I agree with the tooth Dr. I am usually pretty good on direction but when buying options you're also fighting time. That's what usually hurts me when I've bought options, especially calls as volatility usually shrinks if it goes your way too.
Thank you for sharing, really good stuff. What's the return of 2017 look like? It's typical bull market with ultra low volatility. How much capital do you usually allocate? 30%? 50%? Just a kind heads up, when IV expands, your broker might raise your buying power requirement on your trade, how did you deal with this? Also, 1% to 3%, is it for whole portfolio or that single trade? Based on CBOE PUT performance, it seems most strategies cant beat B&H SPY, sometimes one have to think, why bother. Just my $0.02.
... because performance is not everything. Option strategies have very different properties in terms of risk, risk-adjusted performance, and from the tax perspective.
2017 was fine. Usually 15%-20% of total capital. My puts are always cash-secured, meaning I front the total amount that could be required if the put is assigned. So I'll never get a margin call or have my buying power adjusted. I believe the CBOE performance is a purely mechanical strategy. Puts are sold according to predetermined rules and the options are always allowed to expire. It's not hard to improve those results substantially simply by managing the trade. I don't trade the index, I prefer equity options. And I can enter and exit according to market conditions. That, along with the rolling tactic, means there is a world of difference between CBOE performance and mine.
I do something very similar except I keep a very large sum of cash on hand and sell the puts significantly below the current price. Almost always weeklies. Always quality stocks. I'm assigned just over 10% of the time and when I'm assigned I simply turn around and sell more far off puts the next week as well as covered calls on the same stock just over my cost basis. Continually lowering my cost basis and also reaping benefits from the covered call. I almost never buyback because I only deal with stocks I'm comfortable owning. I work with about 5-9 stocks per week. I recognize you need a decent chunk of cash to do this but it works remarkably well.
Everything works fine till you get blown out of the water. You obviously don't have the skills or knowledge to compete with market makers and option professionals. I suggest you call it quits before your account collapses. "but it works remarkably well." do you really think that you found the holy grail?
We've already pointed out that our method is mathematically more conservative (less loss potential) than the equivalent stock position sans options. So is this what you say to someone who buys and sells stock? If so, why the heck are you in a trader's forum? I think you need to reread some of the thread. You're probably thinking that we're leveraged, or going naked. But we don't use margin, so it's safer than plain stock. A LOT safer, because I can sell time value forever. Forever. You need never lose money unless you decide the opportunity cost is too high - you can do better somewhere else. You need never lose money. But the longer you are in a rolling sequence the more your return diminishes, in most cases.