This is the classic bull market strategy that kills. It will not work over the long-term. 1) Sometimes markets gap lower and, as already mentioned, it's not always possible to buy back the options for any price near the price at which you sold it. 2) Rolling to the next month does not mean 'no loss.' It means risk is present for an additional 4-5 weeks. And part of the time, the market tanks further - increasing losses. You cannot roll out to the next month forever. 3) "not risky." that's some quote. He will not be managing other people's money for very long - unless he has extraordinary talent as a market timer and stock picker. 4) the kiss of death. he not only uses this risky strategy exclusively, he uses leverage. Not smart. I don't want to knock the practice of writing naked puts. I've written three option books and recommend that strategy. But, ONLY for investors who WANT TO BUY stock at prices currently below market. Not for anyone else. Mark
Could I ask you a question? How come you wrote three books and yet you flancked answering the question of calculating the ITM prob. of a condor?
riskfree-- you've never made a mistake? Give Mark a break. In the next post on that thread, he humbly admits that he was wrong, which tells me that he is a pretty good guy, and probably does very well trading to boot. I've read every single post that Mark has made on the SPX credit trader thread (one of the best on ET). He comes across as williing to learn, quite knowledgeable and personable (and no, I'm not related to him in any way). Just because a person makes one mistake, don't write off everything they have to say. I've made mistakes, even in entering orders occasionally, and that does not mean that I'm losing money. On the contrary, those who can admit they have made a mistake quickly can usually avoid real disasters both in life and in the markets. By the way, Mark's comments above are completely correct. I'm sure that Atticus, coach, dmo, and others who are experienced will trade these types of positions in modest quantities occasionally, but we understand the risk of what we are doing, and never expose ourselves to complete blowout potential. I'm often short premium, but rarely totally naked, and NEVER with my whole account.
Not Mark here, but... http://www.amazon.com/s/ref=nb_ss_b?url=search-alias=stripbooks&field-keywords="Mark+D.+Wolfinger"
Several possibilities for option trading today - looking to sell SPX calls, and possibly closing 1150 puts. But I will fade this market - scalping SPU8 shorts, over the next day or so
The truth is I got careless. I did not recognize the difference between events are are independent (flipping a coin repeatedly) and events that are mutually exclusive (coin landing on heads and tails at the same time). I calculated the probability of a 30 delta option finishing out of the money in each of two <i>consecutive</i> months vs. two 30 delta options (call and put) - each finishing OTM during the <i>same</i> month. Mark
this sounds like BS an option buyer has the RIGHT NOT THE OBLIGATION to take deliverily of the underlying on an ITM option at expiration..........so how the hell could he have gotten auto-delivery unless he notified his broker beforehand.......he is not obligated to take deliver of underlying.