Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Good example. If you sell corn contract option at $400 and plan an exit at $600, how do you make entry that is precise enough to prevent an adverse market move to stop you out? How do you assure yourself the proper entry?
The other question is that how do you guarantee an exit when it hits $600? Do you use stop loss order to do that for you?
Many thanks. It is my opportunity to meet an option selling guru online and get the questions answered.
Best Regards
David
Can you help answer these questions from other members on NexusFi?
Please read the whole thread. You will find some contributions where I talk about these topics.
In short: Usually my stop loss is oriented at the chart of the underlying. I use fundamental information and important support / resistance lines to determine entry and stop loss. But of course it happens that I am stopped out quickly ...
As I wrote today I usually exit only end of day. I never use stop orders for reasons already described in detail in this thread and in Ron's thread.
On June 20, James Cordier has this in his blog https://www.optionsellers.com/summertime-gold-in-the-quiet-silver-market/ . He recommended March 2019 C22/P14 strangle on Silver with a premium of $1300 collected per strangle. However, I found it is difficult to get that kind of premium in this quiet market.
The total premium of both legs of strangle adds to about 20 cents in its ask price. This translate to $1000 premium per strangle. In this quiet market, I doubt the premium will spike up to 26 cents any time soon.
Anybody know how James can get this kind of premium? Please share with us.
1. As you say James recommends to sell the strangle for $1300. He does not write that he sold it at this price. But obviously at this price the trade does satisfy his criteria regarding risk / reward.
2. The price of the strangle might get there, if the Silver price gets significantly closer to one of the strike prices.
Cordier loves to sell options that are 200+ DTE. Don't do it. Price erosion is very slow that far DTE. That leaves you holding the option for a very long time when possibly the market could turn against you.
In his book, James mentioned his strategy is to sell 2 to 6 month with more focus in the middle, which is 4 months.
However, his trade recommendations are getting more and more on trades that are 9+ months long. I think this is a major deviation from what he recommended in his book, though he also mentioned that he would not hold it until expiration most of the time.
I was wondering why there is such change. Maybe he has to sell long DTE in low volatility environment. Like the P45/C76 crude oil call he made in this Feb. When volatility spikes, it stopped out almost immediately, although it will eventually expire worthless. You just cannot hold it.
1. I do not think that it is a good idea to follow these trades as long as you have not really understood them. James only publishes the entry, but leaves you alone with repair measures. (As long as you are not his customer.)
2. The purpose of his publications is to get customers for his (quite expensive) services. Of course this is ok. Publishing trade suggestions with options very far OTM sounds good and risk-free. And the more DTE, the more OTM.
3. I like entering these OTM strangles if volatility is high. Otherwise you get a problem in case volatility rises significantly. Especially if there are many DTE.
About 3), if volatility is high, how will you enter the strangle, selling the strangle as a package to establish two legs at the same time, or leg in when the daily chart closed inside the bollinger bands after a hitting on the band, in this case it may take quite some days before the 2nd leg in?
Sometimes I sell the spread in one order, sometimes I leg into it within a couple of days or even weeks. In case I have a strong opinion regarding the price development for the next couple of days or weeks I usually leg into the spread.
Regarding volatility, I have a look at the seasonals of the volatility and at the fundamentals (eg. important reports and / or meetings).
In the July's edition of his newletter, James Cordier recommended a trade : Sell Natural Gas January 2018 Call 4.0 at premium 600 per contract. The analysis is OK. But the Call 4.0 is a bit lower comparing to the trade of C5.0 above last year.
What do you think about this trade? Thank you for sharing your opinion.
