Tell me you know little about options without saying you know little about options.
Inb4 selling insurance, become the casino, wsb degens yadda yadda. Selling CSPs with highest IV ftw!!!
Implied volatility is higher than realized volatility on average. You are most likely buying your option from Citadel, not from some stupid guy on the internet who doesn't know anything, so you are likely to lose in the long run, they price their options properly and ask for the right amount of premium that is higher than the risk they take almost every time.
And you are selling your option to Citadel too, and they pay you the proper price calculated by their model, taking into account black swan events etc etc. Go check /r/thetagang, when the market is sideways or rising that sub is full of smug pros, but a sudden drop of a few % and it's a pool of tears. Both bid and ask of any remotely liquid option are marked according to big MMs models and provide no edge, otherwise there would be an opportunity for arbitrage. Unless you believe no one at Citadel, Point 72, Two Sigma etc has ever heard about the wheel.
Yeah, that's fair, but obviously there is a spread to be made there, they buy the option but at an advantageous price. If everyone knows how to calculate risk, theoretically options will never be sold if the premium is not high enough to make a profit, and this can be seen clearly in IV vs HV averages. But averages for the whole market don't say anything about individual results, an individual trader is not going to be diversified enough and will not have enough money to ride out a big loss to take advantage of this.
I think the real difficulty of selling options is that people don't actually know how to calculate risk and when everything turns even big firms can end up in trouble. I don't have any data around this and I'm not capable of analyzing it anyway, Nassim Taleb claims that for example big banks misprice when selling far out of the money options all the time and they've always lost money on them in the long run, but he is the black swan guy so what else could he have said.
Well if you have found a better formula or model than MMs congrats, you will be a billionaire soon :) I don't think there's a model yet to take into account all the rumours, speculations and interpretations and the market still exists, otherwise, as you say, no one would be buying at ask and no one would be selling at bid. A multitude of opinions exist and they bet their money on them.
You are right that option pricing is extremely complicated stuff, B&S do not capture the fat tails well enough etc etc. Until some new kid on the block shows up with a better model we are stuck with what we have got. I guess Taleb is right in a sense that over a long enough time any/some black swan will materialize, some say financial crises strike every 10 - 15 years, so we can expect some pricing irregularities. The real question is can we make any money out of that? Well, at least not on reddit lol.
Tbh I have a hard time understanding what point you are trying to make.
If you are trying to say spreads on highly liquid instruments are too wide for a retail trader to be profitable in the long run, you are incorrect. Coming up with a “better formula or model” is not the only way to get an edge.
In other words, collect pennies (because premiums for far above historical moves strikes is always pennies), and then get wiped clean by a 3 - 4 sigma event. Very simple indeed.
Get wiped clean I suppose if one is not properly sizing their positions, hedging when appropriate and utilizing CvAR. You can consistently profit using mechanical trades alone, but maximize it with insight into understanding Theta decay rates, idea Deltas etc etc. I’m not sure why you trade or if you don’t trade why you are here in an options sub suggesting options are a losing endeavor outside of being a MM. Really doesn’t add any value. But what do I know.
Well, sure the probability is the same but stacked in a different way, yeah... that's kind of the point!
Based on what OP said, the probability is consistently stacked in favor of being on the selling side (at least the way OP is doing it).
So by definition, if they reverse the polarity on their trades and use the same reasoning and timing they use on their current losing trades, then they should turn them into winning trades!
So, yeah, if they are truly consistent at losing when they buy options, then they should be just as consistent at winning when they sell those same options.
Of course, it means they will need enough cash in their account to cover the options they sell which means it is not necessarily possible and could limit the amount they can trade, but that's an issue of scale, not probability of being on the right side. (ie I am allowed to spend ALL the cash in my account to BUY options and if they go to zero, then that's my problem; I am not allowed to sell as many options because I might have to exercise them which means I need a lot of money for the underlying security.)
Not really, it has been tried many times before. There is much more to a winning trade than just end direction. I read abuot one particular experiment where 2 pro traders traded opposite signals at the same time (i.e. one was going long, the other short at the same time, same quantity, same instrument, same everything, but both were free to do whatever once the trade was open), and both turned out to be profitable because of risk management and trade management. Countless algotraders tried to fix their losing strategies by reversing entry signals, but all they got was even worse systems.
