Welp, the second week of NOV is completed and $SPX is 3120. My target was 3111 and once that hit I liquidated a few short put veritcals and long call verticals in $SPX and $RUT. Although the markets are looking as bullish as ever I'm getting ready to deploy some short delta at these levels, just not yet.. will comment on Sunday after I do my analysis!
"Oh man, see articles like this is why you should not allow academics to write articles about things they don't actually trade themselves. Let me offer a "trader's" perspective why it can appear on paper that premium sellers do better in statistical studies. As I stated before, the mathematics of it are very straightforward and easy to prove. What's not so easy to quantify in these studies is the behavioral science of it and I'll go into that briefly. A skilled poker player will tell you that playing poker against bad poker players is not easy. The reason is because they are actually bad players and don't have a clue about odds and how to properly bet, it's actually hard to predict what they are going to do. So, let me move back over to options. Because most people are lousy traders, selling options fits perfectly with the do nothing mindset of most traders. If I sell an OTM option or spread, there really is not much discipline required to sit and let it expire worthless. The problem with being long premium for a bad trader is that it DOES require the trader to make decisions. You can't just sit and do nothing, you have to actually do something. So for a lot of guys, being long juice is hard to manage. Has nothing to with odds or probability, but the fact that they should not be allowed to be alone in a room with a computer and a brokerage account. LOL. Meanwhile the premium seller who has no skills to speak of either, but he can actually be rewarded for a while for being a bad trader with lousy habits. His inability to tie his shoes works in his favor as his ineptitude will bring short term profits. So when academics do studies, they fail to take into account behavioral science. As for most options expiring out of the money. There is a "mathematical" explanation for this. Under the assumption that most stocks drift higher over the long term, strikes get written as stocks move up. The problem is, there is a skew to the downside since stocks usually start low and moved higher. So there are far more put strikes open on avg then call strikes on any given name including an index. Don't believe me, open a chain and check it out. And since stocks generally speaking trend up over time, those puts will expire out of the money. The misleading aspect to this is that a large majority of those puts are NOT tradeable. They were created when the underlying was at much lower prices. If one where to do a study that only looked at the ATM options as well as the first 2 or 3 strikes OTM in both directions, you would see that about 50% off all options expire ITM and 50% OTM. This is beyond most academics comprehension though. Furthermore, most these articles don't even address the synthetic nature of options. That is, that a large majority of long put holders are really long synthetic calls. For example, say I'm long shares of AAPL and I buy puts to hedge my stock position because I don't want to sell my shares. These academics have me down as a long put buyer. And when my put expires worthless, they have me recorded as a net loser. The problem is I'm actually a huge net winner. If I bought stock at 400 and bought the 390 puts for 10 pts then I'm really long the synthetic calls at the 390 strike. And if AAPL goes to 450, I'm a huge net winner as I can now sell those calls for 60 pts that I bought for 20. Yet according to them, I'm just another stupid option buyer who lost money. As with anything in trading, there is a lot of math involved and a lot of variables. If you do not understand the math forward and backward, you will be vulnerable to all these silly myths that get pushed into the market place." @Maverick74
Diagonalized calendar in $RUT Short DEC 1555 Long JAN 1565 @ 12.10 risk the synthetic embedded long-put-spread for -delta to enhance this move if we see a correction soon.
How? The more an asset goes up the less a person can afford that asset. Not many people can buy AMZN stock @ $2,000 a share... but I assure you many a more could buy AMZN stock if it decreased to a much lower price. I agree with your statement if ONE is already in the asset being talked about... but theres no opportunity for the people on the sidelines. When the market is in "turmoil" its on sale for the smart money. This is why every correction gets quickly consumed and we march up. Share-buy/backs and short sales keep propping this market back up at higher prices. Idk about you but I'd much rather buy SPX at its low of 666 rather than its high of 3020..
I thought you trade options? If you bought ATM or slightly OTM call options (or bull spreads) on GOOGL, AMZN the last few years, you don't need a lot of $ to come out very well. If you bought GE, TEVA options you would lose your shirt.
I trade everything, but mostly options... I don't really understand your point? The "if" argument can be applied to anything and is attached to hindsight bias. Of course you'd make money if you bought bull-spreads in stocks that are going up... lol and of course you don't need a lot of capital to trade spreads but what about naked options in $AMZN? I need $4,000 just to buy the ATM option, and something like ($34k) in margin to short the atm call. My point is, that a falling market benefits the smart peepz who know how to buy on sale and appreciate cyclicality and two-way markets. Its the slow drift at new highs that traders dread!