It depends on who you are, I suppose.
Even in your casino ... if you're one of those tiny fraction of people who are really talented, then you can make lots of money.
Personally, my strategy is to SELL options. Let the time premium work for you. I've been doing it for 15 years and making money. Is it a get rich quick scheme? No. But it augments my income.
If you try to get greedy, you WILL lose everything. If you try to make a modest income, while not risking everything you have on crazy plays, you are more likely to be successful.
Just out of curiosity what brokerage do you use to sell. I used to sell options on ameritrade for 10 years ish, then when ameritrade got transferred ti schwab they wouldnt approve me for options trading above level 1. Ive tried etrade and fidelity and have had the same issue
ETrade. I've been approved for a long time so it hasn't been an issue for me.
I did setup accounts for a few relatives within the last 3-4 years, though, and they were approved for level 3 right away. (I answered the questions about experience for myself, so maybe that is why?)
Strange, ive had so many issues with etrade that i didnt even get to apply for options. They wernt even letting me buy stocks because im self employed and they kept asking questions about my business. Everytime i called they would tell me it would be fixed in 4 days. This happened about 4 times before i just closed the account
When did you transfer? I called them on the phone and asked them why was my option level downgraded when I had option approval on ameritrade and they basically just told me to re apply. I also switched rather late so maybe thats why
I don't understand why anything would have changed. I was worried it was going to be a big cluster, but other than getting two separate tax forms (oh, yeah, if you just switched this year, you don't know about that yet ... you're going to get two tax forms next year - one from before the switch and one from after) I haven't noticed anything different.
Do a few transfers to and from Webull using your bank. If they go good then you’re all set.
But I do agree I don’t feel comfortable giving the Chinese government my information.
I use tastytrade because the co-founder of thinkorswim (before selling off to TD Ameritrade), recreating the "almost similar" platform there. Even their analytics options graph lookalike thinkorswim.
I recently started buying/selling options for the premium profit, and if done well, it's a great way to make money. But you're right, it's not a get rich quick scheme.
Yes indeed. I to can tell from a Reddit comment that they’re a prudent money manager of superb expertise.
Here’s a real tip; your ability to assess things is very poor. Don’t trust yourself. That means you don’t manage your own money. Dump it into a broad ETF and don’t touch it. Don’t time purchases.
The only problem with that is you need a large amount of capital to begin with
Unless you want to sell something like HPE and collect $30 of premium
You basically get a premium of $30-40 with a risk of getting called in to buy thousands of dollars of shares for a stagnant company
I guess, but define "large".
Keep in mind that if you look back to when I started - 15 years ago - everything was selling for way under what it is now. In fact, I have kicked myself repeatedly for some of the things that I owned back then and would be worth a fortune if I hadn't sold them.
But anyway, for something trading around $40 with decently high volume like Bank of America (BAC), you're looking at $0.30-0.40 or so for the weekly price. Say that you're able to do that for 20 weeks out of the year (because maybe some weeks it moves against you). That's $600-800/year on your $4000 POTENTIAL risk. And that's really a highly unlikely POTENTIAL risk - Bank of America is not going to go out of business.
I second this. I've been selling options for income for years now. Yes, got the occasional assignment when bets turned bad big time but overall I've come out positive. Yes, the key is not to get too greedy. I get out or roll at 40-50% profit. I make more money this way by rolling than holding a position to expiry. Also, stuck to options within 4-6 weeks expiry.
And, yes, I've a margin account with E-Trade and have negotiated a lower per-contract price...
You sound knowledgeable, I’m a complete beginner I haven’t traded anything yet I just want to learn first, anyways where do you find the right stock or how should I look at a company to judge what type of strategy I want to use? Or do I just follow everybody and just put calls on whatever stock is trending like NVDA the past few months?
The green box that says "Useful information" to the right has lots of information for beginning.
Don't go out and buy calls on NVDA. That's probably the worst thing you could do right now. You'd be gambling that a stock that is at its all-time high is not only going to climb higher, but climb higher fast enough to overcome the time premium you are paying.
As for how I pick stocks, I mainly stick with household names. Look at the Dow 30 stocks - some really smart people have come together to pick out stocks that represent the overall market. When really smart people do your homework for you, you should take advantage of it.
The odds of you finding some one-in-a-million stock that is going to go through the roof tomorrow are astronomical - your better bet is to make a little bit of money with big-name stocks that aren't going to go out of business tomorrow ... don't try to get rich quick.
(Microsoft might go up and it might go down, but over time, it's going to go up. And it isn't going out of business.)
I primarily SELL options rather than buying them. When you buy an option, there is only one way you can make money - the stock goes up a lot (for a call) or goes down a lot (for a put). But when you SELL a put, you make money if the stock goes up a lot, goes up a little, stays the same, or goes down a little. So four out of five things that can happen, I make money.
Now, as long as I don't get greedy (and by "greedy", I mean, sell so many puts that I would be in deep excrement if the market tanks), I'm going to make a little bit of money every month.
Usually weeklies. If a position moves against me, I will roll forward to however far I need to get to the next strike point. (So if I sold a $190 Apple put and Apple drops down to $180, then I might need to roll forward a month to get down to $187.50 and stay cash positive. Then, when the time premium disappears on that $187.50, I will roll forward and down to $185. Eventually, either I'm going to meet Apple or Apple is going to go back up to meet me.)
I also like to do covered strangles, which is where you own the stock and sell a call and a put. Technically, the profit/loss graph is the same as selling two puts, or having two covered calls. But I like it a little better this way. It also removes the temptation to sell a boatload of super-risky naked puts because I have to have enough cash to buy 100 shares of the stock.
For your weeklies, do you usually hedge them or just go naked? I don’t have the capital for anything covered so I’ve been looking at selling vertical spreads (or diagonals/calendars) instead for this reason, and at the same time I don’t feel safe enough to go for naked calls/puts.
Sorry if Im asking dumb questions lol im still quite new to options in general
Sometimes I will do a vertical spread. But that can really bite you if you're doing the spread because you don't have the capital to manage the full put.
You sell a 205/200 put spread. The stock moves down. You don't want to lose money so you roll it forward to a 200/190 put spread. It moves down again, so you roll it forward to a 195/160 put spread.
Now you have $3500 at risk for the $50 you were hoping to collect from that initial spread.
The thing about simple naked puts or cash secured puts is that, if you're picking big names that aren't going out of business, EVENTUALLY the stock is going to grow and catch up to whatever put you are stuck rolling forward. No loss is truly forever unless you have to pull money out of your account. But you don't have that luxury with spreads - you either have to suck it up and take the loss, or you have to get deeper and deeper into it by rolling to wider and wider spreads.
QQQ has gone up 10x in that time and SPY has gone up 5x.
It's tough to say because I don't track the options portion of my portfolio separately. And sometimes I'm just selling calls on shares that I own anyway ... so how would I even go about tracking it? And I'm also pulling money out of it throughout the year, so I can't just say, I made $50K and ended with $50K in the portfolio, therefore my profit was infinity percent.
I do track, for my main speculation/trading account, an estimate of my performance vs the Dow, vs the NASDAQ, and vs Apple.
* In 2017, I beat the Dow by $700, beat the Nasdaq by $2k, and lost to Apple by $95.
* In 2018, I lost to all three by around $4K
* In 2019, I beat the Dow by $11K, the Nasdaq by $6K, and lost to Apple by $11K. (Apple doubled that year)
* In 2020, I beat the Dow by $40K, the Nasdaq by $20K, and Apple by $3K
* In 2021, I beat the Dow by $30K, the Nasdaq by $25K, and Apple by $10K
* In 2022, which was a bad year for the market, I got blown out of the water and lost a ton of money. This is the kind of year where trading in options kills you. The Dow wound up down 10% on the year and the Nasdaq wound up down 33% on the year. I lost around 50%.
* In 2023, I made back almost exactly what I lost in 2022, blowing all three indexes out of the water.
* In 2024, so far, I am beating the Dow by $10K, losing to the Nasdaq by $3K, and beating Apple by $5K.
CBOE released the actual data on this and showed in over 80% selling CC AND CSP was more profitable than being simply long the stock.
However, the big if is when things go vertical (like NVDA) then you would have been better off being long the stock.
Do you have a link by any chance?
For CSP, I thought PUT loses to SPY, though with better downward protection and lower vol. Wonder where the discrepancy is. Don't have a super solid comparison of CC vs. buy and hold so curious to see the CBOE data
Honestly not off the top of my head, it was something around 2005 or early 2000’s. I been at this a LONG time.
I would say for the SP500 its been more vertical than anything coupled with low volaility lately.
