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Realistic Option Trades

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  #1 (permalink)
 blb014 
Dallas, Texas
 
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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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  #3 (permalink)
 blb014 
Dallas, Texas
 
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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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Forex37
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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)
 PK 1 
Kassel / Germany
 
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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)
 samiotis 
Gilroy california USA
 
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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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 blb014 
Dallas, Texas
 
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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

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)
 blb014 
Dallas, Texas
 
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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)
volramp
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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)
 blb014 
Dallas, Texas
 
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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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 blb014 
Dallas, Texas
 
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Some rich stuff here:

"Treating ES same as always. Never know which way it will go. I'm sure some thought ES would have dropped by now this year. They were wrong."

Never know which way the market will go? but Ron supposedly predicted the crash in Sept 2008 because he would have lost millions just like Aug 2015.

Heed this warning loading up on absurd amount of DITM premium will always to disaster, Karen Supertrader, Ron (Aug 2015)

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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 blb014 
Dallas, Texas
 
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Sold 25 125 SEPT AAPL puts last week and few other equities, no /ES options

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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 blb014 
Dallas, Texas
 
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PK 1 View Post
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.


That's tough to do. Not much into TA more fundamentals of the long term market, but it is important to sell on a down day or when the VIX has bumped higher

Big difference between short selling and selling puts but I know what you are saying

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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 PK 1 
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blb014 View Post
That's tough to do. Not much into TA more fundamentals of the long term market, but it is important to sell on a down day or when the VIX has bumped higher

I don't do short selling, just shorting puts and calls as sketched above (--> Short-Put)

If you only sell puts, sure then a down-day can have positive impact, but imho often inviting too much unnecessary risk. Ordering the first lot for me would be fine to scale in but bigger moves can gain a huge momentum running far. I don't want to short a put at such an early stage. Too often waiting for such trades to have only a decent ROI and a lot of them actually need to be bought back to follow strict risk-management. Following the swings the ROI is way better and if not then the mid-term-trend was estimated wrong. I know lots of people do their options by just referring to numbers which is fine and has a long history but having a small edge (isn't that what we all are looking for) recognizing a hidden divergence, a shifting market, that can be worth a lot. Blending such possibilities out is (for me) like driving a car with only one eye.

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 blb014 
Dallas, Texas
 
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PK 1 View Post
I don't do short selling, just shorting puts and calls as sketched above (--> Short-Put)

If you only sell puts, sure then a down-day can have positive impact, but imho often inviting too much unnecessary risk. Ordering the first lot for me would be fine to scale in but bigger moves can gain a huge momentum running far. I don't want to short a put at such an early stage. Too often waiting for such trades to have only a decent ROI and a lot of them actually need to be bought back to follow strict risk-management. Following the swings the ROI is way better and if not then the mid-term-trend was estimated wrong. I know lots of people do their options by just referring to numbers which is fine and has a long history but having a small edge (isn't that what we all are looking for) recognizing a hidden divergence, a shifting market, that can be worth a lot. Blending such possibilities out is (for me) like driving a car with only one eye.


That's interesting. If hidden divergences and swings is working for you that's great. I'm always open to new ideas.

But I can only speak from my experience from trading since 2004, and for me it works until it doesn't work anymore. I have looked all sorts of indicators, divergences, swings and none of them have provided any sort of long term edge for me.

I'm not advocating just looking option prices, greeks or ROI, but the market fundamentals(unemployment,consumer spending) and for an equity (quarterly, annuals) are very important.

IMO a chart is view of the fundamentals, Sure there are certain prices where buyers step in or sellers sell but trying discern that (long term) is very tough to accomplish IMO.

I understand what you are saying but the risk profiles are different for shorting a stock than selling premium.

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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  #16 (permalink)
 blb014 
Dallas, Texas
 
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manuel999 View Post
As Ron mentioned, you are playing it very tight here. this is a trade you will need to monitor closely.

If you have a full time job, it would make more sense to place trades you do not need to watch too often.
E.g.: Ron's ES spread or Myrrdin's recent CL C60-C70 spread do not have to be watched too closely and can be done with a full time job.

