Paranoid about selling Options?

Discussion in 'Options' started by CashDelivery, Jun 22, 2014.

  1. xandman

    xandman

    1% Theta is a lot.

    Calculated some numbers for those who don't find things obvious, such as myself. This isn't even a playable trade for me. Just using it for perspective.

    50,000 account value

    a position of 23 SPY June 11 195P, 1.6% away from spot

    theta is at $91 or 50,000/$91 = .18%

    So you need an exposure of 5x in notional value to get to about 1% Theta trading weeklies at market level risk.
     
    #31     Jul 5, 2014
  2. newwurldmn

    newwurldmn

    Those are it. Delta hedged just coverts an ATM put to a straddle at half the size.
     
    #32     Jul 5, 2014
  3. draft730

    draft730

    I sell strangles on ES and NQ for about a year now with great results (up 30%), The big issue concern however is what would be the appropriate adjustment if the market goes significantly up or down. Up until now, I adjust my positions once the options reach a 0,30 to 0,35 delta. Do you think this is a good approach or I should look for a more complexed strategy, that include other greeks maybe? Any idea/suggestion would be really helpful
     
    #33     Jul 9, 2014
  4. newwurldmn

    newwurldmn

    It will help but really any "adjustment" helps in one situation and costs you in another.

    Bottom line there is no hedge for being short vol when things get raucous.
     
    #34     Jul 9, 2014
  5. draft730

    draft730

    I think this is not actually about hedging. It is about employing the ideal strategy in order to minimize the loss. I think that readjusting the probabilities when delta touches 0,35 ensures that you will not suffer a loss greater than 5% of your capital.
     
    #35     Jul 10, 2014
  6. newwurldmn

    newwurldmn

    You can't minimize the loss except to trade smaller.

    For a given expected return all you can do is shift the max pain scenarios around.
     
    #36     Jul 10, 2014