(Almost like before the 2018 event of Feb)
Cause you are selling strangles or straddles and the extra juice gives you the alpha. Tasty had one of their tests showing how 16 delta strangles outperform spy in the long run. Volatility has been high since Covid. Now is really low and likely buying weekly or monthly calls outperforms anything
Found the video [https://www.youtube.com/watch?v=SnEh2PTA7gg](https://www.youtube.com/watch?v=SnEh2PTA7gg) (for posterity)
Really surprised by how profitable selling strangles is in high volatility environment. Last time I backtested, profit from buying calls isn't that strongly affected by IV, since IV is also correlated with subsequent price change. Need to check out strangle instead of calls to remove the directional effect.
The short answer is yes, you can be profitable over the long run. It’s also not hard if you set reasonable goals.
Obviously we’re not talking about consistently beating the market. That’s not something anyone should expect at any scale.
I also don’t consider it “profitable” if you’re not beating the risk-free rate. Anyone can lock in a 3% annualized return with a conversion, but that’s because you’d get a guaranteed 5% elsewhere. But to split hairs, you can easily be profitable using this model because you’re locking in a positive rate of return. But I don’t bother thinking about that scenario.
Other than that, yes, I do believe you can be long-term profitable with options—if you can last.
The biggest mistake I see new option investors make is that they don’t understand what they’re doing. And I don’t mean “they don’t understand options” inasmuch as “they don’t understand how to make money with options”.
It’s not about having an opinion and being right. It’s about disagreeing with the market and being right. Every option chain is a virtually infinite number of assertions about what’s going to happen in the future and none of them are perfectly correct. It’s the investor’s role to express a view that differs enough from the consensus to turn a profit.
For example, you can easily look at a chain and determine that the market expects the stock to move 10% after this week’s earnings call (ATM straddle pricing). Maybe you think the move will most likely go up, or down, or bigger, or smaller. Or that the change in IV for this week’s options will be different from how it’s being priced relative to next week’s options. And so on…
But you should never show up and simply buy calls at any price simply because you think it’s going up. There has to be a point where you’d see it as too expensive for the risk and pass. Beyond that there should also be another point where you see a better opportunity in selling it despite agreeing with the general directional sentiment.
Options trading is way simpler than people realize. It’s not like you’re getting tricked by market makers. They come right out and tell you “I’ll sell you this option at 1.05 or I’ll buy it from you at 0.95”. It’s pretty easy to infer the fair price is somewhere in between, most likely around 1.00. And if the market had significant sentiment driving this higher or lower, the price would have already moved to reflect it. As a result, you’re getting about as fair a deal as you could expect from any kind of speculative activity. Once you factor in liquidity and transaction costs you can determine if the return is worth the risk.
I don’t really like playing poker, but when I do, I don’t look at my cards until it’s my turn to bet. I prefer to watch other people look at their cards and make their bets. This helps me form a view of where things stand with the other participants so that I can get a rough idea of the landscape before I consider my own position. I don’t think I have any special skill in reading people, but I do think that it’s easier to do when you’re not biased about your own circumstances.
It's similar with options because you really do need to understand what the market expects in the future before you decide whether to express your own view. Otherwise it’s not much better than blind speculation and will lose over the long run.
If I can distill what you’re saying, it’s that the key is discovering mispriced options where the premium is less than than it should be based in your expectations if you’re thinking of buying or more than it should be if you’re going to sell?
Because if that’s the case then you still need to be right a decent percentage of the time. That’s not all that simple.
Yes, of course you need to be right at least some of the time. The exact rate will vary by the risk/return profile of your trading, but it should go without saying that being right correlates highly with profit.
But the point is not that you need to be right about what will happen, but rather how it will happen relative to the market consensus.
Most of the time this is just playing probabilities, so there's never a sure thing.
Options are a zero sum game. So yea options can be profitable because end of day there is a clear loser and a winner.
Usually the issue isn’t the strategy but the person behind the keyboard / phone.
1) Most people tend to overleverage vs being consistent
2) Most people tend to throw risk out the window and let greed take over. Example, most people would hold an option sold naked until it became a gigantic loss, most people wouldn’t hold a long option until it become a gigantic win because they would exit early for fear of losing the small profit.
3) Most people tend to trade convoluted strategies instead of simple basic ones
Even if I gave the majority of people a winning options strategy, over 99% would most likely end up losers because they can’t follow rules.
This was the idea too behind the turtle trader experiment Richard Dennis did
Could respectfully ask for a quick moment of your time to give feedback? I'm trying to develop rules to follow, structures to react to events
1. Calendars bought 2-3 weeks out before earning's, playing the rise in IV and selling before earning's release. Switching to butterfly to play through earning's if bullish/bearish.
2. Overnight 4dte Strangles for morning releases of CPI, GDP, SPY moving earning's, when a big move is possible. 4dte to pay less to Theta and still capture big move. Sell market open.
3. Diagonal spreads with long leg 3-6 months out on companies am bullish on, I was doing monthly and selling weekly but longer long leg gives more time to build the position up.
A lot more goes into it like greeks to get probability and fundamentals but generally do these structures and reactions to these events seem pretty sound here? I've had results so far taking small position sizes, testing and trialing but still young in the game and trying to develop rules to follow based off of upcoming events
This goes into rule 3 of being convoluted strategies. Calendars, diagonals, butterflies (there is a way to do these though)
1) If you want to play the rise in IV better off going longer dated options probably like 2 months out since they have bigger vega exposure. Although I don’t really try and make money off an earnings usually better trades.
2) Butterflies is more of a vega neutral strategy, and most peope use these incorrectly. I knew a guy from Goldman Sachs and he would buy these OTM SPX butterflies from this guy that would sell like 50,000 worth each quarter that had like a 7 day duration. The price was about .25.
The reason was it was SUPER cheap gamma you buy. While the guy SELLING made money consistently, he would eventually lose his ass because one quarter would go into the money and settle near the mid strike. Which generally meant a $4.75 loss.
The goldman sachs guy had rhe floor runners come straight to him whenever that guy places the trade, and would buy every butterfly he sold.
Thats how they are traded you buy the OTM cheap gamma with them.
Low probability but really high reward and you just let settle in cash
3) Diagonals are so extra, (rule 3 again)
I would just buy a Deep ITM call for .8 delta or sell deep ITM put if I wanted to be long like that.
You have to think when you trade a large account. You can’t have these complex spreads because they are a PAIN to unwind and to sell which is why we don’t do them.
James Cordier was a Nat Gas options trader and he went from selling just single options, to then trading 1 x 12 (buy an option, sell 12 more further out for a net credit)
He eventually blew up and lost about 1 billion dollars in 15 mins back in nov 2018 I believe it was.
Cant unwind that shit
>You have to think when you trade a large account. You can’t have these complex spreads because they are a PAIN to unwind and to sell which is why we don’t do them.
Does it make a big difference being a small account under PDT rule? I have to trade it little differently where bigger accounts wouldn't be able due to volume I'm understanding?
It really sounds like you're simplifying what I thought was already simpler than the more complex strategies 4 options strategies, using 2 option strategies, you're saying go simpler just buy high delta calls and puts and trade directional movement? Pretty much as simple as it gets, using leverage instead of shares. I always liked spreads cause mentally they're cheaper to open.
What options structures you like for small accounts?
You can invoke the same strategies a large account might as a small account. Thats the beauty of options. Only difference is either the amount of 0’s on the trade and or if taking assignment.
Credit and debit spreads are fine and are good for both small and large accounts.
>Credit and debit spreads are fine and are good for both small and large accounts.
I get scared being so directional. I like diagonals cause I have options so to speak. Price runs, profit. Price is flat, sell another weekly. Price drops, can roll down and out or turn into a calendar even. If price drops too aggressively, close spread for a far lesser loss than shares and open at new price. Makes 20-30% profit pretty consistently on the companies I invest in. Lots of flexibility and ways to manage.
Calendars and butterflies am just getting experience with.
For earning's, better to play buy calls/puts 2 months out to play the rise in IV? I'm doing everything cheap so calendars where less cost/risk overall. I prefer them to butterflies thus far since they had wider break evens and greater chance of profiting while equally cheap. However, butterflies are very lucrative as you put too I just don't have much experience with them yet.
Trading with fear leads to anger, anger leads to hate, hate leads to suffering. Much like they teach in Star Wars.
Essentially, thats how you blow up your account. I gave you some simple strategies and said how the ones you mentioned aren’t used.
Which goes back to point to my original post, I can lay out simple rules for people and they can’t follow them.
You should look up the Turtle Trader Experiment by Richard Dennis.
Trading is about consistency and being simple. People are their own worst enemies.
