Hi I trade options on index.Last 20 years of data suggest that the index moves at least +5% or -5% in a month ,70-80% of the time. I try to trade this by selling creating two spreads: By selling a call just above +5% & a put just below -5%. Also buying a call with strike next lower to sold call & put next higher to sold put. All the options used are of next months since we may have to hold for a month. Max loss in this strategy is generally double or more of max profit (not adding commissions). I have also experimented with buying options nearer to current market price ,among others. Any suggestions to improve the max profit/loss profile of the strategy or any other general change. Thanks in advance.
So an OTM bull spread and an OTM bear spread, centered around +/5%. Seems backwards to me - capturing the occasional small move and missing out on the occasional big move - but if it works for ya, it works for ya.
a word of advice. any single strategy that is based on a options roll and doesn't have any kind of mechanical, analytical, etc rationale behind it, i.e. sell OTM puts only when volatility has increased by more than 50%, will abide to the law of large numbers. hence, will be a losing strategy in the long run, after paying commissions, spreads, etc.