I'm guessing the put is worth slightly more than you received at this point. It's within one strike so I would hold at this point. But don't know how much it might deteriorate today with the down market. (Yes, 2% of the underlying. For stock at 15.50, 2% is .31)
@robertSt I sold the Put @ 0.67, currently around 0.97 with 1 week to go. Market is 4 strikes below sold put. I can roll to 2 weeks to leave me net apprx 3%, or wait next week. Would appreciate your insight on it. Thanks
You need to calculate sharpe ratio, you can't compare absolute dollar returns. They are not indicative at all. I can make millions if I have a billion.
And any fool can make $5,000 a week selling VIX calls and taking advantage of the inevitable decay of VIX futures, for months and months, until the week they get creamed and lose 10 years worth of that $5,000 a week all at once. You're right, the fact that someone made $X per week for a few months is utterly meaningless for several reasons.
Do the naysayers trade at all? If so, tell me what you do and I'll tell you how you can get creamed. I'm 5 years in to this strategy now. I've seen a 30% correction and a few other volatility spikes. I've had underlyings lose 50% or even more of their value multiple times. I've been carrying UVXY short puts since early October, when volatility collapsed with the post-election meltup. I will close those out in a few more weeks with some gain. So if you have a trading strategy that works for you, I'd be grateful to hear about it. Meanwhile, I'll keep doing what I'm doing and growing my account size until the Armageddon you so fear strikes.
I evaluate my strategies based on something at least somewhat rigorous like a Sharpe ratio (I actually prefer the Sortino ratio) which allows me to determine if I have alpha or I'm just the beneficiary of chance. There's picking up nickels in front of steamrollers and there's getting alpha taking into consideration risk adjusted return. I prefer the latter, as do all professional investors. That's not being a naysayer, that's being a professional and knowing your craft.
Robertst, what is your Sharpe ratio? I don't see how his strategy would result in a worse Sharpe ratio than holding an index fund. The option premium is just smoothing out returns for the most part.
I skimmed this thread, but I don’t think Robert has said anything foolish. There’s nothing wrong with selling cash secured puts unlevered. He’s taking a view that the premium received will compensate him over the long run. I don’t see anything wrong with his strategy of rolling his puts down and out to preserve his premium. he hasn’t increased his risk. He’s not doubling down as much as he’s extending his duration. His strategy should perform with about (maybe slightly better) the same sharpe as the overall market. I certainly wouldn’t qualify it as picking up pennies in front of a steam roller as he isn’t any more leveraged than a buy and hold investor.