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Realistic Option Trades
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Realistic Option Trades

  #1 (permalink)
Dallas, Texas
 
Trading Experience: Intermediate
Platform: TOS
Favorite Futures: AAPL, /ES, IWM, SPY Options
 
Posts: 330 since Oct 2012
Thanks: 552 given, 176 received

Realistic Option Trades

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.

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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  #2 (permalink)
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  #3 (permalink)
Dallas, Texas
 
Trading Experience: Intermediate
Platform: TOS
Favorite Futures: AAPL, /ES, IWM, SPY Options
 
Posts: 330 since Oct 2012
Thanks: 552 given, 176 received


Just to clarify some misinformation being spread on another thread


The S&P has dropped 10%+ over the course of few sessions as recently as Aug 2015. The Dow opened down over -1,000 and the VIX spike 200% to 50 during that time period.

Anyone leveraging to the max would have been wiped out by the VIX spike alone especially someone selling 500 contracts on /ES. The losses would have been astronomical, keep that in mind while reading other /ES option threads. Like I said realistic option trades here, no lies to push broker commissions

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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  #4 (permalink)
Zurich
 
Trading Experience: Intermediate
Platform: Amibroker
Favorite Futures: Fesx
 
Posts: 44 since Feb 2011
Thanks: 64 given, 12 received

Good luck for your thread.
Are you selling those puts naked? What margin do you reserve?
Any recommendations (different from DeCarley) for low cost broker for ES options, who won`t require more than SPAN - for positions like condors and flies.

Thanks

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  #5 (permalink)
Kassel / Germany
 
Trading Experience: None
Platform: MC
Broker/Data: IB
Favorite Futures: CL/NG/ES
 
PK 1's Avatar
 
Posts: 72 since Aug 2011
Thanks: 125 given, 56 received

Interesting thread, good luck with it. I hope it's not only opened due to another specific discussion, recently.

But yes, some parts I handle similar. So instead of selling regularly to be invested at a min amount I use technical analysis and VIX to enter the trades. For selling puts for example I wouldn't prefer adding more puts after the market is going to a swing high and for short calls vice versa. I don't need to be in the market all the time and the argument that one has to time perfectly to find the right time is just a facade. It's actually easily to handle. I do momentum trades on ES-Future with my system and for longer timeframes, so I can use this to see whether shorting puts/calls is rather in my favor or not. One can be of a different opinion whether the outcome is better being most of the time in the market instead of timing it. I would think the outcome would be better but there's way more risk. But even if there wouldn't be a better trade at the moment than a really low premium trade with a short put, I stick to my risk management and better stay out of the market! Not finding a better trade doesn't mean for me to increase my risk compared to the reward.

The daily VIX-Chart is important to me, so I found a good way for me to short puts under specific circumstances. I do this for a few years now and treat this as just one part of all the things I trade. Doing only short puts or only options with my account I would never ever do. But this has nothing to do with fear, just the respect of the market.

Until last year also I did tons of shorting puts on stocks, risking to get assigned and doing covered calls to get rid until it starts again. At the moment I wait and see, the low VIX doesn't look that peaceful to me and market has shown that bigger doubts in Trump can shift the market very fast. So at the moment besides VIX and ES I sell premiums mainly on USO and there most times shorting calls (until last year both sides). The almost reliable "decay" of USO compared to CL is more than a small advantage for the bearish side. For ES these days people tend to say buy the ... dip. On USO I tend to state short the ... swing high.

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  #6 (permalink)
Gilroy california USA
 
Trading Experience: Intermediate
Platform: NinjaTrader,MT,TOS
Broker/Data: TDAmeritrade MBT
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samiotis's Avatar
 
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I guess I must tag along on this thread since I got in to options and I liiiiiike them, I traded futures for 10 years and dint make a dime so I tried options and I made more money then I don't know what.
So the question is, first off I trade call's and put's, so I like to trade credit spreads and put spreads and I don't know how, Is there some setting on the trade window that say "credit spread"
I use primarily Medved Trader's platform for trading If you are familiar with it please share
I use TOS for charts and I also have Ninja Trader
I welcome some insides...... thanks

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  #7 (permalink)
Dallas, Texas
 
Trading Experience: Intermediate
Platform: TOS
Favorite Futures: AAPL, /ES, IWM, SPY Options
 
Posts: 330 since Oct 2012
Thanks: 552 given, 176 received


samiotis View Post
I guess I must tag along on this thread since I got in to options and I liiiiiike them, I traded futures for 10 years and dint make a dime so I tried options and I made more money then I don't know what.
So the question is, first off I trade call's and put's, so I like to trade credit spreads and put spreads and I don't know how, Is there some setting on the trade window that say "credit spread"
I use primarily Medved Trader's platform for trading If you are familiar with it please share
I use TOS for charts and I also have Ninja Trader
I welcome some insides...... thanks

Chaos Theory, trying to apply structure to daily chaos or randomness

Not familiar with Medved. On TOS it is super easy just right click on the option you want to, cursor to the arrow and there will be everything you could think of from double diagonal to a vertical credit spread.

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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  #8 (permalink)
Dallas, Texas
 
Trading Experience: Intermediate
Platform: TOS
Favorite Futures: AAPL, /ES, IWM, SPY Options
 
Posts: 330 since Oct 2012
Thanks: 552 given, 176 received


Forex37 View Post
Good luck for your thread.
Are you selling those puts naked? What margin do you reserve?
Any recommendations (different from DeCarley) for low cost broker for ES options, who won`t require more than SPAN - for positions like condors and flies.

Thanks

I have portfolio margin, and keep in mind that only 1 /ES option is approx 120k so when you read these other threads where someone is trading 500 contracts that means they are leveraging 60 million which is absurd (well at least in my case). I like to keep at least 20k per contract on /ES options, that seems high but when something happens (and it will) such as the Chinese Yuan devaluation (Aug 2015); you will need room to roll contracts down.

I have done condors on equities but I have found that selling puts has been more profitable over the years, more so than any other option strategy

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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  #9 (permalink)
Shoham Israel
 
Trading Experience: Advanced
Platform: TWS
Favorite Futures: ES, CL, FOP
 
Posts: 8 since May 2017
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samiotis View Post
I guess I must tag along on this thread since I got in to options and I liiiiiike them, I traded futures for 10 years and dint make a dime so I tried options and I made more money then I don't know what.
So the question is, first off I trade call's and put's, so I like to trade credit spreads and put spreads and I don't know how, Is there some setting on the trade window that say "credit spread"
I use primarily Medved Trader's platform for trading If you are familiar with it please share
I use TOS for charts and I also have Ninja Trader
I welcome some insides...... thanks

I think you should read the following. It will answer your questions and guide you through your journey...
The Complete Guide to Option Selling, Second Edition
by Michael Gross, James Cordier

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  #10 (permalink)
Dallas, Texas
 
Trading Experience: Intermediate
Platform: TOS
Favorite Futures: AAPL, /ES, IWM, SPY Options
 
Posts: 330 since Oct 2012
Thanks: 552 given, 176 received



Forex37 View Post
Good luck for your thread.
Are you selling those puts naked? What margin do you reserve?
Any recommendations (different from DeCarley) for low cost broker for ES options, who won`t require more than SPAN - for positions like condors and flies.

Thanks

IMO Cost should not be a main concern, if so you are probably overlevarging. I'll sell at most 30 contracts in month, 30 AAPL options is 450k of AAPL. Options are a powerful tool but don't lose perspective on how much you are leveraging

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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