$1MM liquid -- how difficult to achieve 15% annual ROI with option writing?

You can obviously get the prices from your broker's platform, but also from http://yahoo.finance.com, http://www.cboe.com and others.

 

I agree 100% on the advice of obtaining education, however, I do not believe that the education can be achieved solely by attending a seminar. It requires diligent study, various books on the many facets involved in the market. Understanding the difference between investing and trading, risk and money management, the psychology of the market, asset allocation and diversification, developing investing/trading rules and plan, and most importantly experience which can not be gleaned from a book, seminar etc....

I am Very curious on how you manage risk when selling a "naked" option?

Past performance does not guarantee future returns... IMHO, a 15% reward for an infinite risk is for me does not appear as a conservative approach. Am I missing something in your risk management procedure?

I too have unrealized gains exceeding 20% on a 7-figure account, however, I contribute that to a non-typical bull run... My personal conservative approach has these gains protected with trailing stops, which limits my downside risk, I re-enter on opportunity.

Capital preservation is of the utmost importance to me, naked options, I fear defeat the objective... but again, different strategies, for different mind and skill sets are what make the market...

Good luck and good trading to you....

 

There are many reasons why selling naked puts is one of the most conservative strategies ever.

Out of the last 10 months I only sold naked puts for 7 months and that's where the 15% was made and that's only the beginning.

I suggested a seminar only as a starting point.

You can indeed manage risk by selling naked options, professionals do it all the times. Unfortunately this is not the proper place to explore this complex and fashinating subject.

One reader before wrote that he can make 15% in one day, sure !

Thing is that I would never place my 1 million in a straight call strategy, I wouldn't even buy a stock with it because my chances to make money are 50%.

There is a study it says that 50% chances are that the price of a stock stays about the same, 25% price goes up and 25% goes down. Maybe this is not accurate but you would agree with the following fact...if your trade has about 50% chances to work don't do it.

One of the MANY benefits ( I invite you to find out more about selling options in books, seminars and especially from people who do it ) of selling naked puts is that I have much more chances of making money than 50%

If the price goes down A LOT I can buy the stock. Imagine you are waiting for Mastercard now at $ 160 to go to $ 150 to buy it. Well, while I wait I get paid.

If I still don't want to buy the stock I can buy back the options I sold before at a loss ( limited ). Again there are ways to manage risk, it is just too difficult to get in detais here.

Here is the other part:

if the stock goes up I make money

if the stock stays withing the same price I make money

if the stock goes down a bit I make money.


Please do yourself a favor and find out more before making assumptions on this fantastic strategy

thank you for your attention

 

As I stated, different strategies for different skill sets. My post was intended for the OP. Trading options requires an extensive understanding of underlying securities in addition to a thorough understanding of option strategies, considering the OP is retired and has no experience to date, capital preservation should be his primary concern. Your strategy may have worked well during your 7 month experience.... however, it may be a bit optimistic to assume that your strategy will always, make money and has no downside risk. In the context of a new investor/trader with a limited time horizon to rebuild a drawn down account, naked puts may not be a conservative approach and should be approached with caution and avoided by the inexperienced.

 

Any strategy even going out to simply buy and hold a blue chip should be avoided by the inexperienced.

I never suggested the OP to place all his money in naked puts.

No strategy will always, make money and has no downside risk.

The OP said he needed something to do with his time and he said he would like to do option writing with a portion of his assets as a full time occupation.

Also he wonders how achievable is a 15% annual return option writing after a good year of studies. Based on the OP question I find nothing wrong in suggesting a seminar and to take a look at selling naked puts.

Writing options has short, medium or long time orizon, it has capital preservation as a matter of fact the only money that will be required is the margin to place the trade while most of your money sits safely in your account as a back up. And you don't even need to use that back up should you not wish so.

Again I invite you to find put more about selling naked puts before labeling option selling, a strategy that you don't know, as non conservative or risky.

Selling naked puts can be done in a very conservative way, it is not my opinion, it's a fact.

If there is a better way to preserve your capital and still gain a 15% in one year by writing options with a different strategy can be another matter.

I just gave my 2 cents I am not looking to argue with anyone here, I won't reply again, but what I wrote I wrote because I know it and I wrote because I felt that it could help the OP

 

What is your entry criteria for writing puts? I m finding writing puts can be extremely dangerous if market suddenly gaps down against you.............

 

It is amazing to me the amount of misinformation on this site.

Look man, saying that writing naked puts can be done conservatively is like saying that water isn't wet.

When you write a put, you are writing an insurance policy to someone until you offset that risk. Depending on how unlikely the event you are writing the insurance for is or isn't, will dictate on average how many times you have to pay out on that insurance policy. Further, since options are highly leveraged instruments and have easily four components to them (other than direction) that an amateur has no idea how to manage, makes this sort of strategy a time bomb.

It doesn't mean you can't write them, and that you can't make money writting them, just like you can make money from selling the underlying (which to most amateurs has almost identical profit and loss outcomes to selling a naked put, until the option position starts acting like an option, which makes it much worse than being short the underlying) . But that is not the point. The point is, do you have an edge selling naked puts?. If you don't, then one day you give back all the gains, and then some. People think that because you get a premium that is like being in business where your product is puts. It can be like that, but not by writing them naked, at least not overnight.

Unless you are going to state exactly, how and on what time frame and why you are advising this person to sell naked puts, I suggest you refrain from giving this advice, because it is bad advice.

nitro

 

I don't believe the original post anyway. No one in their right minds with several million dollars of hard earned money comes to an anonymous web site asking for advice.

This is some troll or an idiot or someone who gets paid to start threads on ET.

nitro

 

" Unless you are going to state exactly, how and on what time frame and why you are advising this person to sell naked puts, I suggest you refrain from giving this advice, because it is bad advice "

Look, don't be a miserable idiot, ok ?

There are books and seminars, and mentors that have the only objective to get you good at a craft, and all of that combined can and will take you months and months before you can apply it with success and you expect me to write here a simple formula on how naked puts should be written ?

Based on what you wrote before I don’t expect you understand any of the following but here are some benefits:

1) the odds are in your favor 2) taking profits becomes simple aka no emotions 3) being close $ is good enough 4)time is on your side 5) perfect timing is no longer necessary 6) definable risk control.

If you take a seminar or pay someone, he might take you in great details trough all the points above. As a matter of fact pages and pages on each point can be written, a book can be written and that’s only the beginning. You probably won’t take a seminar nor pay for your education, it is much easier to come online and trash everything you don’t know about.

As long as you are making a lot of money, then that’s good for you. You see that is the bottom line, and as they say time is money. I am not here to argue with anyone, and if you wish, go ahead and have the last word. I see that you have over 9000 posts, I now know how you spend your time.

I don’t have the time nor the desire to convince you and anyone reading this that selling naked puts is a kick ass strategy to apply. Especially when you know how, and when like the original poster mentioned one has time to learn and has a capitalized account.

One thing is that you don’t agree, but another is criticizing things you don’t know !

For your information, amateurs buy options, professionals sell them. Does that tell you anything at all ? A lot of traders are deterred by the terms limited profit and unlimited risk. That is good because as an option seller, I need plenty of traders buying options to help fund my retirement.

good bye and good luck to everyone