any suggestions to improve this strategy

Discussion in 'Options' started by ps486, May 23, 2012.

  1. ps486



    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.
  2. 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.
  3. asap


    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.