So back to my original post. Are there traders out there making greater than 20% per year selling options, and not taking abnormal amounts of risk? I can see it being done if you trade directionally IF you can time the underlying very well but not just selling premium. Someone mentioned, "Hey sell butterflies!" but if you have a ton of butterflies on trying to achieve a yearly return of 50%... your going to get blown out eventually right?
Thank you. I assume you and Des do butterflies by going long, i.e., collect a premium? And why do you have to hedge? Flies are essentially non directional?
Minor point here, but "long" flys are put on at a debit -- i.e. you pay the premim (long wings, short middle). Long credit flys are an arb and went out with linkage.
It made no sense as the singles were cleaner, but I once had a five wide in COMS in the front month for a small credit; 50x.
Well he's not only talking about 321/123 flys but he's putting them on away from the money. A lot of these flies have a directional component. Even an ATM fly can accumulate delta as the market moves away from the strike.
LOL. This was definitely not the original question. I thought you were an unreal futures trader? What kind of question is this? I sell options all the time. I also buy a lot of options. Do you mean is there someone making 20% a year short gamma- without over leveraging? Then yes I could name 4 posters on this site. If you are smart (mathematically, programatically, economically), have access to a good broker/good technology and trade under 1 mil, you should have no problem making 20% per year being short gamma.
If you ever see another one, please post it! Plus I am about to PM you about 231 Flys. Grab a glass of wine
There's nothing special about doing 20% a year in options (except that you probably left a hell of a lot of profit on the table only taking 20%). I opened a Schwab account recently and just got everything approved today. I kamakazed the account (just no blowout protection, not stupid positions) and did 11% today, and it wouldn't surprise me if the account triples up on Tuesday (or blows-out--though honestly, after today's close, I'll be disappointed if it doesn't double up). But the point is, this isn't good option trading, it's unreasonable risk management. Which brings us to...your trading needs to be tailored to risk, but expose you to gains. That means you cannot target gains because you can only adjust risk to get there. So figure out how to keep risk in check and afterwards make incremental improvements on cost and profit.