Wiped out selling naked puts with no stop loss or credit spread

There is no safe way unless you are going to limit the loss with spreads. To be blunt, you got greedy. There is a reason someone is buying those puts and those that bought them just earned enough to cover their insurance till the next time this comes around - especially with vols at such historic levels. If selling a put, think what is the worst case - war, natural disaster, company fraud, etc. and decide if you can take a loss if the markets move drastically. You also need to keep in mind you don't need the markets to move through your strikes as a significant spike in volatility can do just as much damage. The markets are hot but these are crazy times - I'm not sure when the next spoke in vol will come or what will provoke the markets but I would make sure you are willing and able to accept a significant loss and forced cover when shorting.
 
R3LZX said:
So I had about 100K in ES and was just cruising along with the normal expectation that it would easily bring in some pennies as always, (about 12K) I've done this same trade many times with CS, and NG, as well as NQ and RTY. I am not new to any of this, I've been picking up pennies in front of the steamroller for quite some time. Sell a strangle, don't sell too much or it will easily move against you etc etc. Keep it 15% OTM. But this time, Feb 5th I got cleaned out.

I was stupid, I had no stop loss, and had not purchased any puts closer to ITM. Again I was stupid, and was going to adjust my trade later, but was traveling and I got liquidated. false security in the low vix market that we have had.

The would haves and could haves all come to light, if I indeed do decide to get back in, and manage to come up with some money somehow someway, I would like to know if any of you guys have a multi year track record with this strategy of Credit Put spread Bull put Spread (same thing) of ES, SPX, etc. with a stop loss of course for added protection.. I figure half of something is a whole lot better than nothing. I know selling options is dangerous, and as I type this I'm closing my office and running my small business form home and have a lot of financial problems, but I am a trader at heart, and truly believe that there is a long term way to make this trade consistently work.


I guess the real question is: If you are going to sell naked puts, what is the absolute safest way? I personally think that Bull Put Spreads seem to be the best way to go, with a stop loss to prevent risk of ruin. (turtles anyone?)

Should I give up? No. but God I'm having a hard time here with this.
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How much of your buying power were you using? I sell strangles and I was down about 10% on this down move. I’ve now recovered all my losses and my account was no where near getting blown out.
 
eastern_warrior said:
There is no safe way unless you are going to limit the loss with spreads. To be blunt, you got greedy. There is a reason someone is buying those puts and those that bought them just earned enough to cover their insurance till the next time this comes around - especially with vols at such historic levels. If selling a put, think what is the worst case - war, natural disaster, company fraud, etc. and decide if you can take a loss if the markets move drastically. You also need to keep in mind you don't need the markets to move through your strikes as a significant spike in volatility can do just as much damage. The markets are hot but these are crazy times - I'm not sure when the next spoke in vol will come or what will provoke the markets but I would make sure you are willing and able to accept a significant loss and forced cover when shorting.
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Bottom line this is absolute truth, I took the boring movements of late with the S&P and did not treat it like the sleeping dragon that is, I should have had my stop in at my 20% and followed my rules. Livermore 101. Thanks for the response
 
Sweet Bobby said:
How much of your buying power were you using? I sell strangles and I was down about 10% on this down move. I’ve now recovered all my losses and my account was no where near getting blown out.
More...


I was in the 1800 ESH8 its now 20 days out, it went from 1.00 and change to 3 or 4.00 instantly, I think on this particular contract it moved exponentially more than the others for an unknown reason and thats what caused the liquidation. I never even saw how much it moved as I was traveling but only saw the aftermath. If anyone has a bloom term i sure would like to know what it did.
 
Even the pros got creamed this month. This is the NAV for the LJMIX mutual fund.
The short vola trade became too crowded with professional money.
Next few weeks will be interesting as Feb numbers start to roll in, a few casualties perhaps.
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R3LZX said:
So I had about 100K in ES and was just cruising along with the normal expectation that it would easily bring in some pennies as always, (about 12K) I've done this same trade many times with CS, and NG, as well as NQ and RTY. I am not new to any of this, I've been picking up pennies in front of the steamroller for quite some time. Sell a strangle, don't sell too much or it will easily move against you etc etc. Keep it 15% OTM. But this time, Feb 5th I got cleaned out.

I was stupid, I had no stop loss, and had not purchased any puts closer to ITM. Again I was stupid, and was going to adjust my trade later, but was traveling and I got liquidated. false security in the low vix market that we have had.

The would haves and could haves all come to light, if I indeed do decide to get back in, and manage to come up with some money somehow someway, I would like to know if any of you guys have a multi year track record with this strategy of Credit Put spread Bull put Spread (same thing) of ES, SPX, etc. with a stop loss of course for added protection.. I figure half of something is a whole lot better than nothing. I know selling options is dangerous, and as I type this I'm closing my office and running my small business form home and have a lot of financial problems, but I am a trader at heart, and truly believe that there is a long term way to make this trade consistently work.


I guess the real question is: If you are going to sell naked puts, what is the absolute safest way? I personally think that Bull Put Spreads seem to be the best way to go, with a stop loss to prevent risk of ruin. (turtles anyone?)

Should I give up? No. but God I'm having a hard time here with this.
More...


The marriage to your strategy has already caused the effects of a sudden and harsh divorce.

May you pick yourself up, dust yourself off and wisely choose a different partner to dance with.

There are plenty of fish in the sea.

The previous one you should just let go of and not try to make it something that it is not.

A steamroller is a steamroller and will always be a steamroller no matter what shade of lipstick.
 
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