Questions about my trading strategy

Discussion in 'Options' started by xCarsonx, Sep 21, 2011.

  1. xCarsonx


    I have been trading for 3 years. Almost entirely with covered calls. I have written some spreads but only a few.

    I have done quite well for myself in my opinion the last few years but once I stumbled into ET I realized I have some more learning to do.

    I basically trend a stock, usually a larger blue chip company, and write options against it. I try to maintain the stock and write a call whether ITM or ATM based on where I believe the stock will end up. It has worked rather well for me allowing me to lower my cost basis on losing trades and average out the lose after a few months.

    What I want to really ask is there any advice anyone could give me as far as the Greeks on my options. Should I try to remain delta neutral or does it even matter.

    Currently my portfolio has the following metrics:

    Delta 0.47
    Gamma -0.13
    Positive Theta
    Negative Vega

    I really want to refine my trading and put myself in a more conservative position.

    I'm sure you can tell that I'm relatively new to any Greeks strategy and appreciate any help that I can get.
  2. rmorse

    rmorse ET Sponsor

    Your strategy is a long based strategy that works well in up markets. Trading the same strategy delta neutral will increase your upside risk, but increase profits for flat to down markets. To ratio sell calls, you'll most likely need a portfolio margin account because REG-T is too restrictive.

    When you trade delta neutral, you're really not stock picking the one you like to go up or down. You're selling volatility in stocks you feel the options are over priced. It's a different skill and you can try both.
  3. SPX greeks? Those greeks are meaningless w/o knowing the size of the portfolio and the composition. Are you short naked calls and puts? Long flies? short verticals?
  4. xCarsonx


    These are my current positions.
  5. For the big picture, the Greeks will enable you to monitor the overall risk/perfomance of your portfolio and if you see their metrics are moving against you, you can hedge or close some positions.

    Since it's a long based blue chip equity strategy that you say is performing well, I think your emphasis should be on the news and performance of the individual components - the Greeks aren't that important for a buy and hold type writng expiration to expiration. Your timing and selection are your key to success and I don't think that you need the Greeks to tell you when that's off :)
  6. Not much to say. A CC portfolio. I would not be long BRK.B deltas as there is no succession plan at the company and there is a lot of leverage on the balance sheet. Not to mention the BAC overhang.