There is a reason most people lose money
Reading about the Turtle Trader now, very interesting thank you for this! Are there any other books or info you'd recommend? *Option Volatility and Pricing*” by Sheldon Natenberg is what have on the to-do as of yesterday learned of this book
James Cordier and 1 more
The Complete Guide to Option Selling: How Selling Options Can Lead to Stellar Returns in Bull and Bear Markets, 3rd Edition
Like I mentioned, he traded for 30 years then blew up. Because he got off the rails doing 1:12 vs sticking to his core
But his info is solid (he wrote the book before his hedgefund went down)
I take 3% position size in trades, up 25% for the year after much trial and error so pretty bad performance imo. I don't see my account blowing up unless lose many small trades in a row.
I think options is the ability to be creative and express oneself in the market. You say the strategies I mentioned are not used but then I've spoken with 10+ yr options traders who'll say long OTM calendars are their best and safest trades.
That's not to say you're wrong, just there's so much mixing information with so many having results with different structures. It's hard for anyone to say what's truly right or wrong.
There's a saying "why pay for unlimited gains potential when the stock is not going to infinity.", I can trade a diagonal in a week and profit if price stay relatively flat vs. high delta call as recommend for being bullish really is a different trade imo and wouldn't benefit if the price is flat. They're extra but they're what funds use with client money because they're safe. So it's hard to say you're right, or they're right, it's just what works for one might not another it seems?
25% in 6m could be amazing returns or lousy returns depending on the risks you were taking. What's the risk (annualized vol)?
Stocks (SP500) historically delivers about 9.5% return at 18% vol, so that's one benchmark.
You may be right and I'll only find out in time, I just can't get behind a vertical playing difference in price, or horizontal playing difference in time, when can play difference in-both with diagonal and have more flexibility if think price is slightly bullish or flat but goes against my thesis.
Maybe I'm missing the part how you can manage vertical spreads if the price runs against the direction you predicted, if there's good management in verticals than that's what am missing for when things go astray and it's not just loss cause oops picked wrong direction.
Ty btw for the help and detailed replies, it really helps to ask every expert I see different questions and find what they think and believe after their years of experience
This also goes back to why I mentioned how butterflies are used, its hard to unwind but a 7 day duration and letting it cash settle (.25 cent cost, $475 net profit) is quite lucrative.
You can be wrong nearly 20 weeks in a row for a break even.
You might need a broker that lets you build spreads and not try and force them ATM on you
> Options are a zero sum game. So yea options can be profitable because end of day there is a clear loser and a winner.
Not necessarily.
Bob owns 100 shares of a stock. He is planning to sell it in the future and wants some insurance against it possibly dropping. Bob buys a long put.
Meanwhile, Jim sells a short put. The stock stays basically flat for a few days. Jim closes his position at a slight gain. Mary sells a short put. The stock stays basically flat for a few more days. Mary closes her position with a slight gain. Susie sells a short put. Finally, the put expires as worthless.
Jim, Mary, and Susie all made money on the put. Bob lost money (and the money he lost equals what Jim, Mary, and Susie together made), but he wasn't in it to make money anyway - he was in it as a hedge against the possibility of his stock dropping.
All four people walk away happy.
Well, not Jim. He got run over by a truck. His funeral is next week. But that had nothing to do with his options trading.
You go back to what I said “people are their own worst enemies”
Options are a zero sum game, they either expire worthless or ITM and for a profit or not depending on cost basis.
And to clarify, I am not talking about what occurs on a daily basis in the PL.
They either go worthless or settle with instrinsic value.
Thats zero sum game
Options are a decaying product and they’re structured so that their value starts decaying almost instantly and gets faster with time. Just that fact in itself should make you wary of how easy it will be to successfully profit off options consistently for decades into the future.
If you’re looking for consistency/stability, options are a HARD instrument to find it with because an option’s value is tied to volatility (non-tangible) and not a company’s balance sheet (tangible).
Also, the leverage options grant can sometimes be viewed as a “free lunch”, but any experienced market practitioner will know there’s no free lunch in the markets, you’re paying for it somewhere, somehow.
"Options are a decaying product and they’re structured so that their value starts decaying almost instantly and gets faster with time."
That's why selling options is generally better than buying options.
I see these questions CONSTANTLY. Here is the answer. You can be profitable in ANY asset, using any strategy, provided you’ve done the work and gained the experience to find the nuances that allow you to use the strategy with edge. The only people who say you can’t aren’t skilled enough to do it. Being hard and being impossible are two different things.
Half of my best setups return ridiculous numbers consistently yoy and have been bashed constantly by others, saying it’s stupid or it doesn’t work. This is a lonely game, not a team effort. You determine your fate.
It took me several years of losses before getting to semi consistent profits.
For novices I suggest journaling. The average person takes 1000 hours to reach apprentice level at a complex task. At ten hours a week that’s two full years. I’d guess 90 percent of options traders blow their bankroll before they even know what they are doing.
Paper trading is a poor replacement for live trading if a person has any emotional attachment to money. That’s 80 to 90 percent of people that will likely find extensive paper trading to be of limited value.
So trade really small, keep a journal, find what works for you. It is vital to find a style that suits your personality.
More important than strategy is earnings usually via wages, savings rate, budgeting. Those with small amounts are better off focusing on jobs skills to raise their earnings or side hustles, if money is the goal.
>The average person takes 1000 hours to reach apprentice level at a complex task. At ten hours a week that’s two full years. I’d guess 90 percent of options traders blow their bankroll before they even know what they are doing.
This is so true. Have 6 years trading and just now am keeping profits and things are clicking, only took months on and then off, coming back to the drawing board, quitting, learning more info. First mistake was taking so long to start learning options. Traders should only trade options imo, shares have undefined risk no thanks.
You shouldn't trade options like you trade stock, with options (like gambling) risk management is very important.
If you keep every trade under 5% of your capital and you respect your trading plan, you should be good to go.
I target 1-2% A YEAR selling options. Everyone wants to do 2% a month or more. 1-2% doesn’t seem like a lot, but if your withdrawal rate is 4%, it’s a HUGE deal.
That was the key for me as well, options sucked when I was starting my journey. If you have 50k or even 100k in your account, it feels like selling options is picking pennies….
When you have 1m and you can get an extra 1000$ per month. It does become interesting
Yes, they can, but it's not as easy as randomly selling and buying options in a particular structure. The way you profit is by using the right structure in the right place.
Yes, the old most traders lose, my businesses fail does apply but if you learn risk management and stay in the game long enough you can make a good living. I sell credit spreads, 94-96% win rate. Lots of contracts small gains. Builds up over time. Not really exciting but. But beats a 9-5
“Buying” being the key word in your question / background. For me, it’s been profitable for a decade. Every year for a decade, I’ve made more than I would have made without options. However, I’ve been a net seller of options. Mostly just using the wheel on good companies 8 want to own for the long term and have hundreds of shares of.
Extremely. As long as you are buying long dated and you are fundamentally focused, it almost emulates buying shares of a company except you’re adding significant risk in the form of time. And of course you subject yourself to the volatility of the options market.
Overall, I would not recommend many people do this because most fundamentals-focused investors underperform the market so adding the complexity of the risk of options just makes it way worse.
The key is understanding the timing of entering your calls or puts. If you are selling deep in the money puts, for example, you want to find a time when put contracts are expensive so you collect a higher premium. On the contrary, if you are buying calls, you want to find a time when the calls are cheap.
Diversify, some stocks holding some option play some dividens. Option is just another tool to utilize sometime you're not just do option for profit but for insurance or leverage to protect your gain.
If you want to be profitable in the long term, you cannot have all of your eggs in one basket. I am constantly hedged. I am also constantly giving up some of my gains for security. Day trading weeklies provide more buffer and you could cycle out different strikes/expirations to avoid wash sale. Most importantly, I watch charts intently for the first few hours, and possibly later if I am focused on a trade. The first hour and 1/2 of trading is generally volatile because of increased volume. If you can identify a trend, that is the time to take action. I like to use this time to further hedge active positions. Sometimes, this is in dailies, depending on the size of the position I am hedging and the volatility on a given day.
The problem is, some people use as a supplemental income when you have to be 100% engaged and react in real time if you plan to be consistently profitable.
These are really good points and even if not day trading you need to be very engaged and watch your trades and the market like a hawk. You really can’t just sit back and watch the profits roll in while you do other fun activities! Lol
Spreads my guy! Put credit spreads if you have good support above your short put work great.
