but selling strangles, plus some rule when you roll over ... if i can make a sharpe of 1 that way, i am truly in the wrong arena ...
There was a good thread on selling OTM SPX spreads recently by someone with the handle Option Coach... If you didn't see it you might want to read through it. He seems to have managed well so far. Of course, the blow-up loss is enormous in this approach... and, of course, the pucker factor could kill you all by itself.
The strength of all option shorting models is the exit. Most people panic and try to hold on. Once those deltas go over .5 and you don't exit you are now set up for a blow up. Selling strangles works, I just doubled an account in 9.3 months. The odds of any short options position WITH risk management winning is probably 70% or higher. The last part of successful shorting is trade construction. No one with 100m + under management is going to tell all their secrets.
.5 Delta is ATM right? If it got there I would think most players would be long gone. As we all know, it's the picking up nickels in front of a steam roller issue. Comes the day...:eek:
Yes and no. This is where I say, "yes, selling is hugely risky so options should only be bought." This keeps the premiums up.
annualised return above 120% is to risky for my taste anways. the last nine months were not perfect for the game i would think. that was already in low vola area and there some significant spikes, like the 12 to 18 (always referrring to the VIX) some weeks ago. how did you handel that? no issue? if i may ask, how far OTM did you go? sold strangles i assume? do you make the position symmetric or let that be determinded by the skew in calls, resp puts.
Just buy in the wings and then you have a 100% defined risk position. Then you can even buy time spreads on both sides. This keeps you delta neutral (or close to it) AND theta positive BUT also makes you vega positive. Best of all worlds....and you sleep like a baby.
What they are doing is not at all what you think it is. They have pricing models in place , place spreads separately way ahead of time and then drive prices to their orders. Hardly stuff that illiterate could do .