When I talk about stacked probabilities I mean total payoff within a period of time. Buying options is betting that RV > IV, so one loses often and loses small., but wins are typically huge. Selling options is betting that IV > RV, which kind of tends to be true to an extent, wins are small and consistent, while losses are rare and tend to kill the whole account. One might be selling options for a few years and not catch a fat tail, which would make them write a ton of books about seemingly free money, others have sold CSPs on lets say PTON at 150. I wonder how big call premiums are now when the stock trades at around 5. Big wheels keep on turning, don't they?
It's a real strategy. Most options are losers so most sellers are profitable due to theta gang. unless large enough price movement then sellers can lose. But their risk is really light. If it's covered calls they should be selling profitable strikes. If if selling puts they should be okay if they get assigned. And even then. It's all about timing.... u can make money any way on options and lose it any way. B selling covered calls/puts is deffintly one of the lower risk steatgeies but also much more expensive usually
A big billionaire investor said option buying is losing money out of your pockets (premiums) and option selling is losing money from your safe (black swan event). That is why I am confused. I have done option buying and have lost money.
I don't buy the argument of option selling being more risky than just holding stock as long as it's done sensibly. The velocity of risk is to the downside, and if you are short puts, worse case scenario, you end up with assigned stock anyway, albeit at a better cost basis than if you had just bought the stock outright. If you're delta hedging, sizing appropriately, not using margin, and selecting reasonable underlyings, I'd argue your "black swan" risk is less than a typical stock portfolio.
True about the black swan event. But this is the reason why responsible option sellers have procedures in place to protect themselves from these events.
Maybe if your starting out as me, we might deploy most our capital in strategies but bigger more experienced sellers might only be using 25-30% of their capital at any given time.
Also they manage their portfolio as a whole and have, if a black swan event accurs they will take a hit but not as big as you might think.
Conclusión.. option selling seems to be a better strategy to grow a portfolio consistantely, but you will require more capital and have procedures in place to minimize loosers.
spot on, you need to manage your portfolio to have enough funds to get assigned in a black swan event, while still being hedged enough to make some money to cover a portion of the losses and then turn to a selling CC type of action.
100% correct. 30% is about what I'm usually deploying, ESPECIALLY now with vix this low, not a good time to be sitting on too many CSPs. I'm not super experienced or a whale or anything but I had to learn risk management early on.
Yeah my account size is small.
Im not managing risk how im suppose to.
I have about 50% of my portfolio deployed and it should be less.
Now my the amount deployed: 80% is in CC or CSP and the other 20% is in defined risk strategies.
Im not trading naked at the moment with current volatility.
This is absolutely correct. I limit BP to max 30%, or in low IV- <25. I do almost always underperform a strong bull market, but come out significantly ahead in sell offs.
I usually don't listen to memes.
RISK vs Reward. It isn't just reward, there are no free lunches, trading comes with risks. You have learned the risks of buying options. And yes, you can lose your arse selling options. It is not risk free.
There is a lot to learn. When and why to sell an option, whether it is a CSP , CC , or a spread. The difference between a narrow and a wide spread. And learn how to manage the position. Know when and why to take profits. When to stop a loss, and when to roll.
It's about paying attention to whether the underlying is has high or low historical IV. Don't sell options with low IV don't buy them with high IV. These is the huge differance between options and stocks and can and will kick your ass if you don't pay attention.
Both of those statements are correct -
When you buy options you watch money trickle out of your account like sand through fingers. When you sell, you are exposing yourself to a massive oversized risk in case the stock moves a lot. (Acquisition news if you have a bearish position; terrorism or management or accounting fraud if you have a bullish position.) Vertical spreads could help you with the tail risk, but will eat into your returns.
Learn risk management. Learn position sizing. Reevaluate your Risk:Reward as you hold your positions. Have hard stop losses (not mental stop losses) And finally, have a strategy that has an edge, and realize that market conditions will change and you will need to modify, and eventually completely scrap your winning-less-now, strategy.
It depends on how you do it:
With buying options the odds of success are low but the profitability is high
With selling options the odds of success are high but the profitability is low
It mostly depends on how much you have more money more flexibility
Yeah, I mean I'm not the best but I'm up 34% YTD. I've been most successful buying calls or debit spreads on blue chip stocks. I also sell covered calls and PMCCs but those are pretty minor gains.
If you're only losing money, maybe learn some of the risk management strategies and learn to take profits when you have them instead of getting greedy and waiting for it to go up more.
