>> âºâº $1MM liquid -- how difficult to achieve 15% annual ROI with option writing? >> You're asking this on the internet where there is some truth and a whole lotta perfect traders and soon to be Warren Buffets? Sarcasm aside, it's not a question of how difficult this is to accomplish but whether you can do it. We all have different skills, different risk tolerance, etc. Let's suppose that due to my analysis skills, I am very successful at trading long calls (I'm not) and that I average 20% from them. Does that mean that you will be able to achieve the same? So my two cents would be to keep reading and find what area of options interests you. Start slowly. Consider lower risk strategies that won't detonate your account if the market or your underlyings zoom/crash. At the onset, determine a draw down amount that you are willing to expend for your tuition. Hypothetically, say $25,000. Once you lose that, accept it that options are not for you. OTOH, if you achieve gains, increase your size gradually but never put yourself in a position of high risk. Retirement is good and I'd shudder at the thought of having to go back to the grind. As someone else suggested, don't put yourself into anything that could take a deep bite into your savings.
With some experience, you can even get 15% even without getting into options at all; swing trading index ETFs. You can even get 15% IN ONE TRADE for example my last trade got me 13.99% (without broker commissions): Buy .QQQAA (January 08 5 Calls) at $1.93 on 10/3/07. Sell on 10/5/07 at $2.20. But it takes time, you need to spot trends, buy dips; and stay in cash when there's no clear trend, and learn to early spot when the trend broke. I NEVER write options. Buying slightly out of the money Calls with 70 or 100 days left gives about 10:1 leverage -enough for me-.
You could probably easily achieve 15% per annum writing OTM vertical spreads, if you pick stocks whose behaviour you are reasonably confident you can predict. Heck, you could probably invest most of your portfolio in debt to make about 5% and trade spreads conservatively with the margin to make another 10%. Closely following a somewhat diverse portfolio of about a dozen stocks will definitely be a full-time job. My real question for you is, why are you considering a completely new-to-you form of securities trading as a full-time hobby? If you're otherwise provided for, a million bucks can keep you busy for an awful long time doing something you know you enjoy.
First off happy retirement. Secondly, I like your outlook in that study is required if worthwhile goals are to be achieved. Two of my threads are devoted to just this topic: <b>http://www.elitetrader.com/vb/showthread.php?s=&postid=1634404#post1634404</b> <b>http://www.elitetrader.com/vb/showthread.php?s=&postid=1629852#post1629852</b> Anything worth having is worth working for. Ps
Good advice. Covered call writing is often sold to newbies as a safe and conservative way to invest, but you get virtually all the downside and none of the upside. My advice is to get the Natenberg book and read it a couple of times, then come back here and kick some ideas around. Don't waste your money on the $3500 seminars various gurus offer.
Asking for financial advice around here is like getting a root canal from a plumber. EliteTrader is for your amusement only.
I have been writing naked options for a while now and 15% is average. People will tell you things like, "why sell an option and limit your upside and have unlimited risk?" Don't listen to them. It is very consistent if you know what you are doing and are not greedy. You have to look at it as you are selling insurance not gambling.
I am trying to manage a bit over 1 M. My suggestion is to take a seminar and educate yourself. If you manage several millions on your own you better know what you are doing. $ 3500 for a seminar is a pittance compared to the losses you might have in the market if you don't know what you are doing. Personally I sell naked puts on stocks I would like to own. This year, almost 3 months to go, I am up 15% and my approach was very conservative. A capitalized account makes a huge difference when selling options. Despite of all the bad hype option selling if done well and if done by managing risk is one of the most consistent strategies ever. No one has found a way to stop the march of time !
G'day, new to trading ,could you please tell me where you get your prices from for qqqaa 08' calls etc. Through broker or website Thanks