you spend buying the wings. So if you are lucky the stock does not move much over time and you collect more premium every day as the options lose value.
If the underlying moves in any one direction, roll the UNTESTED side closer to the middle. For example, if XYZ goes up, then you buy the put back at $70 and pay a little but you get more credit by also selling the $80 put. Then also sell $60 and use some of the credit from the previous trade to buy the $70 put.
New positions below:
buy call at $140
sell call at $130
--------------------- XYZ at $105 -----
sell put at $80
buy put at $70
This keeps you in the game without costing you money. However, it is best NOT to do this every day. Ideally you should only do this when your position (XYZ) moves way ITM (general rule: when it is down double the credit you received for it).
By managing less you save on commissions, it is also easier to track all your moves AND you should not adjust when there is still enough time for the underlying to go back to where it was originally.
My fave directional play - Bullish: sell deep OTM puts. (bullish put credit spread)
XYZ at 100
sell naked $75 puts - or
sell $90 puts for credit but also buy $75 puts to reduce buying power reduction and to reduce risk of stock dropping too far.