When Selling Options, What Delta & Expiration Date Do YOU Like?

[taowave]

Hi,you are operating under the assumption that most traders continuously delta hedge..

I would guess that most traders sell 85-95 percent spot put,light some candles and say a little prayer...

If short, it is from the realization of less volatility than implied.

If long, it is from the realization of more volatility than implied.

Most beginners don't know that this is the cause of the P&L of a option.

Most beginners don't put an emphasis on price. They look at one-dimension of an option, such as time, and go by that, when options are multi-dimensional. Not saying you are or aren't, just putting it out there for your information.

Go to Chapter 10; http://docs.finance.free.fr/Options/Dynamic_Hedging-Taleb.pdf

 

[BlueWaterSailor]

I would guess that most traders sell 85-95 percent spot put,light some candles and say a little prayer...

That explains why their P&L sucks. Your typical deity is not options-savvy; all that "thou shalt/shalt not" crap is is obviously way too binary. Might work for day-traders, but for derivatives? Shyeah.

I mean, think about it. That "man made in his image" stuff - is that a clue, or what? You need a deity that can process multiple sensory inputs as well as send coordinated control signals in lots of directions at the same time, a CNS that's organized around multivariate analysis...

Or, at the very least...

You following the logic here???

Candles. Duuude. Unless they're black ones arranged in pentacles, that's just fundamentally wrong.

 

[tommcginnis]

You following the logic here???

Arrrrrrr, Matey!!! And you DO realize that we just passed September 19th, don't you?!?

"Ra-men!"

 

[traider]

Hi,you are operating under the assumption that most traders continuously delta hedge..

I would guess that most traders sell 85-95 percent spot put,light some candles and say a little prayer...

how can you out delta hedge the machines? They have almost 0 transaction costs or are paid hefty rebates and also have speed advantage

 

[taowave]

Trade the S&P options vs futures.....

Sell Vol 3+ months out if and when you deem it rich...

If rebates or transaction costs are a concern,you are in the wrong trade

how can you out delta hedge the machines? They have almost 0 transaction costs or are paid hefty rebates and also have speed advantage

 

[CannonTrading_Ilan]

Assume for this question that Delta and Prob ITM are the same thing. I have been watching the educational courses at Option Alpha and (when selling/shorting) he sticks with a delta of around 0.3 giving him a 70% chance the options will expire worthless...and 25-45 days till expiration as that range has the highest theta impact on option pricing. Does that information sit well you you bad ass elite traders? Do you prefer something different?

thanks.

EDIT: Delta of .30 determines the anchoring strike of which you can build your spreads off of etc...

I like selling vertical call spreads or vertical put spreads. anything between 30-70 days depending on the market and premium. I have experimented with selling diagonals but found out that for my specific situation/time etc. picking a don the market is not going to and using vertical for protection works best.

At rare times I will do ration spreads when volatility is extremely high, like buying a gold 1600 call and selling 1 1650 calls if I can get credit.....

This is just personal / general preferences i am sharing.

 

[ffs1001]

^ Reading a simple trade related post like this is a breath of fresh air. Sometimes all the talk of vomma, volatility surfaces, kurtosis, microstructure, forward implied forecast vol, synthetic this, natural that, actual realised implied triple-legged high-winged broken-nosed skew etc, makes for a heavy read.

I trade a lot of credit spreads. When the SPX hit 3020, I sold Oct 3075-3100 calls.
I'm also doing diagonals, as they allow me to fine tune my theta/vega.

At rare times I will do ration spreads when volatility is extremely high, like buying a gold 1600 call and selling 1 1650 calls if I can get credit.....

Do you mean "Selling 2 1650 calls"? Otherwise, this is just a debit spread.

 

[Wheezooo]

"If rebates or transaction costs are a concern,you are in the wrong trade"

...Funny, I'd say if rebates and transaction costs aren't a concern to you, you are in the wrong trade.

 

[Wheezooo]

That explains why their P&L sucks. Your typical deity is not options-savvy; all that "thou shalt/shalt not" crap is is obviously way too binary. Might work for day-traders, but for derivatives? Shyeah.

I mean, think about it. That "man made in his image" stuff - is that a clue, or what? You need a deity that can process multiple sensory inputs as well as send coordinated control signals in lots of directions at the same time, a CNS that's organized around multivariate analysis...

Or, at the very least...

You following the logic here???

Candles. Duuude. Unless they're black ones arranged in pentacles, that's just fundamentally wrong.

You're picking this up quickly

 

[BlueWaterSailor]

Arrrrrrr, Matey!!! And you DO realize that we just passed September 19th, don't you?!?

Oh, heck yeah! A close friend of Cap'n Slappy's and I used to hang out in a USENET group, and she turned me onto it in the early days. Besides, after working Ren Faire for a couple of years and singing sea chanteys as one of The Bilge Rats in St. Augustine (sung in the key of "ARRRR", of course), my friends would disown me if I dared to miss it!

"Avast, ye scurvy scalawags! Shiver me timbers if I don't masthead a dozen o'ye - where's my grog?"

"Ra-men!"

And may the sauce be with you, too!