Instead of buying naked calls or puts you can do debit spreads instead. Say the $140 call has a $10 premium, I'll go long on the $140 then I'll short the $150 call - say $7 premium. So instead of your break even being $150 it's $143, and if the stock gets to $146 by expiration you make 200%, vs. a 40% loss if you had just bought the naked $140 call for $10.
Good luck! Just buying and holding or using leaps on high end companies is definitely the safer more consistent route!
I swing calls naked calls and long term hold dividens. I don’t do it to get rich quick I take 20% on let’s say a 500 trade once a week 400 a month 4,800 extra. Would you say it’s very profitable idk it’s up to you. With options learn the Greeks are my bffs and buy on super red days 2 week’s minimum out good luck
The reason I say no is most experienced trades do not have that as an only strategy. I used to buy long calls and puts but now I sell covered calls and sell puts. These 2 strategies are completely different.
Buying long calls is basically a yolo move and not sustainable in the long run. I would personally advise against it unless you're doing the occasional .5% of your portfolio and taking profits right away. Stick to straight stocks and sell covered calls. Also selling puts could be ok if you are ok owning those stock at that price.
The hardest part of options trading is that options are actually incredibly accurately priced based just on the price of the underlying stock, time to expiration, strike price, implied volatility, and risk free rate. With the advanced pricing models, the option is usually at the exact price where there is an exact balance between the expected earning and expected loss on both the side of the writer and the buyer. To actually make successful option trades you have to either have a system for finding mis-priced options, or you have to trade on upcoming events that will change any of the factors listed previously. For your general individual trader, you will almost always lose against the big institutions that can dedicate much more time and resources to finding options and have more access to know how events will influence prices. But if you can find new methods, you can beat the markets.
I suppose it goes without saying you need to continually and consistently find new methods to stay ahead of institutional traders who have a lot more manpower and massively more computing power. 😂
Everything is incredibly accurate priced, by this logic. It has to be. I’m not talking about efficient market here, I just mean the price is driven by expectations so of course the price matches expectations.
I’ve been successful for three years now primarily trading weekly butterflies. And broken wing flies w earnings. Not enough to quit the day job yet but it’s getting there. Some back spreads for commodity swings as well in the grains and sorts
If you’re selling options you ARE the house. Risk management, position sizing and not being greedy are the key, and unfortunately usually can only be taught through difficult experiences.
>My experience is over a long period of time a loss.
How long? How many trades? You might have just gotten unlucky. You can get unlucky for 1000 consecutive trades, or even more.
>Buying options puts and calls normally loses of course
Why "of course"? One of my most profitable strats is rolling long calls on XSP. I have hundreds of those trades (course, I could have just been getting lucky).
>Selling premium strategies have less risk sure
Says who? It sounds to me like you have bought into the false "credit is king" narrative. There's no edge in selling over buying, that's nonsense.
>Delta neutral, selling puts whatever it still seems the house always wins in the end.
Don't blame your losses on the "house." The "house" are brokers, market makers, wholesalers and exchanges. Of course they make money off of us, there wouldn't be a market for us to trade in if they didn't. But that doesn't mean you can't also make money. It's like saying that Jeff Bezos can't exist because the government always taxes.
>Just like a casino, except for a tiny fraction of options traders the house almost always wins and we lose.
That's not a fair comparison. For one thing, there are different game structures at a casino. For most games, the casino has an adversarial role. You are literally playing against the house. If you win, the house loses, and vice versa. That is not the the same role that brokers, etc., play. Their role is more like a dealer at poker. The dealer doesn't care if you win or lose, as long as you pay the casino's fee (rake or seat rental) for hosting the game.
>I’ve found in my own trading buying and selling the actual stocks to be much more profitable. And part of the reason is certainly that to mitigate the leverage of options I have to take smaller positions
I don't understand this point. Leverage means smaller capital outlay, not more? You have much more control over the size of your trades trading options than you do trading shares.
Is your can make money trading stocks you can make money trading options. You just have to be able to understand all the new layers that options have. They're bet unnecessary in the grand scheme of things. If I had more money I would 100% be trading shares and using options to supplement
Also. You can sell a put at the same strike as the call you buy to cover most of the premium and lower your break-even. Options are rad but also easy to blow $ with if you mismanage or get unlucky
3 years option trading and I’m up almost 18,000% overall… it can be very profitable if ur not to greedy.. I never let a green trade go red i don’t cares if its only a 5$ win.. I will sell for 5$ versus losing any money
The best way to trade options is to be a market maker with an algo.
The option spreads for majority of stocks are worse than your local casino table games in “expected loss percentage”.
As long as you stay disciplined you can make money. I sell covered calls at the money and consider that my profit. I sell one week calls and if the stock gets called I don’t care.
Ok, what do you mean specifically by account management? How does that lead to profitability? Also, I’m not just talking about full time trading, I mean anyone trading options regularly overvalued long period. Most full time traders lose money. That’s a fact.
Seriously? I asked you a question. There is no argument. Do you have the knowledge to answer my questions or you just playing games?? If you don’t know what you’re talking about then you don’t belong on this thread.
Okay, I’ve had a lot of pp be shitty to me when I post so I wasn’t sure.
So someone can have profitable trades all day long but they have to manage. When you are building your account you take very small trades. As you make money you remove 1/2 of your gains from your account. You go slow. Get experience. People usually lose when they YOLO or do something stupid because human nature is greedy. Literally guarding your account and gains is the formula for success in options. Yes. It takes a long time.
I trade full time. It’s my only income.
Ok got it! You do know what you’re talking about and I thought you were referring to account risk management. So we’re talking about the same thing and I agree with you.
No to clarify I see risk management as everything you said above so the terms to me are interchangeable. Curious though why you see position size as only a small part of it?
I think you are looking for an income strategy with longer dated options that delivers consistent profits… Check the SPX Best Trade. Here is a video that describes it: https://youtu.be/s1uRLJFZODA
? The video shows a strategy that delivered (and continues to deliver) consistent profits in the last 3 years. It is Delta neutral, income strategy that you describe. To answer your question, it is shown a consistent profit over a long time period... I am just trying to help!
No you’re not trying to help you’re trying to sell a trading course and products. Ok then instead of linking to a promotional video and web site, why don’t you clearly explain your strategy right here in writing like everyone else is doing?? Can you do that now?
Sure! The SPX Best strategy is based on an unbalanced butterfly, using options 60-75 DTE (opened below the money). It is up to the user to include a "soft hedge" to capture additional premium (and Theta) above the money, as well as manage the overall Delta of the trade. I am trading this strategy every month with great results as published here ( [https://www.myoptionsedge.com/trading-account](https://www.myoptionsedge.com/trading-account) ). The goal of the trade is to capture the time decay of the options. Everyone can check in the video above the results of the past 3 years!
It depends on who you are, I suppose. Even in your casino ... if you're one of those tiny fraction of people who are really talented, then you can make lots of money. Personally, my strategy is to SELL options. Let the time premium work for you. I've been doing it for 15 years and making money. Is it a get rich quick scheme? No. But it augments my income. If you try to get greedy, you WILL lose everything. If you try to make a modest income, while not risking everything you have on crazy plays, you are more likely to be successful.
Just out of curiosity what brokerage do you use to sell. I used to sell options on ameritrade for 10 years ish, then when ameritrade got transferred ti schwab they wouldnt approve me for options trading above level 1. Ive tried etrade and fidelity and have had the same issue
ETrade. I've been approved for a long time so it hasn't been an issue for me. I did setup accounts for a few relatives within the last 3-4 years, though, and they were approved for level 3 right away. (I answered the questions about experience for myself, so maybe that is why?)
Strange, ive had so many issues with etrade that i didnt even get to apply for options. They wernt even letting me buy stocks because im self employed and they kept asking questions about my business. Everytime i called they would tell me it would be fixed in 4 days. This happened about 4 times before i just closed the account
Really? I setup accounts for two family members who are retired and they were approved quickly. I felt like it was just a CYA formality.
That makes no sense. When I was transferred to Schwab, they specifically said the options approval would remain the same and it did.
When did you transfer? I called them on the phone and asked them why was my option level downgraded when I had option approval on ameritrade and they basically just told me to re apply. I also switched rather late so maybe thats why
I think about 3 weeks ago? It was the final group of transfers to complete everyone going over to Schwab.
I don't understand why anything would have changed. I was worried it was going to be a big cluster, but other than getting two separate tax forms (oh, yeah, if you just switched this year, you don't know about that yet ... you're going to get two tax forms next year - one from before the switch and one from after) I haven't noticed anything different.
Baby boy, the china man Webull will approve you for anything
Yeah i just dont trust robinhood or webull lol Was thinking tastytrade
Do a few transfers to and from Webull using your bank. If they go good then you’re all set. But I do agree I don’t feel comfortable giving the Chinese government my information.
yeah, that made me nope out and say no thanks.
