Basically my strategies are Shorting Strangles/Puts on those most liquidity stocks/ETFs that prices above 50. The delta I choose are most less than 16 and the strike price is besides the recent support/resistant pos. Since the market volatility has been stayed in a ultra low position for quite a long time, Evething seams to work pretty good. I get around 10% percent returns each month recently. The positive return days is around 80%.. But I know that Selling naked options is like picking up coins before a running train. So, what I can do to lower the potential risk during a rapid crush in the future? What I am thinking: 1. Lower the leverage, trade small. 2. Spend some money to buy some insuracne, say long volatility products, VXX/UVXY.. 3. Deversify my portofolio, decrease the correlation, not only sell US equities, but also index ETFS of other countries, commodities...etc. I haven't been through crushs like 1987， but from the history data of crushs like 1998/2011, although the volatility reaches to a really high value, it still takes time, and it didn't get there in one day, so I wonder on that situation, do i have time to exit the market if i set a stop loss? say 3 times my premium? Or do i have enough time to play defense during a rush crush? Or any other suggestions to lower the risk?
check out my youtube its really easy question to answer and its not any of the 3 things you have in mind. 21 dte and 16/5 is the answer. managing winners helps to but specifically for drawdown reduction the 21 DTE is more important youtube.com/channel/UCOzuNy76QXMpXwAQCoMTXUA
Hi, fyretrading, i guess you didn't read my post carefully, it's not about single trade management, it's about overall portofolio risk management.
Just to check out the premise of selling premium before earnings, I ran a few backtests with FAANG stocks... sell the X/Y delta strangle nearest to 7 DTE, 5 days before earnings and close the trade 1 day after earnings. All data based on EOD. Doesn't look like a good idea. Maybe only with FB... but still iffy. Facebook, http://tm.cmlviz.com/index.php?share_key=20171114063014_bF53ra9eZ6xYM5YB Apple, http://tm.cmlviz.com/index.php?share_key=20171114062930_auv5ziPM5Ffk45SX Amazon, http://tm.cmlviz.com/index.php?share_key=20171114062853_6o6KM29PMoCwHaSi Netflix, http://tm.cmlviz.com/index.php?share_key=20171114062822_6gJFTgGeOwmutL8U Google, http://tm.cmlviz.com/index.php?share_key=20171114062737_ni46GQ1Zm39pS1Gc
individual equities in general are a bad idea , individual equities might have 12+ standard deviation moves while in indexes, commodities, currencies you might see 4SD Also the commission cost + slippage will really add up. liquidity + low commissions > diversification
Do you ever buy vol, either as a hedge or as a standalone position? If so, care to get into it? Cool YouTube page, by the way.