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Options selling is a risk vs reward game. The closer you sell to the money, the bigger the reward in terms of higher premiums but your risk also increases quickly.
And no, you absolutely do not need to go after the higher premium to achieve solid returns. You can sell a tiny strangle (only ONE put and ONE call) with strikes that have delta's below 0.10 on many markets and be able to make good money. The other thing is in order to get decent premium at far out strikes with low delta's, you must be willing to wait longer or be willing to trade farther out months where the way out of the money strikes have plenty of time premium.
Can you help answer these questions from other members on NexusFi?
Jun CL puts. 60 DTE. As I write this Jun futures are down 1.06.
70 puts settled at delta .0071 friday and at a premium of .03. Right now it is .03 bid .04 ask. Not much movement. You can sleep well even though futures are down.
80 puts settled at .0458 delta and at .19. Right now .24 bid .26 ask. It has moved .06 against you. You are not feeling well about this.
85 puts settled at .1196 delta and at .53. Right now .64 bid .71 ask. It has moved .15 against you. Pain is being felt.
Jul CL puts. 92 DTE.
70 puts settled at .0154 delta and at .08. Right now .09 bid .11 ask. A little movement but not too bad.
80 puts. .0781 delta. .43 premium. Right now .50 bid .57 ask. .54 last. Current delta .0909. Pain.
85 puts. .1625 delta. .96 premium. 1.10 bid 1.21 ask. 1.17 last. delta is up to .1793. Major pain and now very close to ITM.
well looks like the Cyprus news may not be so bad as everybody thought---so far at least. Futures opened yesterday down 20 and as I write this only down 3.5
Anyways, was wondering an opinion on a trade:
/ES April 1350 Put. DTE is 32. Credit 475 and it reduces my buying power (as per TOS) by 7500 ?
thanks and any critique would definitely be welcome
Im sure this has been posted before so I apologize in advance but how did you get 2 % ? If i take the credit received and divide by my buying power reduced I get a 5 % ROI ? obviously im doing something wrong so if you could please elaborate?
