Discussion in 'Options' started by TraderTactics, Apr 7, 2010.
I do most of the time.
Is 40% Per Month Shorting Index Puts a Fair Return?
40% a month. thats funny. here is how a pro did during the crash. ansbacher was an experienced put seller. one of the best. the crash hit him hard. he kind of fell off the radar this last year. no idea if he survived.
So you can 56 fold your money in a year by selling index puts? I'd like to see how. 56 is 40% per month compounded for just 12 months.
Has the author of this thus multiplied his money by approx. 20,000 fold (30 or so months at 40%). I have my doubts
This line is worded badly IMO:
Systematically selling one-month-to-expiration, unhedged index puts generates extraordinary profits: 39% (95%) per month for at-the-money (deep out-of-the-money) puts.
What does the 95% in parenthesis mean? Something with deep out of the money puts? If thats what it means, how in the heck can someone make 95% in a month selling those? Anyone who sells puts knows that's insanity to expect 95% monthly returns selling OTM puts.
this ONLY works and is ONLY true for those with HUGE cash balances in their account...if you have under $100,000 in your account...forget writing/selling naked options...totally forget it
What about iron condors? They're your selling options and hoping the underlying doesn't move too much, but you still have protection. I don't understand this strategy at all . . . you're not going to get rich 20c at a time. If you're going to speculate, don't do it halfway.
Anytime a simple solution like this is aired, you need to consider two things:
1) why aren't the $multi-billion hedge funds/IBs doing this and arbing the heck out of it? Yet it is available on one-man-wonder websites? (because it does not really work)
2) what happens after slippage, bid-ask spread, commission, fees, taxes and everything else is factored in?
You either have an edge or you do not. It is not a simple thing like "gee, what if I just do this?"
If so, who'd be buying options, and why? When you write an option and it drops in value you make money. It's just that simple ...
PS: How old are you?
Its a good strategy if you have low commissions, on penny wide options, tons of open interest and the market is going sideways.
Sideways is the key.
All option stategies must be selected for the right market.
All of my covered call trades have been profitable for the last 6 months: GE, EGO, TSO, GFI because this is perfect covered call weather ... slowly drifting upward/sideways market.
Scale has nothing to do with it: 1 call contract on 100 shares or 10 on 1000., except the sting of comissions is decreased of course on big trading.
Last year, naked put selling was my huge money maker (on volatile stocks I wanted to own anyway.)
And that has also been my experience over the years. Had I simply bought or shorted the underlying I would have had much greater gains and more control over the position.
Selling options provides a very false sense of security, and novice traders/investors don't fully appreciate their exposure.
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