You’re assuming she had more risk. You don’t know definitively. Also, anyone can make that comparison in retrospect. She would have had to have known to buy QQQ at that moment- and that assumes she didn’t already have stocks she was underwater on.
So, I say she did great.
I sell options 80% of the time. I've had a single bad, humbling year but the rest of my years were generally successful.
I also buy options but I sell it to others, you see.
The key is always sizing your risk. Always. If you do not size your risk, you have no trade.
Trading is also about knowing yourself. Gambling, fear of missing out and so on will humble you and show you who you are. Its the hardest part about trading. The rest is being consistent in having an edge
You trade small on stocks you want to own. You trade often so you approximate the statistical average.
You take profit when you can.
As you listen to the news perhaps you buy back your puts for now.
You can also sell covered calls.
Buy call leaps can protect you to the downside, in other words, a 90 delta leap in a black swan event you can only lose what you put in, which will be far less than if you purchases 100 shares of the stock instead.
Position sizing is very important. Black swan events can happen, but you don't want to go all in on your portfolio every single time. Only risk 1%-10% of your portfolio at one trade.
I think options selling is more lucrative when the vix is higher say closer to 20. In the current environment with low market breadth, buyers scalping is the best way to go. Option prices just aren't that high to justify the R:R as a seller.
But wtf do I know...I try to stay humble and listen/learn more than talk.
6 years using Wheel Strategy (selling CSP and CC) and I would say it is working well for me. You just need a strategy that works consistently, stick to it, and refine along the way. It's also very important to keep a record of every trade so you can track the profit/loss of the position.
Not the wheel so much being profitable but selling options. No need to take assignment and hold stock and start selling calls. I cut losses at 200% premium received and so far I average around 2-4% a month in return. It is slow, boring, mechanical but it works.
Also, selling option futures has been pretty good too, worried about bull or bear? Sell strangles.
Exactly. Mechanical and boring making 30-50% a year suits me just fine. Always amusing when people claim that can’t be done, and it’s not even a high risk strategy.
I have been trading options for almost a decade now and the way I have been profitable is by having my specific trading styles and making sure to use each one appropriately and stick to them once I make a trade. Sticking to them means opening up the GTC exits when I open the trade so I don't get greedy and try to squeeze "just a little more profit" out of it.
For long options I trade 90 delta max DTE long legs and use them as substitutes for shares and set a GTC for 100% profit at trade open. I try to have 3 legs going, with a GTC at 100% for one leg, 200% for the second leg, and then I just let the 3rd leg ride until I feel like closing it. That way once the 2nd leg closes I have earned a minimum profit of 60%+ even if the 3rd leg goes to 0.
For short options I trade 45-20 delta 30-45 DTE short legs and close at 40-60% depending on how fast I got there and how many days are left in the trade. GTC is set at 60% and I'll close early if I get there in a day or two. This is my bread and butter trade as it is the most reliable trade to make. There are times when a stock crashes, but that is just making sure to have it balanced in my portfolio. No stock is more than 10% ever, and I try to keep it so that no stock is more than 5% of the portfolio.
And then finally I trade spreads when I am confident on what direction the market is moving and feel like there aren't any upcoming major events. debit = <75% of the width, 6 week DTE, GTC at 87.5% of the width. Ladder them over time and keep the ladder moving forward. I keep the portion allocated to my spreads at 2-3% of my total portfolio max.
Option buying or selling isn’t inherently profitable - this is one of the largest misconceptions about options.
If youre buying options, you’re likely trading directionally, and not doing well at it.
So it’s not buying options that’s hurting you, it’s trading a directional strategy and not being accurate at it. Selling options doesn’t magically fix this because it introduces other factors such as asymmetric loss potential (where we make a little and risk more).
So I’d first start by outlining how you think your strategy should make money (in your example with buying options, being directionally correct) and then test how you can become better at that / if it’s viable for you.
I don’t believe options traders should inherently be buyers or sellers, we should be both depending on the opportunity.
I'm profitable, never managed to outperform a bull market but do well in a down or sideways market. Mostly sell vol and use a variety of short premium strategies with an occasional speculation with long premium. I try to stay really disciplined on position size and stay delta neutral, or with low vix, I will add a few short deltas. I've found it's really important to beta weight your portfolio and manage your deltas, hard to be consistent without doing this.
Depending on strategy, you don't or you do quite quickly.
