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Writing options for a living
- Thread starter torontoman
- Start date
Quote from chiguy:
i bought the straddle...
a push would have been if the straddle and strangle were priced at the strike interval of 2.50.
straddle = 3.5
strangle = 1.5
difference 2.00...the straddle is the better expectancy....
break evens are better on the straddle because of this...
i thought the earnings would have been either very good or very bad but they were even better than i had expected...
got lucky on this one....
What do I win?
Quote from chiguy:
the knowledge that you got.... that the others don't....
options are mostly math and part intuition...would you not agree...
just fishing for the "experts"...
have a good weekend..
I am no expert, but there is no intuition. I tried trading with intuition. Not a pretty sight. After reading this thread many times, I am convinced it's math.
But back to my question. Isn't it easier to sell options because you don't have to be as accurate as trading the underlying? Any other comments?
Quote from Samson77:
I was asking a question and I will rephrase it for those that care to share !
On a trade like this or any other that I can get the direction correct 70% of the time, do you really think that understanding all the greeks would be of any importance at all and do you think if I shared the exact same set up with one of you "pro's" and we both sell against the set up, that you will come out better then me????????
I ask this because I believe that it's really just about common sense at the end of the day and all the math is just nonsense imo.
Once again correct me if I'm wrong!
I can appreciate your point, but there are times if you are long the stock it will be less costly to not buy the put or sell itm calls when iv implodes if everyone also anticipates a strong down move.
How far of a point move did the underlying make while you were in your position and how much did the put gain?
Good luck, Chiguy. You know we are all watching. I paper traded earnings straddle. It did not work for me. Premiums are too high.
But does anyoner have an opinion about straddling or strangling AFTER earnings, when volatility is low?
But does anyoner have an opinion about straddling or strangling AFTER earnings, when volatility is low?
There are at least two areas where intuition routinely comes into play - underlying direction, and volatility.Quote from torontoman:
I am no expert, but there is no intuition. I tried trading with intuition. Not a pretty sight. After reading this thread many times, I am convinced it's math.
But back to my question. Isn't it easier to sell options because you don't have to be as accurate as trading the underlying? Any other comments?
And you don't even have to know the math. A rudimentary understanding of how price change in the underlying affects the greeks is all you need. You can pick that up today on the web at a number of sites.
That said, it is a rare breed that can speak the lingo as quickly as riskarb. Don't judge your understanding using risk' as a comparison. It isn't necessary to know it as well as he does. But understanding the greeks will help you undrstand why an option price moves the way it does.
And yes, I think collecting premium is better than paying premium - one of the reasons being the one you suggest. And yes again, I know one can make a living writing options, both naked and covered. Over the last two years I do so almost exclusively to any other strategy. It was rough at first, but I'll give you one guess as to why it was rough. Because at first I was paying attention only to "the math", and not to the direction of the underlying. I had omitted my usual TA evaluation of direction in favor of the math. Big mistake. It all starts with your "intuition" about the direction of the underlying.
Quote from inandlong:
There are at least two areas where intuition routinely comes into play - underlying direction, and volatility.
And you don't even have to know the math. A rudimentary understanding of how price change in the underlying affects the greeks is all you need. You can pick that up today on the web at a number of sites.
That said, it is a rare breed that can speak the lingo as quickly as riskarb. Don't judge your understanding using risk' as a comparison. It isn't necessary to know it as well as he does. But understanding the greeks will help you undrstand why an option price moves the way it does.
And yes, I think collecting premium is better than paying premium - one of the reasons being the one you suggest. And yes again, I know one can make a living writing options, both naked and covered. Over the last two years I do so almost exclusively to any other strategy. It was rough at first, but I'll give you one guess as to why it was rough. Because at first I was paying attention only to "the math", and not to the direction of the underlying. I had omitted my usual TA evaluation of direction in favor of the math. Big mistake. It all starts with your "intuition" about the direction of the underlying.
Thanks Inandlong. Good post.
Quote from torontoman:
I am no expert, but there is no intuition. I tried trading with intuition. Not a pretty sight. After reading this thread many times, I am convinced it's math.
But back to my question. Isn't it easier to sell options because you don't have to be as accurate as trading the underlying? Any other comments?
the "intuition" as i call it is an adjunct to the math...
as i look at an earnings straddle or whatever the play may be i take past history of my experiences and try to guess-timate the value of the play in respect to the current values being bid or offered...
it does not fit a historical profile as it is a one-time event lasting overnite or minutes at best....
call it what you will but that's how i do it..