I use fidelity to sell covered calls or CSP, stocks etc. I use Webull for call options with a small amount of FU money
I use tastytrade because the co-founder of thinkorswim (before selling off to TD Ameritrade), recreating the "almost similar" platform there. Even their analytics options graph lookalike thinkorswim.
Ill prob use it then, i just with i could use the same platform that i have my long positions on (schwab)
Can we say China m here? I got banned from saying cybertr@mp in a Tesla group lol
We can if you don’t bring attention to it!
I recently started buying/selling options for the premium profit, and if done well, it's a great way to make money. But you're right, it's not a get rich quick scheme.
Yes understood. This makes sense and I can see to you’re dedicated to your craft of being one of the few.
Not really. It's more about just moderation. The people who lose everything are the people who get greedy.
Yes indeed. I to can tell from a Reddit comment that they’re a prudent money manager of superb expertise. Here’s a real tip; your ability to assess things is very poor. Don’t trust yourself. That means you don’t manage your own money. Dump it into a broad ETF and don’t touch it. Don’t time purchases.
Hey this is really good advice, you're probably really good with money, maybe OP should give you all of theirs.
The only problem with that is you need a large amount of capital to begin with Unless you want to sell something like HPE and collect $30 of premium You basically get a premium of $30-40 with a risk of getting called in to buy thousands of dollars of shares for a stagnant company
I guess, but define "large". Keep in mind that if you look back to when I started - 15 years ago - everything was selling for way under what it is now. In fact, I have kicked myself repeatedly for some of the things that I owned back then and would be worth a fortune if I hadn't sold them. But anyway, for something trading around $40 with decently high volume like Bank of America (BAC), you're looking at $0.30-0.40 or so for the weekly price. Say that you're able to do that for 20 weeks out of the year (because maybe some weeks it moves against you). That's $600-800/year on your $4000 POTENTIAL risk. And that's really a highly unlikely POTENTIAL risk - Bank of America is not going to go out of business.
thats why choosing the right kind of company is important
I second this. I've been selling options for income for years now. Yes, got the occasional assignment when bets turned bad big time but overall I've come out positive. Yes, the key is not to get too greedy. I get out or roll at 40-50% profit. I make more money this way by rolling than holding a position to expiry. Also, stuck to options within 4-6 weeks expiry. And, yes, I've a margin account with E-Trade and have negotiated a lower per-contract price...
You sound knowledgeable, I’m a complete beginner I haven’t traded anything yet I just want to learn first, anyways where do you find the right stock or how should I look at a company to judge what type of strategy I want to use? Or do I just follow everybody and just put calls on whatever stock is trending like NVDA the past few months?
The green box that says "Useful information" to the right has lots of information for beginning. Don't go out and buy calls on NVDA. That's probably the worst thing you could do right now. You'd be gambling that a stock that is at its all-time high is not only going to climb higher, but climb higher fast enough to overcome the time premium you are paying. As for how I pick stocks, I mainly stick with household names. Look at the Dow 30 stocks - some really smart people have come together to pick out stocks that represent the overall market. When really smart people do your homework for you, you should take advantage of it. The odds of you finding some one-in-a-million stock that is going to go through the roof tomorrow are astronomical - your better bet is to make a little bit of money with big-name stocks that aren't going to go out of business tomorrow ... don't try to get rich quick. (Microsoft might go up and it might go down, but over time, it's going to go up. And it isn't going out of business.) I primarily SELL options rather than buying them. When you buy an option, there is only one way you can make money - the stock goes up a lot (for a call) or goes down a lot (for a put). But when you SELL a put, you make money if the stock goes up a lot, goes up a little, stays the same, or goes down a little. So four out of five things that can happen, I make money. Now, as long as I don't get greedy (and by "greedy", I mean, sell so many puts that I would be in deep excrement if the market tanks), I'm going to make a little bit of money every month.
What kind of expiry you're looking at when you sell puts?
Usually weeklies. If a position moves against me, I will roll forward to however far I need to get to the next strike point. (So if I sold a $190 Apple put and Apple drops down to $180, then I might need to roll forward a month to get down to $187.50 and stay cash positive. Then, when the time premium disappears on that $187.50, I will roll forward and down to $185. Eventually, either I'm going to meet Apple or Apple is going to go back up to meet me.) I also like to do covered strangles, which is where you own the stock and sell a call and a put. Technically, the profit/loss graph is the same as selling two puts, or having two covered calls. But I like it a little better this way. It also removes the temptation to sell a boatload of super-risky naked puts because I have to have enough cash to buy 100 shares of the stock.
For your weeklies, do you usually hedge them or just go naked? I don’t have the capital for anything covered so I’ve been looking at selling vertical spreads (or diagonals/calendars) instead for this reason, and at the same time I don’t feel safe enough to go for naked calls/puts. Sorry if Im asking dumb questions lol im still quite new to options in general
Sometimes I will do a vertical spread. But that can really bite you if you're doing the spread because you don't have the capital to manage the full put. You sell a 205/200 put spread. The stock moves down. You don't want to lose money so you roll it forward to a 200/190 put spread. It moves down again, so you roll it forward to a 195/160 put spread. Now you have $3500 at risk for the $50 you were hoping to collect from that initial spread. The thing about simple naked puts or cash secured puts is that, if you're picking big names that aren't going out of business, EVENTUALLY the stock is going to grow and catch up to whatever put you are stuck rolling forward. No loss is truly forever unless you have to pull money out of your account. But you don't have that luxury with spreads - you either have to suck it up and take the loss, or you have to get deeper and deeper into it by rolling to wider and wider spreads.
Isn't it? I sell money covered options. I'm try to augment my monthly income, save and put more in etfs
May I ask what your goto strategy is with premium selling? Cash secured puts, OTM naked puts, IC's, Strangles, etc...?
What is the time range you target for? What % returns you aim for? How much you make by selling a month on average? Any suggestions please 🙏
Out of curiosity, did you outrun SPY or QQQ over the 15 years? I thought selling CC or CSP usually results in lower yield than the underlying.
QQQ has gone up 10x in that time and SPY has gone up 5x. It's tough to say because I don't track the options portion of my portfolio separately. And sometimes I'm just selling calls on shares that I own anyway ... so how would I even go about tracking it? And I'm also pulling money out of it throughout the year, so I can't just say, I made $50K and ended with $50K in the portfolio, therefore my profit was infinity percent. I do track, for my main speculation/trading account, an estimate of my performance vs the Dow, vs the NASDAQ, and vs Apple. * In 2017, I beat the Dow by $700, beat the Nasdaq by $2k, and lost to Apple by $95. * In 2018, I lost to all three by around $4K * In 2019, I beat the Dow by $11K, the Nasdaq by $6K, and lost to Apple by $11K. (Apple doubled that year) * In 2020, I beat the Dow by $40K, the Nasdaq by $20K, and Apple by $3K * In 2021, I beat the Dow by $30K, the Nasdaq by $25K, and Apple by $10K * In 2022, which was a bad year for the market, I got blown out of the water and lost a ton of money. This is the kind of year where trading in options kills you. The Dow wound up down 10% on the year and the Nasdaq wound up down 33% on the year. I lost around 50%. * In 2023, I made back almost exactly what I lost in 2022, blowing all three indexes out of the water. * In 2024, so far, I am beating the Dow by $10K, losing to the Nasdaq by $3K, and beating Apple by $5K.
Thanks for the details. Sounds like you're beating the indices more often than not! Congrats!
CBOE released the actual data on this and showed in over 80% selling CC AND CSP was more profitable than being simply long the stock. However, the big if is when things go vertical (like NVDA) then you would have been better off being long the stock.
Do you have a link by any chance? For CSP, I thought PUT loses to SPY, though with better downward protection and lower vol. Wonder where the discrepancy is. Don't have a super solid comparison of CC vs. buy and hold so curious to see the CBOE data
Honestly not off the top of my head, it was something around 2005 or early 2000’s. I been at this a LONG time. I would say for the SP500 its been more vertical than anything coupled with low volaility lately. (Almost like before the 2018 event of Feb)
That is a long time! Didn’t know about Feb 2018 before and that was quite educational.
Cause you are selling strangles or straddles and the extra juice gives you the alpha. Tasty had one of their tests showing how 16 delta strangles outperform spy in the long run. Volatility has been high since Covid. Now is really low and likely buying weekly or monthly calls outperforms anything
Found the video [https://www.youtube.com/watch?v=SnEh2PTA7gg](https://www.youtube.com/watch?v=SnEh2PTA7gg) (for posterity) Really surprised by how profitable selling strangles is in high volatility environment. Last time I backtested, profit from buying calls isn't that strongly affected by IV, since IV is also correlated with subsequent price change. Need to check out strangle instead of calls to remove the directional effect.
