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I sell S&P puts on VIX spikes. At VIX 11... way too much risk for a VIX spike and little premium. Would not be a lot fun to watch the price of the puts go up 10x+ from a silly VIX spike at these levels.
What are you selling, monthlys, weeklys? How many DTE and what Delta?
That is true, although you can do the same thing with other futures options, but starting with a much better ROI/Delta ratio. I just ran the ES thru Dudetooth's spreadsheet and you have to go up to a 4 delta to sniff a 2% ROI.
I did some ZM puts this week with a 1 delta and a 3.88 ROI.
Until I run out of other "options" (or until their ROIs improve), I'm avoiding ES for now.
CORRECTION: Based on Friday's ES closing numbers, the lowest delta offering a 2% ROI is 6.96. That is too close to the fire for me.
Last edited by mu2pilot; June 7th, 2014 at 05:34 PM.
I agree with all this and I'm not arguing with you.
But, the reason why you can flip ES options quicker is because the market is moving in your direction. All I'm saying is that if you trade any other option and it moves in your direction like the ES has, you'll have a very nice ROI in short order. I don't think there is anything special about the ES. It is a result of its recent market movement.
The challenge I remain to have is finding enough, different options to sell. I don't want to be heavy in any one option. I want diversification and I have it to some degree. But my challenge happens when an option moves in my favor and I lock in 5-10% ROI over a couple weeks' time. I can't always replace it with something else that meets my minimum criteria.
For example, right now, I have RB options that, when I sold them, offered a 3.66% ROI and a 33 DTE. Now, 15 days later, I've made 7.53% on capital risked and can expect only .43% over the next 18 days. As soon as I can find something to replace it, I'm going to buy it back in.
I can see the potential for lowering my minimum ROI standards and replacing something like this with even a 1.5% ROI option. But I am having difficulty getting excited about that ROI.
I'm still learning and am still developing my trading plan. I'll get better.