No need to be sorry, I appreciated and respect your post. Advice, comments, input and observations like yours and others that take the time to post always contain something of value that I keep with me. I'm learning that the size of the premium says alot about the underlying. It's kinda funny, as option writers, we want some volatility so there will be a decent premium to take the risk and get a good amount of money from the sale, but not too much! How much is the right amount? Now, there's a good one. I think we are looking for lotsa volume and some volatility in the underlying, they usually make good writing plays. Now good ole' GE, lotsa volume, but not much volatility. Almost zero premiums on the options. Thanks again to all of you, I learn so much from your input. Arnie
selling options naked isn't for the inexperienced nor the undercapitalized. Please be careful... be sure to use stops. It doesn't sound like you are using stops either. Lasting long term requires small losses and consistently bigger profits. Don't end up doing the reverse. Best of luck.
Gawd! Naked Calls scares the bejesus out of me! Iâve sold a few naked Puts, most profitable but one was a disaster, losing all the profit I made. I sold puts reasoning Iâd buy the stock if it got down to my strike price. Problem is, if it gaps way down past the strike price, you still buy at the strike price. That is the inverse of the traders axiom: buy low, sell high. Iâm still learning and hanging in there. Set stops and get out and donât look back when/if your stop is hit. Rick
I'm thinking about selling an AAPL Apr. 60p-75c strangle, and protecting it by purchasing a Jul. 55p-80c strangle. That way I will hopefully be able to sell may and jun strangles against my long as well. Hist. or stat. vols are quite low to IV, and am hoping stock is range bound for a while. I was also thinking of pushing the call strikes up a notch to allow more breathing room. Anyone else think a double diag. is a prudent play at these levels?
whoops, state vols on AAPL are actually quite high, coming off their highs. I was looking at another d.d. candidate. Still looks on the Rachael McAdams(smokin' hot) side to me.
Arnie, 1. I try to open my positions when vola is high, however I can`t always wait. 2. Regarding timing - depends what you do. If you sell theta, you`d better stay with theta curve, if you sell mostly gamma - your defense plan is the key. 3. Do not be mistaken about short results selling OTMs. The truth comes when them market jumps against you. Then you know what are you really selling
Thanks again to all of you for your insight and advice. Well, 2 weeks to go, and my March positions are looking pretty good. I am short 2 put positions, and 1 call position, all on the same underlying. I am short the March 65 and 60 puts, and short the March 80 calls on MO. MO is at 72+/-, and a move to either strike price in 2 weeks is doubtful, but who knows, someone else took the other side of the trades, so they think it's possible! It's going ex-div (.80) on 13, Mar. Again, my deepest thanks to all who took the time to offer their perspective and advice, I really appreciate it. I've been following the market for years, and you can paper trade 'til yer blue in the face, but there is nothing like shooting real bullets! It's totally different. Arnie
Consider conversion into verticals in the last stage: - you limit your risk and unfreeze a lot of margin - you protect yourself against big moves, when options move more on deltas Good luck
Chris, Thank you for your advice, but I must admit my ignorance. I do not know what you mean by "Conversion into verticals". If you have the time, could you briefly explain what means. Covering my shorts and going long the same options? Again, sorry for being a dummy. Arnie
You just buy one more OTM e.g.: - you are short put65.. then you buy one put 60. Your total risk is strike difference (credit-60-55) and this position can be converted again, but first get comfortable with this technique.