My most conservative strategy ever

Discussion in 'Options' started by oldtime, Jul 23, 2011.

  1. Well spidro, what do you think about this one? I'm seriously thinking about getting out of the trading business and into the insurance business.

    Since most of my clients are long, I sell them a put and wish them well. If they succeed as I hope they do, I sell them another put to protect their increased value.

    If they take it in the shorts, like a good neighbor I am there until my short put goes in the money. And then I get the hell out of Dodge.(at a loss)

    And I start looking for new clients in the lower strike district.

    The whole thing is based on my exhaustive scientific research which states that not all markets can go down all the time. Which should be obvious because if they did, why would anybody ever go long?

    And I provide the worried trader with complete peace of mind all for the mere price of a cheap put.
  2. Why not sell them on covered calls? Most of the sheeple out there have been programmed into thinking it's a solid strategy, and you'll get double the fees on the exact same risk profile as a naked put.
  3. Because I'm fundamentally bullish. I think we are still in a commodity bubble. Crude may drift lower, but I don't think it will plunge. It can at any time spike up.

    Big money never attracts investors to go short.

    But you are correct. Long or short, it doesn't make any difference to me. For me personally, I just seem to get a better read on a mkt if I only trade it from one side, and today, for me, that side is long.

    Plus, people buy calls because they expect it to go up. Maybe they know something I don't. So that's why the premiums are fatter.

    People buy puts because they are afraid or to lock in a profit.
  4. selling naked puts is not the most conservative :); not by a long shot

    not meaning it wont work. ofcourse everything does; given you do it the right way. wink. wink..

  5. But I will consider your suggestion. Short straddles would probably be a more complete strategy.

    I would probably need to understand vix and delta and things like that.

    Like I said, I want to get out of the trading business, but you know, I'll probably always do a little on the side (just as a hobby.)
  6. I'm not really planning on living that long, so it's not like it has to work eternally.
  7. At any rate, what I was really looking for is a back test.

    Shorting pretty tight, say 3% below mkt.

    Covering when in the money and rolling down another 3%.

    This is also based on my proprietary research (first hand experience) that most of the time, most mkts don't trend. And I'm not expecting a long extended bear mkt in commoditys (which is all I trade) at least not for a while.

    Actually, covered calls has been working pretty well for me, especially 2 x 1. But I can never come up with a good exit or stop loss strategy.
  8. spidro, I know you advised me against this, but as Bubie used to say, "A healthy man you feed, to a sick man you offer."
  9. Some fine descriptions of naked put selling that I've read here are:

    It works until it doesn't

    You eat like a bird and sometimes shit like an elephant

    Collect peanuts in front of a steam roller

    :D :eek: :p
  10. Maybe I should get out of the insurance business and into the drawing board business.

    If my recent activities since I started hanging out on this forum are any indication of the world as a whole, a lot of people should be going back to them.
    #10     Jul 23, 2011