So we have a highly liquid weekly market .when our portfolio losses touch percent we unwind everything and book losses. We have been doing for last 7 years profitably including covid.we keep mostly intraday position Here is a video of a similar strategy for your reference .
so you open at 930 and close at 4pm? a 1percent stop loss on account or on notional or on premium? How much notional vs your account size?
So in India we get 5x leverage on margin . Say I use a margin of 500k usd, so max loss will be 1-2 percent of margin depending on premium at opening. Now I open the trade when market opens , 9.15 here, I will sell straddle plus strangles .to reduce gamma on one strike. Say now market start trending. Il cut the tested side and roll it down and untested roll up. I can choose other adjustments also like reduce size of tested side etc depending on my view of overall market and premium, I keep changing stop loss based on how much theta I can squeeze..say I am alrdy 1 percent up .stop loss on notional would be reduced from 2 percent to 1. The idea is manage position and try to keep stable mtm..if realized vol start hitting losses . everything is unwound at 2 percent loss and close for the day There are weeks when you make consistent returns and few when you hit stop loss.. As you get better at making adjustments you are able to manage different expiry behaviour.
Just remember one thing: The more margin you use for leverage, the more you will lose when shit fits the fan. With short strangle/straddles, your possibility of loss is double the chance of winning because you are naked short on both sides so if either of the legs goes ITM you will lose whereas when you want to win, you have to have both legs being OTM. And when the options go ITM, the loss is ALWAYS ALWAYS bigger than the premium that you've earned because of gamma so you will always always end up losing more than what you have earned, guaranteed. Stop-loss does help but remember that prices can often gap and can gap way past beyond stop-loss so it's not fail-safe. Coupled with the high leverage via margin, you do the math. Many many option traders have years and years of record profit doing nake short strangles/straddles or even just nake shorts on one side and they eventually lose on one big HUGE loss and they pretty much lose everything. If you do some research, examples are plenty.
What the apx percent of spot on the straddles /strangles that you sell?? Is there a minimum threshold? I will say that when i was short gamma, I did not have a hard stop in place,and i was short ALOT of really cheap expiring options and I paid dearly. If I am reading you correctly,you are short 5x the 500k,so you have 2.5 mil of notional in short vol.. Long story short,you are making apx 6% non leveraged?
No need to research,I am right here .Ive made my contribution to the short vol Gods. The only saving grace is he appears to have a hard stop,and hes not holding overnight.Thats huge From the little I backtested,I would trade 1-3 day options from the long side,especially in this vol enviorment..
I'm new here. There is something in BSM about continuous markets. I've never know of hard stops to be a thing other than MIT-orders.
LOL..........F&*%ing NOOB!!!!!!!!!!!! Im assuming,unlike the old me,when the gamma guillotine is about to come down,he gets out with a market order....
In 2020 and 2021 we made 10 and 12 percent unleveraged , in 2022 it's approx 8, so we target mostly 6-10 percent. Like I mentioned say if 100 is the spot , we sell 100 straddle, the next strangle and next and so on until we are getting meaningful premium. We don't like to cluster on one strike to avoid huge gamma movement. Our hard stop is mostly below are max loss as their is slippage when gamma move is strong. Some traders utilize algos to avoid freak trades for exiting and minimising slippages
Also do note we trade on nse and currently it has world's highest volume on weekly options , so liquidity is not an issue. https://m.economictimes.com/markets...-traded-index-option/articleshow/88994125.cms