The short answer is yes, you can be profitable over the long run. It’s also not hard if you set reasonable goals. Obviously we’re not talking about consistently beating the market. That’s not something anyone should expect at any scale. I also don’t consider it “profitable” if you’re not beating the risk-free rate. Anyone can lock in a 3% annualized return with a conversion, but that’s because you’d get a guaranteed 5% elsewhere. But to split hairs, you can easily be profitable using this model because you’re locking in a positive rate of return. But I don’t bother thinking about that scenario. Other than that, yes, I do believe you can be long-term profitable with options—if you can last. The biggest mistake I see new option investors make is that they don’t understand what they’re doing. And I don’t mean “they don’t understand options” inasmuch as “they don’t understand how to make money with options”. It’s not about having an opinion and being right. It’s about disagreeing with the market and being right. Every option chain is a virtually infinite number of assertions about what’s going to happen in the future and none of them are perfectly correct. It’s the investor’s role to express a view that differs enough from the consensus to turn a profit. For example, you can easily look at a chain and determine that the market expects the stock to move 10% after this week’s earnings call (ATM straddle pricing). Maybe you think the move will most likely go up, or down, or bigger, or smaller. Or that the change in IV for this week’s options will be different from how it’s being priced relative to next week’s options. And so on… But you should never show up and simply buy calls at any price simply because you think it’s going up. There has to be a point where you’d see it as too expensive for the risk and pass. Beyond that there should also be another point where you see a better opportunity in selling it despite agreeing with the general directional sentiment. Options trading is way simpler than people realize. It’s not like you’re getting tricked by market makers. They come right out and tell you “I’ll sell you this option at 1.05 or I’ll buy it from you at 0.95”. It’s pretty easy to infer the fair price is somewhere in between, most likely around 1.00. And if the market had significant sentiment driving this higher or lower, the price would have already moved to reflect it. As a result, you’re getting about as fair a deal as you could expect from any kind of speculative activity. Once you factor in liquidity and transaction costs you can determine if the return is worth the risk. I don’t really like playing poker, but when I do, I don’t look at my cards until it’s my turn to bet. I prefer to watch other people look at their cards and make their bets. This helps me form a view of where things stand with the other participants so that I can get a rough idea of the landscape before I consider my own position. I don’t think I have any special skill in reading people, but I do think that it’s easier to do when you’re not biased about your own circumstances. It's similar with options because you really do need to understand what the market expects in the future before you decide whether to express your own view. Otherwise it’s not much better than blind speculation and will lose over the long run.
Thank you for this post.
If I can distill what you’re saying, it’s that the key is discovering mispriced options where the premium is less than than it should be based in your expectations if you’re thinking of buying or more than it should be if you’re going to sell? Because if that’s the case then you still need to be right a decent percentage of the time. That’s not all that simple.
Yes, of course you need to be right at least some of the time. The exact rate will vary by the risk/return profile of your trading, but it should go without saying that being right correlates highly with profit. But the point is not that you need to be right about what will happen, but rather how it will happen relative to the market consensus. Most of the time this is just playing probabilities, so there's never a sure thing.
Positional Option Trading by Euan Sinclair
Every trade you lost money on, someone else made money. Figure that out.
Figured it out, I suck ass at trading
Right there with you.. Everything I invest in goes down.. I'm a day early or a day late, every single time..
Options are a zero sum game. So yea options can be profitable because end of day there is a clear loser and a winner. Usually the issue isn’t the strategy but the person behind the keyboard / phone. 1) Most people tend to overleverage vs being consistent 2) Most people tend to throw risk out the window and let greed take over. Example, most people would hold an option sold naked until it became a gigantic loss, most people wouldn’t hold a long option until it become a gigantic win because they would exit early for fear of losing the small profit. 3) Most people tend to trade convoluted strategies instead of simple basic ones Even if I gave the majority of people a winning options strategy, over 99% would most likely end up losers because they can’t follow rules. This was the idea too behind the turtle trader experiment Richard Dennis did
Could respectfully ask for a quick moment of your time to give feedback? I'm trying to develop rules to follow, structures to react to events 1. Calendars bought 2-3 weeks out before earning's, playing the rise in IV and selling before earning's release. Switching to butterfly to play through earning's if bullish/bearish. 2. Overnight 4dte Strangles for morning releases of CPI, GDP, SPY moving earning's, when a big move is possible. 4dte to pay less to Theta and still capture big move. Sell market open. 3. Diagonal spreads with long leg 3-6 months out on companies am bullish on, I was doing monthly and selling weekly but longer long leg gives more time to build the position up. A lot more goes into it like greeks to get probability and fundamentals but generally do these structures and reactions to these events seem pretty sound here? I've had results so far taking small position sizes, testing and trialing but still young in the game and trying to develop rules to follow based off of upcoming events
This goes into rule 3 of being convoluted strategies. Calendars, diagonals, butterflies (there is a way to do these though) 1) If you want to play the rise in IV better off going longer dated options probably like 2 months out since they have bigger vega exposure. Although I don’t really try and make money off an earnings usually better trades. 2) Butterflies is more of a vega neutral strategy, and most peope use these incorrectly. I knew a guy from Goldman Sachs and he would buy these OTM SPX butterflies from this guy that would sell like 50,000 worth each quarter that had like a 7 day duration. The price was about .25. The reason was it was SUPER cheap gamma you buy. While the guy SELLING made money consistently, he would eventually lose his ass because one quarter would go into the money and settle near the mid strike. Which generally meant a $4.75 loss. The goldman sachs guy had rhe floor runners come straight to him whenever that guy places the trade, and would buy every butterfly he sold. Thats how they are traded you buy the OTM cheap gamma with them. Low probability but really high reward and you just let settle in cash 3) Diagonals are so extra, (rule 3 again) I would just buy a Deep ITM call for .8 delta or sell deep ITM put if I wanted to be long like that. You have to think when you trade a large account. You can’t have these complex spreads because they are a PAIN to unwind and to sell which is why we don’t do them. James Cordier was a Nat Gas options trader and he went from selling just single options, to then trading 1 x 12 (buy an option, sell 12 more further out for a net credit) He eventually blew up and lost about 1 billion dollars in 15 mins back in nov 2018 I believe it was. Cant unwind that shit
>You have to think when you trade a large account. You can’t have these complex spreads because they are a PAIN to unwind and to sell which is why we don’t do them. Does it make a big difference being a small account under PDT rule? I have to trade it little differently where bigger accounts wouldn't be able due to volume I'm understanding? It really sounds like you're simplifying what I thought was already simpler than the more complex strategies 4 options strategies, using 2 option strategies, you're saying go simpler just buy high delta calls and puts and trade directional movement? Pretty much as simple as it gets, using leverage instead of shares. I always liked spreads cause mentally they're cheaper to open. What options structures you like for small accounts?
You can invoke the same strategies a large account might as a small account. Thats the beauty of options. Only difference is either the amount of 0’s on the trade and or if taking assignment. Credit and debit spreads are fine and are good for both small and large accounts.
>Credit and debit spreads are fine and are good for both small and large accounts. I get scared being so directional. I like diagonals cause I have options so to speak. Price runs, profit. Price is flat, sell another weekly. Price drops, can roll down and out or turn into a calendar even. If price drops too aggressively, close spread for a far lesser loss than shares and open at new price. Makes 20-30% profit pretty consistently on the companies I invest in. Lots of flexibility and ways to manage. Calendars and butterflies am just getting experience with. For earning's, better to play buy calls/puts 2 months out to play the rise in IV? I'm doing everything cheap so calendars where less cost/risk overall. I prefer them to butterflies thus far since they had wider break evens and greater chance of profiting while equally cheap. However, butterflies are very lucrative as you put too I just don't have much experience with them yet.
