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Realistic Option Trades
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Created: by blb014 Attachments:0

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Realistic Option Trades

  #31 (permalink)
Elite Member
Incline Village + NV or elsewhere in the world
 
Trading Experience: Intermediate
Platform: E*Trade, TOS, IB & T'wrks
Favorite Futures: Emini ES
 
Posts: 19 since Jan 2016
Thanks: 17 given, 11 received

Looking for a "reasonable" approach

Hi blb014,

My experience is similar as I started with daytrading in '99. I will not bore you with the long list of gurus and systems in stocks, futures, and options that I have tried while I have looked for the holy grail, a decent "edge". Nothing I tried made consistent profits for me, just for my brokers and gurus. Also, I am no longer willing to be glued to a monitor during market hours so I am trying options once again so I can enjoy my life.

I have been experimenting with different profit targets 35 - 70% on naked puts, so I am still holding some naked puts, like PCLN/BKNG, that I should have closed for a 50% profit but am waiting for the rebound to the 50% target again. I am slightly underwater on a few other naked puts but am well capitalized so I can take some heat. I am wondering whether this is my "edge", enduring a limited paper loss while awaiting the rebound, or if I have just been lucky and not good.

I am trying the 2 times credit received as a stop loss since inevitably some trades, probably like TSLA, will not work. I just double checked and Options Alpha actually has a 3 times credit received as a stop loss for naked puts.

I target selling puts on a down day in the market or after some stock news that is only superficially bad, but not really bad, e.g., the marketing executive at BIDU resigned. I also do some fundamental analysis plus chart reviews prior to placing my trades to be comfortable that I could tolerate being assigned. I try to wait a couple of days and sell the puts at the "bottom" when that stock IV has peaked. I had to sell December puts to get an adequate premium for BIDU.

During the 2016-7 Buy the Dip period, the puts I sold usually had a good profit in 2 - 4 weeks even when the expirations were 2 - 3 months out. In 2018, the price rebounds and put profits have been slower but still good. Only once in 2017 did I convert a put into an iron condor for some downside protection when I got uncomfortable in a trade, but I could have avoided that step if I had the 2 times credit received as a stop loss.

I am looking for some validation that naked put selling, when down methodically and with very good risk management discipline, is not a bad way to trade the market. I understand that taking assignments is not fatal, but I am still clawing my way out of a VRX assignment hole from 2 years ago when I was naively trying to hold to expiration rather take than a 50% profit. After numerous additional VRX put and call sales, I have a $24 break-even and will exit soon, I hope.

I succumbed to temptation again a few months ago and signed up on a monthly basis with John F. Carter, Simpler Trading, and am watching a variety of presenters with different options and futures strategies. Their DR results also seem mixed so I am thinking about dropping them and focusing just on naked puts.

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The following user says Thank You to mscholder for this post:
 
  #32 (permalink)
Elite Member
Dallas, Texas
 
Trading Experience: Intermediate
Platform: TOS
Favorite Futures: AAPL, /ES, IWM, SPY Options
 
Posts: 329 since Oct 2012
Thanks: 552 given, 175 received

@mscholder

Sorry for the slow response, didnt see the post. Yes puts are profitable for me but I only sell puts on equities I would own, that takes all the stress out of assigment. Basically companies I know, use, and fundamentally sound. I also like PLNT stock, been member there for two years, know the franchisee, and have been building up a position.


There is no sure way to profit without assuming risk, I think that's why all these people on here who have never traded jump right into futures or forex thinking the shorter the time frame the less risk, it is actually the exact opposite the longer the investment horizon the less risk, you have time to maneuver and more room to recover.

Assignment will happen and the market falls faster than it rises but there are very good opportunities.
I'm going to load up on FB puts again after the post earnings $100 billion sell off

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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  #33 (permalink)
Elite Member
Incline Village + NV or elsewhere in the world
 
Trading Experience: Intermediate
Platform: E*Trade, TOS, IB & T'wrks
Favorite Futures: Emini ES
 
Posts: 19 since Jan 2016
Thanks: 17 given, 11 received


Hi blb014,

I thought about you today after seeing the FB crash as I was also thinking about selling some FB puts. I may apply the 3 day rule before selling many FB puts in order to gauge the real market volatility impact.

I share your trading philosophy generally but taking assignment on $1,000 plus stocks like Google, Amazon and Booking (BKNG) can be a financial challenge and tie up too much capital too long.

There could be collateral damage from FB to other tech companies like Google, which have been profitable for me in the past and I personally like that stock better for an assignment, if required. I am still awaiting a naked put trade to hit 2 times credit received as a hard exit for a naked put. I have come close a few times but the stocks always rebounded in time and I closed for a profit.

Coincidentally, my BKNG Sept puts trade hit the 50% profit level today so I closed it and then sold 2 NORTHROP GRUMMAN puts at the 1.5 SD strikes after they reported great earnings and gave a good forecast but sold off anyway.

I just cancelled my Simpler Trading subscription since their traders seemed by have 50/50 win loss results with mostly defined risk trades. I can do 50/50 results on defined risk trades already and will now save the monthly fees. I plan to stay with put selling until the market drops or my defined risk trading improves.




========================================================================

blb014 View Post
@mscholderabout

Sorry for the slow response, didnt see the post. Yes puts are profitable for me but I only sell puts on equities I would own, that takes all the stress out of assigment. Basically companies I know, use, and fundamentally sound. I also like PLNT stock, been member there for two years, know the franchisee, and have been building up a position.


There is no sure way to profit without assuming risk, I think that's why all these people on here who have never traded jump right into futures or forex thinking the shorter the time frame the less risk, it is actually the exact opposite the longer the investment horizon the less risk, you have time to maneuver and more room to recover.

Assignment will happen and the market falls faster than it rises but there are very good opportunities.
I'm going to load up on FB puts again after the post earnings $100 billion sell off


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  #34 (permalink)
Trading Apprentice
Kansas City, Kansas/United States of America
 
Trading Experience: Beginner
Platform: Sierra Chart
Favorite Futures: CL, GC, Currency Futures, NG
 
Posts: 5 since Oct 2017
Thanks: 0 given, 3 received

Only AAPL?


blb014 View Post
It is time for a realistic option thread.

I sell options on AAPL and /ES mostly

I use substantially less margin, I usually don't sell longer dated options >90 days because of the substantial amount of Vega risk.

I sell puts from Delta -.10 to -.20 and 80 days to 50 days expiration. I will also look to sell during higher volatility periods or spikes, which usually coincide with a down day or correction.

All are welcome to post/ critique. I welcome different views and analysis. And I will not put someone on ignore if they have a different opinion. I believe that different view points can only make someone a better trader. I am not promoting a broker or commissions.

I think I get why the ES works for you consistently, but how are you able to stick to just AAPL?

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  #35 (permalink)
Elite Member
Dallas, Texas
 
Trading Experience: Intermediate
Platform: TOS
Favorite Futures: AAPL, /ES, IWM, SPY Options
 
Posts: 329 since Oct 2012
Thanks: 552 given, 175 received


nyjbarnes View Post
I think I get why the ES works for you consistently, but how are you able to stick to just AAPL?

I have been trading AAPL for 15 years and built up a position that takes the stress out of market gyrations.

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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