So, Feb was good to me, I had several OTM options that expired worthless . So now I have all this selling power back again, now that the margin requirements are gone from the Feb options. But I'm wondering, many times I'll take new positions the first day, (today), and regret waiting, because I could have gotten a better price. Do full time pros count on impatient guys like me.? Is the fix in? I've been trying to get a steady monthly income by selling OTM options maybe 2 months out, and not be greedy. Should I wait a couple of days, or more, after the previous months expiration to take new positions?
Arnie I think patience is always a good trait, but especially so in this game. Let the market come to you. BTW, Proâs have the same crystal ball that youâve got ! Selling OTM options normally provides a good income stream - until the market turns and bites you. Up the escalator / down the shoot comes to mind. Good luck.
Thank you. Patience is easily the hardest thing I have to learn. I got spooked out of one position this past period, and even though I told myself not to do anything, I closed the position at a loss. Had I listened to my own advice, the position would have expired worthless, at a decent profit. Oh well. The underlying was moving hard against me, and I couldn't take it. The position was naked AAPL Feb 70 Puts. The stock closed above 70, but not by much. It had been in the low 60's during the period. I also had sold the naked Feb 90 calls, but I just closed everything out. Rookie move I guess. I've heard some people refer to it as "Scared Money". I know most of the people on this board only rely on technical analysis, and I know I should, but I just get overwhelmed by all of it. I just go on gut feelings. I'm sure many of you are thinking, "He won't last long". I hope I last, I enjoy it, although sometimes it is very stressful. Arnie
Technical analysis â Pah (!) you may as well go read tea leaves, or trade according to astrology. The markets are random, but I canât prove it. Well done in cutting your APPL Puts, that takes courage. I think he will !
Hi hi..... Im not too sure whether you actually meant you should've waited longer instead, or not. But it seems you regret not getting a better price. Well it depends on the underlying's price movement and volatility mainly, since you dont sell so close to expiration then the time factor of getting a good price is more negligable. If you notice you can get much better price as the underlying move closer to your chosen strike, and so if you really want to maximize your profit then there's no other choice but to determine your entry points. So just wait until it's about to turn upwards again then sell at that point. It's not so difficult if you do simple support and resistance levels, just see where they are, once it hits support level and goes up again, sell. This will max your profit. The problem with us options traders is that sometimes we get transfixed with greeks and complicated spreads that we often forget if there's any directional calls we make then definintely directional analysis will need to be mastered too. It can't be left out or it will come back to haunt us sometime in future.
Also I think you did the right thing by repairing your threatened put. The problem with this far OTM put selling is that it's a 'blink or not' game. If you dont blink in the face of danger, and the market turns upwards later, you get to keep your profit. But if you keep staring and not blinking and it does hit you, it's much more painful. A good analogy is maybe like 2 car drivers facing each other, if you dont blink and the other guy turns then you win. But if you dont blink and finally it hits, your car is ruined and maybe your life too. In this case when you saw the other car getting too close for ur comfort and u quickly turn to save yourself, although it skidded some and ruined ur tyres but it's much cheaper than major car damage from a collision. Dont regret doing this, or else one day you will have much bigger regret. Blinking is actually good for your long term survival.
Thanks to all of you for your thoughts and analogies. It just made me so mad at myself, because the previous option period, January, I made a bad play on AAPL, and I told myself, no more AAPL option plays, it's too volatile! But those premiums were just so big, fat and juicy, I couldn't resist temptation. If I remember right, it went like this, AAPL had a STRONG run up to 88, pulled back to 82, and I sold the Feb 90 calls, and sold the Feb 70 puts. I thought to myself, boy, I'm safe here, this is a sure thing. Apple was getting lots of media coverage because of the strong run, and I felt good about my position. The part that really made me mad was the day after I sold them, the puts doubled in price! Some bad press came out and the stock went south BIG time. Have mercy. Looking back, I should have let the calls expire, but I was just so fed up, and mad at myself, I didn't want to hear the name Apple again. I covered everything. I still have it in my watch list, but I don't think I'll take a AAPL option position for awhile.
I agree you made a bad Apple play. But for different reasons. Closing your NAKED short puts was the prudent course. What was to say it couldn't have hit x friday at 60 or even 40? As has been said, the primary error is not lack of patience, but grandiosity. Why on earth are you selling naked options on highflying stocks?? You have regrets about selling the puts too late. That is greed talking. One or 2 more bad press reports and the regret would have been selling the puts at all that morning after the down gap..... Yes, hedging your sells is less gratifying but it will allow your survival so that you can learn to improve your timing. best of luck.
I think you misunderstood me. I didn't have regrets about selling the puts too late, I had regrets about selling the puts at all. I realized the momentum was now down, and I had made a very bad play. So it wasn't greed talking, it was "I just made a big mistake" talking. Why was I selling naked options on high flying stocks? Inexperience and the lure of fat option premiums. I thought I was hedging by selling both OTM calls and puts. Lesson learned.
Sorry if I misunderstood your point or sounded too preachy. Just be careful! Don't get seduced into getting naked for those juicy premiums.