Anyone selling premium only

Discussion in 'Options' started by optionbull, Feb 9, 2013.

  1. Hello looking for like traders that sell option premium and are aware of the risks etc

    Looking to start account doing this knowing all that I can going in
  2. rwk


    Option beginners like to sell premium because it is a "feel good" play with a high win rate. The problem is that the occasional losing trades can wipe out the traders' account. Read "fooled by Randomness" by Taleb.

    There are some more sophisticated strategies around such as iron condors ("Profiting with Iron Condors" by Benklifa) or short wide strangles ( The hard part is seeing the weaknesses of each strategy in time to avoid a hit to your account. The adjustments (rolling the combos up or down) often wipe out much of the profit.

    As Richard Dennis once said: When you're starting out, start small. You will never be any worse than you are now.
  3. 1245


    Yes. If your good at it and stick to credit spreads and some naked options, you can make a consistent return. You have to be disciplined with risk management and have an exist strategy when your wrong.


  4. Read that book long ago, so you are saying that nobody does this for any length of time?

    If one has success for a couple years and pulls out original account value plus some then playing with house money?
  5. Where to begin to find a reasonable premia selling Strategy?thnx
  6. 1245


    That's a good question. I learned to trade options a long time ago through watching others around me and learning through time what works for me and what does not as a Market maker on an option floor. There are programs out there that teach, but it's not clear to me their method is good.

    Maybe someone else here that has paid for and used a mentor or program can say what has worked from them and why. My only advise with selling credit spreads and naked options is to stick with broad based indexes. You will have less premium to sell but news events will not hit you as hard. You will also benefit from a Customer Portfolio Margin account that is better for selling. If you have no experience with this, start very small. If you don't have the assets for a CPM account, stick with credit spreads and don't sell naked options.

  7. I never understood this type of thinking. And what will you do if one event wipes out the account (house money). Pay in more money and do it all over again, change strategy or look for a new job?
  8. rwk


    I am not saying all short premium strategies are unsound. I have a short premium strategy that I believe I can sustain. It's how I pay the rent. I am just saying that it is harder than it looks. The difficulty is partly psychological. To make a short premium strategy work, you need to understand the risks and be able to manage them. If you don't respect the market, it will bite you.

    I make no distinction between trading gains and money I earned at a day job. I treat money with care regardless of how I got it. What is important is whether I have an edge and whether I can sustain it. I also continue to research ideas in case what I have been doing quits working.
  9. you really have to respect the guys that are in the insurance business

    on the outside they seem very conservative

    but on the inside they take on incredible risk

    Everytime there is a hurricane like Katrina or Sandy

    You expect them to declare bankruptcy

    Yet somehow they have survived many of these events

    and still made money
  10. who the heck said you put all assets ful force into this or anything..... sorry your just not getting it
    #10     Feb 9, 2013