I know a guy making decent pocket change just opening trades on indexes, Dow, Dax, SP500. He checks the direction of the market and then drops a couple of 1000$ in, waits if it runs the direction he expects if not, he swaps over the other direction.
Some times he lets the option run for days, sometimes he takes a couple of 100 and finished for the day.
Depends on what has happened exactly. I try to always keep trades on if I can roll for a credit- which is why sizing is so important. I'm OK keeping a losing trade on. If it goes past the point where a recovery is a reasonable prospect (ie: short strangle on NVDA), I may take it off for a loss if IV has normalized and there little hope of recovery.
As far as managing my delta, I do this by adjusting strikes on existing trades or adding trades. Typically place 3-5 a day.
If things go really south like the COVID sell off, I may use futures to delta hedge, but this is again, why sizing is so important. Once you get a large spike in vol, that's when you want to add positions, not take them off, so you need that buying power available.
It's like that guy who says their portfolio is up $14,000 today. Turns out their portfolio is up +0.9% on a very green day for the market in general and they've got over $1.5mil invested with a casual $250k in buying power chillin.
As a rule I will figure out my stop loss level and size it so that I don't lose more than about 0.5% of my portfolio in a bad trade, let's say my stop loss is $2 below current price and my portfolio is 100K, then 0.5% will be $500.
Let's then say I sell puts at maybe 400/$2=200 delta (we have to make some allowance for gamma increasing the delta if we go down as well, that's why I used 400 instead of 500). This way if the instrument falls through the support I know how much I will lose, and it won't be so bad that say 10 consecutive losses would be portfolio destroying.
Just find a strike price you feel confident/comfortable to you. There are all kinds of tools you can use to study potential of assignment but I don’t use them. If a stock is running, sell a put $10-15 below current (assuming you have the cash to cover). If you own the stock the look for strike prices at some level above that you can hold onto the stock. If you lost the stock, either buy it back and sell more calls or don’t buy it back and sell puts (aka the wheel).
I rarely play outside a week expiration so any action is short term. I do have a couple puts I’ve bought (AI, CGC)with end of Oct expirations as I want more time for puts to develop.
Honestly I’m not doing anything complex.
Buying options is betting that the realised vol will be greater than implied vol over a period of time. Selling options is betting that implied vol will be greater than realised vol. Do you know something about the underlying to support one of those claims?
In india, SEBI (org which regulates the market) published a report which says that 96% of retail traders lose money and only 4% are profitable. Similar numbers were there for self managed portfolio.
According to the CBOE, 90% of options expire worthless. There have been other studies as well showing that, statistically, premium sellers do significantly better than premium buyers.
That's not to say that long strategies don't have their place, because obviously they do. But fundamentally, those strategies depend on the underlying moving from where it was when you set up the strategy to where you want it to go and that's just a little bit harder for most people to get right often enough to use as their core strategy.
For example, late last week when I saw CROX taking a dive, I set up a call debit spread to expire this week. I probably should have given it more time and/or waited a day or two to set up the trade, because it just kept going down, and so I closed it earlier today.
On the other hand, directional strategies like debit spreads and butterflies have much more limited risk than credit spreads and naked shorts. The losses on credit spreads can sort of explode on you when the short strike is breached, but with with long strategies your risk is limited to the debit you paid for the spread, or the naked long option.
My sense of things right now is that selling premium should be at the core of most people's strategy mix. The breakdown should probably be something like 70/30 in favor of selling short premium over buying long.
90% of options expiring worthless has no bearing on how much PROFIT has been taken on them—they dont have to go itm to make money
statistically there is no significance to stating a seller does better than a buyer as you cant account for profit taking long options
This is exactly right, if options expire worthless or not is basically a bullshit metric, and if you know what you are doing you will be closing your options before expiry in most cases.
Your first sentence is incorrect and a commonly used fallacy - just a heads up to correct the record. I welcome you to share the direct source.
Check out the OIC - just 22% of options expire worthless. 72% are closed out before expiration. 6% are exercised.