I have a full time job as well. These types of trade do not take much time, give me more room and also offer good learning experiences.

Ron's ES trades are terrible idea, He would have lost millions during Aug 2015 (if his trades are even legit). Leveraging that much and worrying about SPAN margin is all around bad idea.

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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 blb014 
Dallas, Texas
 
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Going to try and close the AAPL puts in the morning. Will update

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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 blb014 
Dallas, Texas
 
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Ron99:
"BTW I just calculated my days held average for 2017 and it is 27.3."


Did you ever calculate how many millions you lost during Aug 2015? You had over 750 /ES options open at the time VIX spiked to over 50. Tell the truth and be transparent

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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  #19 (permalink)
 rainmonkey 
Oakland, California
 
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With stuff that seems to be trending higher (relatively reliably), do you have a hard time with the short call side if you're doing IC's?

It seems like if you select your short strikes using delta, often times you still run very close if not breach the short calls anyway.

Perhaps these recent couple weeks aren't the case, but since we've had such low volatility and generally grinding higher, I find that putting on IC's is incredibly frustrating in this environment given the low(er) premiums associated with lower volatility.

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 blb014 
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rainmonkey View Post
With stuff that seems to be trending higher (relatively reliably), do you have a hard time with the short call side if you're doing IC's?

It seems like if you select your short strikes using delta, often times you still run very close if not breach the short calls anyway.

Perhaps these recent couple weeks aren't the case, but since we've had such low volatility and generally grinding higher, I find that putting on IC's is incredibly frustrating in this environment given the low(er) premiums associated with lower volatility.

Haven't traded IC's in years. That's is the problem with iron condors. I have traded calendars, diagonals, condors, ratios and none have been as profitable as selling puts for me.

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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 blb014 
Dallas, Texas
 
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Looks like he is at it again. Everytime he implodes his account he invents a new strategy to sell exorbitant amounts of premium. This strategy always ends in disaster see Karen SuperTrader and Ron99.

He imploded in Aug. 2015 and came up with his new "spread strategy" and now he is changing again and try fool his followers by his faulty backtesting. I have no idea what he gains from lying on here, Don't be fooled by this guy.





Ron99 "The ES spread strategy I have been trading made it through this extreme test. I did not exit any positions. As I write this I have made back 90% of what I lost yesterday.

I will be adding more cash excess because this was too close for comfort. I'm going from 4xIM to 5xIM. 80% cash instead of 75% cash."


Ron99 "Feb 5, 2018 was the 4th largest price drop (midnight to midnight) percentage wise since 2005."

This VIX spiked higher in Aug 2015 and option premiums skyrocketed even higher than the last couple days

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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 blb014 
Dallas, Texas
 
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rajab View Post
On Jan 22 i put on EWK3K8 P(-2)2230 and EWK3K8 P(+3)1940 x10 IM. Since I have never experience the drop we realised recently I notice at the very bottom the premium on my position was 2.5 times the maintance margin(MM) requirment. Maybe some one can explain how that is possible please? I thought the idea was to get out before losses mount.

THANKS
BABAK


Because of volatility, that is priced into the value of the option.

Don't let Ron99 fool you, back a couple years ago in Aug 2015 margins increase even more when the VIX spike higher than recently and you would have had more than likely had a margin call even though you were 10x initial margin

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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 mscholder 
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I am trying to assess my options trading results and determine whether to continue defined risk (DR) options trading or just do undefined risk (UR) trades.

After an 18 month focus on selling premium in DR trades (verticals, iron condors and a few calendars and butterflies) plus some undefined risk (UR) trades, I have reached the conclusion that, at least in this low VIX environment, it is very hard to make money in DR trades (stocks with high IV, premium = 1/3 the width of the strikes, 45 DTE, and trying to take profits around 50% of max profit). I have a net loss on DR trades of several thousands.

While DR trading seems to be a futile effort, my past UR (all naked puts) trades (usually .20 delta strike price with 60 - 90 DTE) in Google, Amazon, Apple, Tesla and Priceline were all successful. I also look to sell during higher volatility periods or spikes and then buy to close before the next earnings release. I have a net profit on UR trades of several thousands.

