Generate income through options

Discussion in 'Options' started by ssp729, Apr 3, 2019.

  1. sle

    sle

    He wants to retire, I guess.
     
    #21     Apr 6, 2019
  2. ironchef

    ironchef

    The devil is in the details. My associate only writes put options, on one stock, and has been doing that for over a decade, profitable every year. The key is he writes only when conditions fit his criteria.

    The other thing I found, from experience, is if you need all the profits from trading to put food on the table, for living expense, you will not succeed. Drawdowns are a fact of life and the key to long term survival is generating a cushion during good time to soften the impact during bad, so the law of compounding is on your side.

    Finally, if you are serious, try to understand Kelly before you start.
     
    #22     Apr 6, 2019
    tommcginnis likes this.
  3. destriero

    destriero

    Kelly assumes an edge. There is no edge in underwriting at the retail level.
     
    #23     Apr 6, 2019
    Windlesham1 and qlai like this.
  4. ironchef

    ironchef

    True. I assumed the book would point him to find an edge and achieved positive expectancy.:finger:
     
    #24     Apr 6, 2019
  5. qlai

    qlai

    Let's say I trade 60-90% win rate strategy and try to only trade when conditions are favorable (obviously gut feel), what is the maximum percent of total capital should I allocate? Assuming I am retail. Someone mentioned Options Alpha, I think Kirk is suggesting no more than 50%.
    If you tell me ZERO, please explain why!
     
    #25     Apr 6, 2019
  6. ironchef

    ironchef

    I am just an amateur retail, so take my comments/method with a grain of salt:

    Win rate does not mean a thing. Calculate your expectancy. If negative, zero, if positive, allocate ~20%-30% capital, then calculate your Kelly and bet < 1/4 Kelly to start. The key is to lower your "risk of ruin".
     
    #26     Apr 6, 2019
    tommcginnis likes this.
  7. qlai

    qlai

    Well that's the problem for me with options (or for any leveraged short gamma strategy), they all look good on paper and make sense in theory.
    I think your advice is good and I had 30% in mind, but I don't think its worth it then. It becomes more of a hobby.
     
    #27     Apr 6, 2019
  8. ironchef

    ironchef

    Option is all about probability, neither buyer nor seller has an edge unless one side has a more accurate predictor of outcome. So, I don't know how any amateur retail like us can get 3%-8% a month returns consistently.

    However, compounding at a few points above benchmark is quite possible using options during a bull market. Here, the bull market (luck) is your edge. :)

    Have a good day.
     
    #28     Apr 6, 2019
  9. I can backtest any system you like and show at least 20% per month profits- unless people show real trades in real time they should do one. I once had a share tipster do this- in the first week they lost 4%- I carried on profitably trading options my own way +40% last year. I reckon 95% of trading is plain luck derived from having billions of other people's money. Us retail players have to be honest- the rest of the industry doesn't have that requirement
     
    #29     Apr 7, 2019
    ironchef likes this.
  10. vanv0029

    vanv0029

    I agree you need to get market direction right to make money in options. In the current market short term weekly credit put spreads have been working. You need to be able to figure out if a market dip is going to happen in the next one to two weeks. There are some good free sites (you do not need to pay the subscription to start). Jeff Augen has some good ways to use VIX to try to guess coming market direction and large moves. Sheridan option TV has twice weekly short videos that describe the possible trades. You need to find your own set ups. Always use spreads. I think with VIX down to 12 calendars probably make sense again.
     
    #30     Apr 7, 2019