Taking loss per plan may work if you are at desk and watching the market. But not for persons with Job/other occupation. Also the flash crash is speedy (with in 10-15) minutes and so even checking the market few times a day would not work...
Main question is how to protect the account from that risk and still earn decent return? Once broker has liquidated the account/positions (or you have taken stop loss of 20-30 times premium) there may not be much left in account to recover....
If when you put on a trade and the margin is 500 you should have 1000 cash excess.
If the loss on the premium plus the increase in margin wipes out your $1000 cash excess it is time to give up on that trade.
I'm switching and probably I will now get out early on 50% of my options. Depends on when the option goes to the lowest price possible and whether the ROI for keeping it to expiration is worth it. And if I can get out at a reasonable price.
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yep, i know the 67/33 bit......just didnt know you had a stop target limit, as well as a stop loss.
and good point, if the ROI is close to say c90% (my subjective measure) of expected total ROI with a certain amt of DTE left then perhaps close out / else accept a possible large amt of risk for a v small payout.
loads to think about.
will be signing up for the webinar!
(p.s. and will set up a weekly thread over the weekend)
If you are worried a crash, you could always put on credit spreads. You won't get the same premium as naked positions, but the margin will be less, so you could sell more credit spreads...but when you sell more, the loss could be more as well (difference between strike prices minus premium received * # of spreads sold)...a lot of different ways to skin the cat, but just be sure that whatever the risk is, you are comfortable with it and losing the full boat on the trade before you place it.
I agree that there is always the chance of a flash crash...I remember watching it and wondering what the hell was going on...I wasn't in the market at the time, but remember the free fall.
While we have no idea what will happen in the market, all I can do is play the probabilities of certain things happening or not...while I know it can happen, I do not think it is likely ES will be -100 points next week...but that doesn't change the fact that it could happen.
Are you trading options? If yes, what product(s) are you trading them on and what is the strategy you are using?
I'm under the impression that a 25% move within 30 days would be more profitably capitalized on with a "strike price spread" of options - even if you bought two months out, or exercised with only a couple days left till expiration when buying one month out.
Absent there being options software to back test what would have happened if you made those trades - I cant be sure and have no context - not even being clear on the impact of exercising vs selling, how it differs from equities to futures contracts, ect.
Is it irrational to not let a broker optimize the orders b/c they can't give an exact figure either?
Thanks. Enjoy the weekend.
"Be right and sit tight." - Jesse Livermore
Last edited by whatnext; April 27th, 2013 at 12:21 AM.
I had considered credit spreads but as you mentioned the return is even lower and so not worth to me...
Regarding my strategy, it is kind of similar but on little longer term, like wait for ES to go down few days then sell options with 30-40 day expiry and about 2 significant support out (on weekly charts - so usually they are about 150-200 points away). I had sold weekly before but got burnt and in my personal experience I find it more profitable to buy weekly options rather than selling them...I know this thread is about selling options but it is just that I could not find a way to control risk on weekly options that is acceptable to me and that is why I am asking for any thoughts/ideas for that.....
I am still on board for selling longer term and deep OTM options with preparedness to delta hedge or roll further....