I occasionally look for attractive SPX, SPY, and similar trades, but the IV is usually so low that, for me, the risk is simply too high for the reward offered.

I am concerned that a big correction could destroy my account so I only trade 1 contract each in Google, Amazon, or Priceline or 2 - 5 contracts in lower price stocks. I am taking some heat on a few naked put trades now and am looking at a stop loss target of twice the credit received in lieu of the assignment risk.

Any feedback would be appreciated.

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 blb014 
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mscholder View Post
I am trying to assess my options trading results and determine whether to continue defined risk (DR) options trading or just do undefined risk (UR) trades.

After an 18 month focus on selling premium in DR trades (verticals, iron condors and a few calendars and butterflies) plus some undefined risk (UR) trades, I have reached the conclusion that, at least in this low VIX environment, it is very hard to make money in DR trades (stocks with high IV, premium = 1/3 the width of the strikes, 45 DTE, and trying to take profits around 50% of max profit). I have a net loss on DR trades of several thousands.

While DR trading seems to be a futile effort, my past UR (all naked puts) trades (usually .20 delta strike price with 60 - 90 DTE) in Google, Amazon, Apple, Tesla and Priceline were all successful. I also look to sell during higher volatility periods or spikes and then buy to close before the next earnings release. I have a net profit on UR trades of several thousands.

I occasionally look for attractive SPX, SPY, and similar trades, but the IV is usually so low that, for me, the risk is simply too high for the reward offered.

I am concerned that a big correction could destroy my account so I only trade 1 contract each in Google, Amazon, or Priceline or 2 - 5 contracts in lower price stocks. I am taking some heat on a few naked put trades now and am looking at a stop loss target of twice the credit received in lieu of the assignment risk.


Any feedback would be appreciated.


When did you sell these? The market has been sideways. Rolling down is an option, definitely would wait for an IV pop

Try shorter term puts 45-60 days out at 1.5-2SD moves, FB and AAPL have been my main plays the last couple years.

FB a few months ago during the aynatilca scandal, I sold as many as I could. I posted when I sold them in another thread. Some people thought I was crazy, superficial bad news on these strong companies are the best times to sell


I agree in low IV periods the indices are not the most attractive options.

I have tried every option strategy also, non have been as profitable as puts. Your strategy is sound

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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 blb014 
Dallas, Texas
 
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Also, don't be afraid of assignment. I had many contracts that I wished would been assigned only to have the price move the last week. I have priced into many AAPL shares over the years this way, with the rise in price, splits and dividends it has been a blessing.

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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 samiotis 
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mscholder View Post
I am trying to assess my options trading results and determine whether to continue defined risk (DR) options trading or just do undefined risk (UR) trades.

After an 18 month focus on selling premium in DR trades (verticals, iron condors and a few calendars and butterflies) plus some undefined risk (UR) trades, I have reached the conclusion that, at least in this low VIX environment, it is very hard to make money in DR trades (stocks with high IV, premium = 1/3 the width of the strikes, 45 DTE, and trying to take profits around 50% of max profit). I have a net loss on DR trades of several thousands.

While DR trading seems to be a futile effort, my past UR (all naked puts) trades (usually .20 delta strike price with 60 - 90 DTE) in Google, Amazon, Apple, Tesla and Priceline were all successful. I also look to sell during higher volatility periods or spikes and then buy to close before the next earnings release. I have a net profit on UR trades of several thousands.

I occasionally look for attractive SPX, SPY, and similar trades, but the IV is usually so low that, for me, the risk is simply too high for the reward offered.

I am concerned that a big correction could destroy my account so I only trade 1 contract each in Google, Amazon, or Priceline or 2 - 5 contracts in lower price stocks. I am taking some heat on a few naked put trades now and am looking at a stop loss target of twice the credit received in lieu of the assignment risk.

Any feedback would be appreciated.

why don't you check this service out <https://optionalpha.com/> their good people and releasable and I have good results with them.

