I see in your optionxpress paper account you are primarily naked short optons. That is a strategy that has gotten many people killed. Read New Market Wizards. This guy was making money just shorting naked options then one day a company got taken over, he lost is all of this $100,000 account and owed $500,000 more. As a good rule, you newbe should NEVER be naked short an option. Most experienced trader donât like to be naked short options. One big event can wipe out an account. You can be positive theta by doing calendar spreads. Good luck
If you recently quit your job to sell naked options then I am very concerned for you. Naked options always look so easy but the problem is that it is the one loss you take that wipes you out. You should never trade anything where one loss wipes you out. No advice on this thread to you should be taken except the advice of stop selling naked puts, either with real money or in the virtual trading. It is not a strategy a newbie should be playing with. I know naked puts are like covered calls, but it does not make it any less riskier. Also you are selling strangles. Two words for you.... Nick Leeson (google him)
So I'm guessing from the two respondents that you would not recommend writing strangles as a viable strategy? Are there circumstances where writing options is a good technique, other then hedging? So far I've made most of the profit in the paper account from writing puts. Thanks!
Here get a trial to www.vectorvest.com 5 weeks for $9.95 it will let you backtest stratgeies. It offers fundamental and some technical. Not a bad product. They also have a lot of training videos on their website.
I would not recommend going the real estate route...First off...it takes 2 years of working full time as a real estate agent to become a real estate broker. Real estate agents average salary is 36k a year and its only that high because those top agents that are pulling in 100k to 300k a year inflate the numbers. Had my license for 3 years and did it part time. How much did i make for those 3 years? 7500 total. Thats a whooping 2500 a year, hell, welfare pays more than that. Oh and when you go to be a real estate "broker" after the 2 years, i believe you have to put up something like 20k to 30k to start it up. So lets say you do that and start it up. You have to get 50 employees like me to produce 31k a year gross assuming a 75/25 split with your employees and thats not covering your rent, and other fees associated with running a real estate office. Even if you do find a star realtor that makes 300k a year they wise up real fast and go to those 100% commission places and just pay 300 bucks per transaction or whatever it is in your state. Now heres a better idea...go to vegas, become a blackjack dealer, work the late swing shift (9pm to 5am) go get a breakfast special at your casino for 99 cents...you are home by 6am....market opens 30 minutes later...finish trading by noon, go to bed, wake up at 8pm, get ready for work. Hows that for a plan.
Seeing the 10 contract straddle on RMBS reminded me of a very poorly managed trade that I executed. In the first week of February 2004, I sold a RMBS Iron Condor, Short the March 30 call/put and long the 35 call and long the 25 put. I stood to make $300 with a maximum theoretical loss of $500 which was well within my risk tolerance. I used to use ivolatility.com to find stocks with very high IV which led me to this trade. Anyway, I managed to lose about $550 on the options by 'managing' the trade as follows: 1) On 2/12, the stock drops like a rock and they halt trading. On 2/13 it opens at $25 and my put position is only down about $400, so I close the put side of the trade. I left the calls sit because how could it possibly ever get back to $30? I'm going to get out of this with only a $100 loss. (Took in $300 in premium and closed half for $400 loss) 2) On 2/18, it opens at $36, now I'm down $450 on the call side. I again panic and close the position. Over the next 3 weeks, it fades back to the original price range of $30 and in retrospect would have been a profitable trade. This turned me off to selling volitility. IV is usually high for good reason. I occasionally still do trades like this, but I let the trade sit to expiration and do not attempt to manage it.
The recommendation I have recieved when the underlying goes against the position is to always wait. Also never 'leg' out of a combination position. That is to close one side and leave the other open, just for the situation that you just described. When the option gets near expiration, you can decide to either roll one leg up/down/forward, etc. I think the real danger in a write strategy is a huge change in price very close to the expiration date. One other thing, I'm not too familiar with Condors but it sounds like you sell a straddle and purchase another one? Would it have made sense to close or leg out of the options you purchased rather then the options you sold when a situation you described happens?
Two things: If you have an acct with thinkorswim it will be able to calculate greeks for you for individual positions as well as total overall portfolio exposure numbers. IMO thinkorswim is a light years ahead of optionsxpress (nothing xpress about it actually). I see you sell some covered calls against stock. You can also look into shorting puts instead (cash secured puts), exact same risk graph but less transaction cost. I have done what you are trading now in the past, it will not work. No one is that good or that lucky for very long (a bit of ta, a bit of news etc.) Have you read Mark Douglas, Trading in the zone? Turned my trading career around.
I do have some naked puts in my paper account. They have been extremely profitable so far. I've been doing some reading on Condors, looks like its a way of hedging a uncovered strangle/straddle write. In the long run there could be a large gap up/down that could wipe out an account utilizing naked write strategies. Anybody with long term experience in this strategy can comment on this?
I'm not quite sure why you quit your job .... unless it was involuntary. I really hope you have excellent cash reserves and a place to stay free of charge because your strategy is quite risky. It seems to me that it would have been much wiser to just look for another job at a different company where they would fund your MBA or part of it. If you are are taking time off and pursuing an MBA and debating whether to trade with your cash or go to school, I would go to school full time and get the MBA out of the way if you think you need it. The value of an MBA even from a top school is a question mark. .....