I would like to hear about some losing trades on selling puts during the crisis and how those went down.
Blowing up is what everyone is going to be afraid of but that is going to largely be from larger funds taking illiquid positions. I assume when things start to look bad you have no trouble getting out?
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With options, you can't count on your stops getting filled reliably in a crisis situation. Options are a much thinner market than futures and the times when you really want to be able to get out in a hurry (such as a big market crash) are the same times when your stop loss order won't be able to find liquidity to execute at the price you expect.
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I can attest to this. During the last crisis I lost a bundle on selling puts on equities. Currently I've been trying calendars with initial good IV skew. With the current "crisis" I lost all my profits on my current trades and wasted a month and a half just waiting for these to pan out, only to come up with a loss.
And that's right about stops not working on options. On TOS, there are only stops on options based on option price only. And during a giant move up or down, the option price can gap anytime. TOS sure as heck isn't going to honor an untriggered stop loss due to an overnight gap.
I'm thinking of getting out of positional options on equities completely. One needs a lot more capital to profit from IC's and calendars anyways , perhaps at least 300k starting. (And just do it simu for a few more years or so until I prove to myself it can't really be done). That's why this thread interests me. Selling options on futures may be a different kind of game than selling options on equities entirely. Can't hurt to explore other "options", pun intended, at least on demo.
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You can use various combinations of options and the underlying to limit risk, and also to maximize profits, for that matter... It can get complex fairly quickly, though... But, for me at least, that's the allure of options. You get so many more options (pun intended), and they offer good mental exercise..
I see my answer eluded you in my last post, so I'll try again:
You can not use stop-losses like with futures when selling options. When you have sold an option, that means someone else owns it, and you can't take it back. You can, of course, buy another option to offset your position. If you've sold a put, you can buy a put with the same strike & expiry, and they will cancel each other out.
Also, as @GoldStandard stated, the nature of the options market does not inspire active trading like with futures. The limited liquidity and bid/offer spreads, are not enticing. Do not use market orders, unless you absolutely have to (which you shouldn't!). You are often better off using the underlying and/or other options to balance your position, rather than selling your inventory outright.
Last edited by Lornz; August 3rd, 2011 at 10:30 AM.
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