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 mscholder 
Incline Village + NV or elsewhere in the world
 
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Thanks for the feedback. Since all my UR trades worked, I have gradually increased the number of UR trades. I had seen a few posts that selling .20 delta naked puts (roughly 1.5 SDs) could be profitable, so over the past 2 years I was profitable just doing Google puts. Gradually I added a few other stocks that I would be comfortable owning if assigned at a price net of the premium received.

Obviously, loading up on naked puts can be a very risky strategy, so I wanted to have a balanced portfolio with DR trades and UR trades. While DR trades have limited loss potential, those were net losers in aggregate for me, so I am reducing those trades until I can find a DR approach that is net profitable.

My trades were placed over the last 60 days and I sometimes "bent" my rules on DTE to get a decent premium. I would prefer to have shorter term puts, 45-60 days out at 1.5-2 SD moves, but to me there is usually not enough reward for the risk. Extending expirations to 60, 90 or even 120 days, past the next earnings report, but closing the trade before the next earnings report has been profitable.

Also, i have staggered expirations for some diversification in the event of substantial short term corrections, e.g., a summertime meltdown. I am somewhat trusting the historical precedent that corrections happen (stock market down 10%) but not bear markets (stock market down 20%) unless a recession is imminent.

Would you share your profit targets and your stop loss or rolling parameters for your UR trades?

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 mscholder 
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I actually am using the Options Alpha stop loss criteria for my naked puts. I do like their educational material. Fortunately, I have not hit those stop loss targets yet in any of those naked put trades but am getting close in a few now. I need to take a few stop losses to reinforce my discipline to close losing trades or perhaps just roll one or two trade to get the experience.

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 blb014 
Dallas, Texas
 
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mscholder View Post
Thanks for the feedback. Since all my UR trades worked, I have gradually increased the number of UR trades. I had seen a few posts that selling .20 delta naked puts (roughly 1.5 SDs) could be profitable, so over the past 2 years I was profitable just doing Google puts. Gradually I added a few other stocks that I would be comfortable owning if assigned at a price net of the premium received.

Obviously, loading up on naked puts can be a very risky strategy, so I wanted to have a balanced portfolio with DR trades and UR trades. While DR trades have limited loss potential, those were net losers in aggregate for me, so I am reducing those trades until I can find a DR approach that is net profitable.

My trades were placed over the last 60 days and I sometimes "bent" my rules on DTE to get a decent premium. I would prefer to have shorter term puts, 45-60 days out at 1.5-2 SD moves, but to me there is usually not enough reward for the risk. Extending expirations to 60, 90 or even 120 days, past the next earnings report, but closing the trade before the next earnings report has been profitable.

Also, i have staggered expirations for some diversification in the event of substantial short term corrections, e.g., a summertime meltdown. I am somewhat trusting the historical precedent that corrections happen (stock market down 10%) but not bear markets (stock market down 20%) unless a recession is imminent.

Would you share your profit targets and your stop loss or rolling parameters for your UR trades?

Essentially I have the capital to cover most positions, there are special opportunities such as FB scandal that are prime opportunities to push the leverage button. But I shy away from selling “naked” premium.

I have traded since 2004 and I have been put through the ringer more than once with naked positions, 2008, SP down grade. I learned to leverage less and only sell puts on equities I want to own. I always encourage less leverage because no can predict the future, Ron99 can, but it is only matter time before “black swan” event will happen

Selling naked you have to be more structure, If I have a contract that has eroded more than 50% Especially in short timeframe I will close. Sometimes it will happen in less than a week. The key is to sell only on when VIX is inceasing and capture Vega. It is waiting game for me sometimes.

Opening after a earnings especially after a missed earnings is good in low vol times, but the best are by far the market corrections or bad company news like FB recently

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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 blb014 
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Try rolling to back month and down when there is a down day. It can be a little nerve racking but will be second nature with time.

I have long term approach so I roll very few contracts. It took me several years to break even on some positions and shares I had during 2008. Viewing options as way to acquire shares or sell shares on solid companies is best way to trade IMO.

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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 mscholder 
Incline Village + NV or elsewhere in the world
 
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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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 blb014 
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@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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 mscholder 
Incline Village + NV or elsewhere in the world
 
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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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 nyjbarnes 
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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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 blb014 
Dallas, Texas
 
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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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