@ atrp2biz Let me add some context to my undefined risk statement. If you are using 50% or more of net liq you are in danger of taking substantial losses. I am going to make an educated guess and say Sweet Bobby uses more than 50% of net liq. What do you consider a high degree of leverage? I am market neutral. Based on your statements you seem to be a pretty confident trader what is your YTD % gain or loss? How much leverage do you use in your account?
I'm unclear if these two points were meant to be tied together because low leverage is not synonymous with being flat delta. If you are using 50% of net liq for defined risk spreads, the amount of leverage you are using is a lot higher than you think. This is the wrong question to ask. My % gain YTD would be a function of the amount of leverage or risk I am taking. My YTD returns are a hell of a lot lower than 25%. However, my confidence is not in the size of my returns, but in knowing that my account will never blow up. I measure my risk not by buying power but by the notional value of the options.
I said I trade market neutral so you would understand that my returns did not come from being long as you indicated as a possibility. My recent gains 25% YTD and 76% over last 12 months are based on using 50% of my net Liq. However I have recently added a decent chunk of change to my account and I have lowered my leverage to using 25% of net liq. If I can continue at my current pace (Yet to be seen) I will be able to bring 30% or better returns based on using 25% of net liq. Do you think I will blow up my account using defined risk while using 25% of net liq? I do not. What leverage are you using in terms of Net Liq? And what are your returns? I hope you are staying away from undefined risk.
The key to not blowing up is position sizing. People that blow up have on too many positions. I utilize approximately 25% of my net liq and I can go up to 50% in high volatility. That's the key. Keep it small. Tastytrade research.
Let's don't complicate things. Here's my strategy. Sell options between 60 to 30 DTE on ETFs and Indexes. I generally pick the ones with higher volatility. I try to use between 25 - 50% of my buying power. I want to collect .01 to .5%thetadecay per day. Attempt to maintain negative delta at a 2 to 1 ratio to vega. I close trades either at 50% profit; at a loss of 2x the initial credit received; or close the position when it reaches 1/2 of its original DTE, regardless of profit or loss. Simple, simple, simple!
@Sweet Bobby Honest question, no bustin' stones. Have you calculated your expectancy ? In the simplest terms is the 50% profit more than the 2x initial credit loss across the board ?