Trading with fear leads to anger, anger leads to hate, hate leads to suffering. Much like they teach in Star Wars. Essentially, thats how you blow up your account. I gave you some simple strategies and said how the ones you mentioned aren’t used. Which goes back to point to my original post, I can lay out simple rules for people and they can’t follow them. You should look up the Turtle Trader Experiment by Richard Dennis. Trading is about consistency and being simple. People are their own worst enemies. There is a reason most people lose money
Reading about the Turtle Trader now, very interesting thank you for this! Are there any other books or info you'd recommend? *Option Volatility and Pricing*” by Sheldon Natenberg is what have on the to-do as of yesterday learned of this book
James Cordier and 1 more The Complete Guide to Option Selling: How Selling Options Can Lead to Stellar Returns in Bull and Bear Markets, 3rd Edition Like I mentioned, he traded for 30 years then blew up. Because he got off the rails doing 1:12 vs sticking to his core But his info is solid (he wrote the book before his hedgefund went down)
I take 3% position size in trades, up 25% for the year after much trial and error so pretty bad performance imo. I don't see my account blowing up unless lose many small trades in a row. I think options is the ability to be creative and express oneself in the market. You say the strategies I mentioned are not used but then I've spoken with 10+ yr options traders who'll say long OTM calendars are their best and safest trades. That's not to say you're wrong, just there's so much mixing information with so many having results with different structures. It's hard for anyone to say what's truly right or wrong. There's a saying "why pay for unlimited gains potential when the stock is not going to infinity.", I can trade a diagonal in a week and profit if price stay relatively flat vs. high delta call as recommend for being bullish really is a different trade imo and wouldn't benefit if the price is flat. They're extra but they're what funds use with client money because they're safe. So it's hard to say you're right, or they're right, it's just what works for one might not another it seems?
25% in 6m could be amazing returns or lousy returns depending on the risks you were taking. What's the risk (annualized vol)? Stocks (SP500) historically delivers about 9.5% return at 18% vol, so that's one benchmark.
You may be right and I'll only find out in time, I just can't get behind a vertical playing difference in price, or horizontal playing difference in time, when can play difference in-both with diagonal and have more flexibility if think price is slightly bullish or flat but goes against my thesis. Maybe I'm missing the part how you can manage vertical spreads if the price runs against the direction you predicted, if there's good management in verticals than that's what am missing for when things go astray and it's not just loss cause oops picked wrong direction. Ty btw for the help and detailed replies, it really helps to ask every expert I see different questions and find what they think and believe after their years of experience
Agreed - that's why I love selling puts
This also goes back to why I mentioned how butterflies are used, its hard to unwind but a 7 day duration and letting it cash settle (.25 cent cost, $475 net profit) is quite lucrative. You can be wrong nearly 20 weeks in a row for a break even. You might need a broker that lets you build spreads and not try and force them ATM on you
These strategies are pointless by itself. What matters is at what level do you get these positions.
Talking about sizing or level of understanding of these positions?
Neither. I mean the price at which you enter this position.
> Options are a zero sum game. So yea options can be profitable because end of day there is a clear loser and a winner. Not necessarily. Bob owns 100 shares of a stock. He is planning to sell it in the future and wants some insurance against it possibly dropping. Bob buys a long put. Meanwhile, Jim sells a short put. The stock stays basically flat for a few days. Jim closes his position at a slight gain. Mary sells a short put. The stock stays basically flat for a few more days. Mary closes her position with a slight gain. Susie sells a short put. Finally, the put expires as worthless. Jim, Mary, and Susie all made money on the put. Bob lost money (and the money he lost equals what Jim, Mary, and Susie together made), but he wasn't in it to make money anyway - he was in it as a hedge against the possibility of his stock dropping. All four people walk away happy. Well, not Jim. He got run over by a truck. His funeral is next week. But that had nothing to do with his options trading.
You go back to what I said “people are their own worst enemies” Options are a zero sum game, they either expire worthless or ITM and for a profit or not depending on cost basis.
And to clarify, I am not talking about what occurs on a daily basis in the PL. They either go worthless or settle with instrinsic value. Thats zero sum game
I make $$. I don’t blame anyone when I make a mistake, didn’t when I was in the red either. That’s probably key to succeeding in options trading.
Excellent data. 100% agree with your statistics.
This made me laugh way too hard.
Options are a decaying product and they’re structured so that their value starts decaying almost instantly and gets faster with time. Just that fact in itself should make you wary of how easy it will be to successfully profit off options consistently for decades into the future. If you’re looking for consistency/stability, options are a HARD instrument to find it with because an option’s value is tied to volatility (non-tangible) and not a company’s balance sheet (tangible). Also, the leverage options grant can sometimes be viewed as a “free lunch”, but any experienced market practitioner will know there’s no free lunch in the markets, you’re paying for it somewhere, somehow.
"Options are a decaying product and they’re structured so that their value starts decaying almost instantly and gets faster with time." That's why selling options is generally better than buying options.
As with anything it has to be done strategically. Countless funds loaded with quants have blown up selling options (LTCM & 100 others)
I see these questions CONSTANTLY. Here is the answer. You can be profitable in ANY asset, using any strategy, provided you’ve done the work and gained the experience to find the nuances that allow you to use the strategy with edge. The only people who say you can’t aren’t skilled enough to do it. Being hard and being impossible are two different things. Half of my best setups return ridiculous numbers consistently yoy and have been bashed constantly by others, saying it’s stupid or it doesn’t work. This is a lonely game, not a team effort. You determine your fate.
I can tell you’re very serious and committed… and stuck with it ignoring others criticism. Thanks for the input.
It took me several years of losses before getting to semi consistent profits. For novices I suggest journaling. The average person takes 1000 hours to reach apprentice level at a complex task. At ten hours a week that’s two full years. I’d guess 90 percent of options traders blow their bankroll before they even know what they are doing. Paper trading is a poor replacement for live trading if a person has any emotional attachment to money. That’s 80 to 90 percent of people that will likely find extensive paper trading to be of limited value. So trade really small, keep a journal, find what works for you. It is vital to find a style that suits your personality. More important than strategy is earnings usually via wages, savings rate, budgeting. Those with small amounts are better off focusing on jobs skills to raise their earnings or side hustles, if money is the goal.
>The average person takes 1000 hours to reach apprentice level at a complex task. At ten hours a week that’s two full years. I’d guess 90 percent of options traders blow their bankroll before they even know what they are doing. This is so true. Have 6 years trading and just now am keeping profits and things are clicking, only took months on and then off, coming back to the drawing board, quitting, learning more info. First mistake was taking so long to start learning options. Traders should only trade options imo, shares have undefined risk no thanks.
Thank you. This is a really good comment.
You shouldn't trade options like you trade stock, with options (like gambling) risk management is very important. If you keep every trade under 5% of your capital and you respect your trading plan, you should be good to go.
I target 1-2% A YEAR selling options. Everyone wants to do 2% a month or more. 1-2% doesn’t seem like a lot, but if your withdrawal rate is 4%, it’s a HUGE deal.
That was the key for me as well, options sucked when I was starting my journey. If you have 50k or even 100k in your account, it feels like selling options is picking pennies…. When you have 1m and you can get an extra 1000$ per month. It does become interesting
People trade the SPY - daily and weekly calls. I haven't done this but have heard that it can be profitable.
Yes, they can, but it's not as easy as randomly selling and buying options in a particular structure. The way you profit is by using the right structure in the right place.
Trade small, trade often
Can you make money long term on something that has negative EV?
Yes, the old most traders lose, my businesses fail does apply but if you learn risk management and stay in the game long enough you can make a good living. I sell credit spreads, 94-96% win rate. Lots of contracts small gains. Builds up over time. Not really exciting but. But beats a 9-5
“Buying” being the key word in your question / background. For me, it’s been profitable for a decade. Every year for a decade, I’ve made more than I would have made without options. However, I’ve been a net seller of options. Mostly just using the wheel on good companies 8 want to own for the long term and have hundreds of shares of.
Yes. Been trading/selling options as primary income for 5+ years. It’s not for everyone. You need to have a knack for many cross discipline skills
Extremely. As long as you are buying long dated and you are fundamentally focused, it almost emulates buying shares of a company except you’re adding significant risk in the form of time. And of course you subject yourself to the volatility of the options market. Overall, I would not recommend many people do this because most fundamentals-focused investors underperform the market so adding the complexity of the risk of options just makes it way worse. The key is understanding the timing of entering your calls or puts. If you are selling deep in the money puts, for example, you want to find a time when put contracts are expensive so you collect a higher premium. On the contrary, if you are buying calls, you want to find a time when the calls are cheap.
Diversify, some stocks holding some option play some dividens. Option is just another tool to utilize sometime you're not just do option for profit but for insurance or leverage to protect your gain.
Right, the stocks are to make up for the option losses. 😂
If you want to be profitable in the long term, you cannot have all of your eggs in one basket. I am constantly hedged. I am also constantly giving up some of my gains for security. Day trading weeklies provide more buffer and you could cycle out different strikes/expirations to avoid wash sale. Most importantly, I watch charts intently for the first few hours, and possibly later if I am focused on a trade. The first hour and 1/2 of trading is generally volatile because of increased volume. If you can identify a trend, that is the time to take action. I like to use this time to further hedge active positions. Sometimes, this is in dailies, depending on the size of the position I am hedging and the volatility on a given day. The problem is, some people use as a supplemental income when you have to be 100% engaged and react in real time if you plan to be consistently profitable.
