He does go on to explain that he trades mainly on the basis of seasonal patterns. I think one needs to build up one's own personalized approach. These books are good inputs to this process - to see how others approach it.
I have been following his weekly updates (now discontinued) and newsletters for quite a few years. All of his clients lost most of their money in the PFG collapse. That is why he lowered the account minimum as he starts up over again with a new clearing firm. He does look for at least $500 credit on each position. He sells 3 to 4 months out (sometimes up to 5 or 6). He does not sell close to the money. The $75 fee per round trip is a common way of charging for many CTA's. It is true that it may not be as favorable as 2/20. Personally, and I think this is true of most here, I am not interested in having money managed by him, just in learning from him among many other sources. I can see right off that one big limitation that affects him more than us is that he has to be always in the markets. On the other hand, he does diversify very widely and takes losses quickly. Another limitation that he has that we do not is that, as you point out, he has to receive fairly large credits to be able to cover the fees. This means that he has to sell further out in time than we might.
Any feedback how you're performing in this bull market ? I sold a few strangles, mostly monthly but some weekly and 60days, over the last few months with 2%otm calls on ES and up to 5% on RUT but the calls have been on fire, even more when selling on higher VIX days (dips). Today woke up just after market open and the pnl column was showing -19K, I've seen worse but a triple expresso and neutral pnl is better for breakfast. Also it's particulary frustrating to lose a fair bit while the market is rather quietly trending upwards. With 5 calls for 1 put it must be even hotter, did you adjust your strategy lately ?
BTW, I found the article below usefull on the topic of selling ctm strangles, there is also a following article where Reel Ken digs a little deeper in the topic http://seekingalpha.com/article/959711-selling-puts-and-calls-a-better-recipe
So call sellers, is everyone rolling or just letting calls expire itm before opening new ones (which I'm doing). I opened a bit more calls than puts entering May on worries of market pullback and May's mtm Pnl doesn't look cute. Anyone else has feedback on Atticus proposition, with 2 or 3synth puts for 24 short puts, the rationale does make sense : "So short a 2-lot synth and you retain nearly half of the credit at 830 RUT. The rationale is that the skew is bountiful, so why not hedge as OVER HALF of that credit is due to asymmetry (risk-reversal prem on put strike)? " It does make sense plus Im a bit reluctant to open new naked puts or strangles right now ( I follow other strats besides short premium, pretty new to those but the loss this month is significant enough for me to feel it - if the market had crashed rather than ramped up, the pain would have been worse, so I take note)
I'm pushing up some DITM sold calls and buying OTM calls (a few weeks ahead) to limit losses as we continue to grind up. I have that feeling that we are going to fall off a cliff at some point - if only temporarily. I think the selling will be panicky when it finally starts and I want to be short some DITM calls when it gets going. We are really in this bulletproof stage here. WMT missed this morning and guided down 5%, jobless claims were way up, CPI was negative and housing starts missed badly...and none of it matters today. This will continue...until it doesn't.
Thanks, I'm trying to understand your position. What is the point to be short ditm calls with little to none extrinsic value ? Do you feel it's a better way than a long put to profit of a sell off ?
hey Luis...I know what your feeling! I'm also selling monthly strangles...but have been buying slightly otm call spreads (trying to leg into them) on the weekly's to help with the digestion issues in the am. Its VERY difficult to try and keep as close to delta neutral in a market that "seems" so irrational...I can't imagine a 5/1 call to put...that has to have changed or my guess is the broker will close it out for him