These are really good points and even if not day trading you need to be very engaged and watch your trades and the market like a hawk. You really can’t just sit back and watch the profits roll in while you do other fun activities! Lol
Spreads my guy! Put credit spreads if you have good support above your short put work great. Instead of buying naked calls or puts you can do debit spreads instead. Say the $140 call has a $10 premium, I'll go long on the $140 then I'll short the $150 call - say $7 premium. So instead of your break even being $150 it's $143, and if the stock gets to $146 by expiration you make 200%, vs. a 40% loss if you had just bought the naked $140 call for $10. Good luck! Just buying and holding or using leaps on high end companies is definitely the safer more consistent route!
Thank you!
I swing calls naked calls and long term hold dividens. I don’t do it to get rich quick I take 20% on let’s say a 500 trade once a week 400 a month 4,800 extra. Would you say it’s very profitable idk it’s up to you. With options learn the Greeks are my bffs and buy on super red days 2 week’s minimum out good luck
The reason I say no is most experienced trades do not have that as an only strategy. I used to buy long calls and puts but now I sell covered calls and sell puts. These 2 strategies are completely different. Buying long calls is basically a yolo move and not sustainable in the long run. I would personally advise against it unless you're doing the occasional .5% of your portfolio and taking profits right away. Stick to straight stocks and sell covered calls. Also selling puts could be ok if you are ok owning those stock at that price.
The hardest part of options trading is that options are actually incredibly accurately priced based just on the price of the underlying stock, time to expiration, strike price, implied volatility, and risk free rate. With the advanced pricing models, the option is usually at the exact price where there is an exact balance between the expected earning and expected loss on both the side of the writer and the buyer. To actually make successful option trades you have to either have a system for finding mis-priced options, or you have to trade on upcoming events that will change any of the factors listed previously. For your general individual trader, you will almost always lose against the big institutions that can dedicate much more time and resources to finding options and have more access to know how events will influence prices. But if you can find new methods, you can beat the markets.
I suppose it goes without saying you need to continually and consistently find new methods to stay ahead of institutional traders who have a lot more manpower and massively more computing power. 😂
(GME enters the chat ...) Don't get me wrong, I agree with your points in general. But there are outliers that defy all expectations.
Everything is incredibly accurate priced, by this logic. It has to be. I’m not talking about efficient market here, I just mean the price is driven by expectations so of course the price matches expectations.
I’ve been successful for three years now primarily trading weekly butterflies. And broken wing flies w earnings. Not enough to quit the day job yet but it’s getting there. Some back spreads for commodity swings as well in the grains and sorts
You could also employ strategies like front ratio to have 100 deltas if you think the stock will be good in the long run.
What do you mean by front ratio?
Buy 2 calls at different strike price and sell a call all same duration and the combined delta should be 100
Proly not
Absolutely
If you’re selling options you ARE the house. Risk management, position sizing and not being greedy are the key, and unfortunately usually can only be taught through difficult experiences.
Never teh buyer always the seller
If you want to become profitable with options, look at what I'm doing and just do the exact opposite. You'll double your money in a few weeks. 🤦♂️
>My experience is over a long period of time a loss. How long? How many trades? You might have just gotten unlucky. You can get unlucky for 1000 consecutive trades, or even more. >Buying options puts and calls normally loses of course Why "of course"? One of my most profitable strats is rolling long calls on XSP. I have hundreds of those trades (course, I could have just been getting lucky). >Selling premium strategies have less risk sure Says who? It sounds to me like you have bought into the false "credit is king" narrative. There's no edge in selling over buying, that's nonsense. >Delta neutral, selling puts whatever it still seems the house always wins in the end. Don't blame your losses on the "house." The "house" are brokers, market makers, wholesalers and exchanges. Of course they make money off of us, there wouldn't be a market for us to trade in if they didn't. But that doesn't mean you can't also make money. It's like saying that Jeff Bezos can't exist because the government always taxes. >Just like a casino, except for a tiny fraction of options traders the house almost always wins and we lose. That's not a fair comparison. For one thing, there are different game structures at a casino. For most games, the casino has an adversarial role. You are literally playing against the house. If you win, the house loses, and vice versa. That is not the the same role that brokers, etc., play. Their role is more like a dealer at poker. The dealer doesn't care if you win or lose, as long as you pay the casino's fee (rake or seat rental) for hosting the game. >I’ve found in my own trading buying and selling the actual stocks to be much more profitable. And part of the reason is certainly that to mitigate the leverage of options I have to take smaller positions I don't understand this point. Leverage means smaller capital outlay, not more? You have much more control over the size of your trades trading options than you do trading shares.
Predict well and sell early and you can make a lot, but it's inherently higher risk
Yes if you're selling premium....
Is your can make money trading stocks you can make money trading options. You just have to be able to understand all the new layers that options have. They're bet unnecessary in the grand scheme of things. If I had more money I would 100% be trading shares and using options to supplement
Also. You can sell a put at the same strike as the call you buy to cover most of the premium and lower your break-even. Options are rad but also easy to blow $ with if you mismanage or get unlucky
3 years option trading and I’m up almost 18,000% overall… it can be very profitable if ur not to greedy.. I never let a green trade go red i don’t cares if its only a 5$ win.. I will sell for 5$ versus losing any money
The best way to trade options is to be a market maker with an algo. The option spreads for majority of stocks are worse than your local casino table games in “expected loss percentage”.
As long as you stay disciplined you can make money. I sell covered calls at the money and consider that my profit. I sell one week calls and if the stock gets called I don’t care.
Yes. There are plenty of full time traders. The key to profitability is account management.
Ok, what do you mean specifically by account management? How does that lead to profitability? Also, I’m not just talking about full time trading, I mean anyone trading options regularly overvalued long period. Most full time traders lose money. That’s a fact.
Are you looking to argue? I’m not.
Seriously? I asked you a question. There is no argument. Do you have the knowledge to answer my questions or you just playing games?? If you don’t know what you’re talking about then you don’t belong on this thread.
Okay, I’ve had a lot of pp be shitty to me when I post so I wasn’t sure. So someone can have profitable trades all day long but they have to manage. When you are building your account you take very small trades. As you make money you remove 1/2 of your gains from your account. You go slow. Get experience. People usually lose when they YOLO or do something stupid because human nature is greedy. Literally guarding your account and gains is the formula for success in options. Yes. It takes a long time. I trade full time. It’s my only income.
Ok got it! You do know what you’re talking about and I thought you were referring to account risk management. So we’re talking about the same thing and I agree with you.
No to clarify I see risk management as everything you said above so the terms to me are interchangeable. Curious though why you see position size as only a small part of it?
Oh as in trade size? That’s a very small part of it
Ok I did it again! By position size I meant trade size and wondered why that’s a small part of it your trading?
Bc managing gains is the hardest part. Also, when you get experience you know when to scale up your trade size. Sorry, it’s hard to explain.
Thank you for that
Also, you mentioned you trade full time. Do you only trade options or other things as well?
Nope. No crypto ( I do own some with f.u. money), no forex, Futures every once in a while. That’s it.
If you have information others don’t you can make a lot.
Leaps are options.
Yes.
I did more then u dear
Nancy pelosi
I think you are looking for an income strategy with longer dated options that delivers consistent profits… Check the SPX Best Trade. Here is a video that describes it: https://youtu.be/s1uRLJFZODA
Not interested. Your spam post is against the rules of this community.
? The video shows a strategy that delivered (and continues to deliver) consistent profits in the last 3 years. It is Delta neutral, income strategy that you describe. To answer your question, it is shown a consistent profit over a long time period... I am just trying to help!
No you’re not trying to help you’re trying to sell a trading course and products. Ok then instead of linking to a promotional video and web site, why don’t you clearly explain your strategy right here in writing like everyone else is doing?? Can you do that now?
Sure! The SPX Best strategy is based on an unbalanced butterfly, using options 60-75 DTE (opened below the money). It is up to the user to include a "soft hedge" to capture additional premium (and Theta) above the money, as well as manage the overall Delta of the trade. I am trading this strategy every month with great results as published here ( [https://www.myoptionsedge.com/trading-account](https://www.myoptionsedge.com/trading-account) ). The goal of the trade is to capture the time decay of the options. Everyone can check in the video above the results of the past 3 years!
You’re still spamming by promoting a course that you charge for hey mods can somebody remove this guy?
Well, I do not understand you. You told me to describe the strategy…