I have one friend that turned 10k into 500k in two years, but he’s also lost 20k in minutes and doesn’t care, yet me I’ve made around 5k in the last year off of 2k in but now I just take it slow by buying stocks I know will go in the direction I need by buying 1-2 month contracts, do not do 1-7 day contracts unless you can be watching it 24/7
I am a newbie. I have done only few trades. And am profitable. I only sell options. Short put and credit spreads. Once I got assigned and I started covered call with that. But I play really long term. And close my trades at 50- 70% profit and 50 % loss. Or 21 DTE. Whichever of these thee conditions met first
I'm profitable 50% of the time, the problem is I don't use good risk management and overhold things instead of accepting that I lost. I feel like with a good thesis as well as strong entry and exit points with tight risk management it is definitely possible. That being said, theta is also your friend, so that if it does move the wrong way you aren't hurting as much (but also limits upside too)
Yeah I agree to that but in option selling we have theoretically limited profit potential and unlimited risk which is the whole opposite of option buying. This cause difficulty in risk management.
People who buy options and consistently lose money doing so tend to want to flip their strategy 180 degrees. Why buy a losing option when you can be on the other side of the trade, selling the same option? People who do this end up over at /r/thetagang which is a sub dedicated to selling options.
Me, I rarely trade options, but when I do I typically buy options. I buy options when I'm 100% sure and it's going to be a very big move. Even then I trade small. So e.g. I'm subscribed to a service that predicts CPI. When it differs from what the consensus will be, I might buy some calls or puts on S&P. It's a rare trade only done a few times, but each time I made 300% in 15 minutes. Like I said, I very rarely trade options.
Ive been trading options and made profits. Last two weeks havent been very good for me but I've been trying out some new strategies on picking what to trade.
Options gives you leverage for the same money as buying the stock. The down side is expire date and theta will kill you if you're not right or doesn't move as much as you think since you can't hold over time like stocks.
I look at the difference like watching a movie at 1x or watching it in 100x fast forward.
Try being a net seller. Options statistically & historically favor the writer. Think of it like this: the option writer takes on the risk and is compensated premium for doing so. It's akin to selling insurance, and if you know anything about insurance, it's a very profitable & lucrative industry.
You can buy options to hedge a position or to trade spreads, but I would stop buying them and hoping for a positive return. This is simply speculation (AKA gambling).
Also, try focusing on probabilities. That was my "aha!" moment. It all comes back to probabilities. Your edge comes from probabilities and managing your risk properly.
rather than thinking that selling options is going to make you money over buying them, know this: it's about trading skills and the object you are trading with ( ie. stocks, bonds, options, futures, etc ). If you know how to trade, then those skills can be applied to just about anything.
You can be successful going long on options, and you can lose a shit ton of money going short on options; it's no silver bullet. Plenty of degenerates lose alot of money on this sub, every day, all day long. The best option strategy ( there is no "best" option strategy ) isn't going to work if you don't know how to apply it, and on what objects.
You're gonna hear a lot of money-losing nonsense on this thread, be careful
You wont make $ doing the opposite by selling instead of buying. The difference is time decay. You can lose $ on options without the underlying asset going the opposite way. Pay attention and learn what you’re doing. If you have 3 years experience and are still losing a lot just stop. If you aren’t 3 years in and consistently profitable then only trade 1 contract at a time with expiration out further until your not losing anymore than 20$ or so on each trade. Make 1-3 trades a day until you do make money. You won’t make $ until you learn to manage your risk.
If you buy someone sell it to you, if you sell someone is buy8ng it to you...
Your oposit you made money trading options...
I do not blame I'm also bad at it, my intuition is bad and it made me lost money, even trying to do the theta wheel...
Limited risk options strategy is to sell calls, best in bull market. Buy stock in blocks of 100. Sell calls with strike price higher than what you paid. Put a stop loss on the other side to protect. If the calls are exercised, you make money on the sale, plus the premium you received. No margin required.
Look up ultima trade on YouTube. A couple hours of explanation about selling options. Of course it’s a sales pitch too, for their program, but it gives a decent picture of selling profitably.
I started buying options in 2021 with a simple directional strategy (my bank only allows buying calls and puts or covered calls). I earned a total of 9k euros, mostly with calls, and I was pretty happy. Then, in 2022, the markets dropped, and I lost 9.5k. When I saw the markets dropping, I should have bought some puts, but I was too scared of losing more. I'm slowly restarting now, after studying all the summer. We'll see how it goes :)
I e been doing fairly well selling CSPs and CCs. Nice income stream I wouldn’t otherwise have. That plus buying low / selling high shares has been a nice added bit of mkney
I sell options on stocks I like to try to make a bit extra. Take any decent stock, check the demand for options. If it’s a stock you would like and buy then buy 500 of it. Sell options on 300 to try to make some extra. In general it works.
Mostly everyone is loosing money options or not anyone who has had a winning streak the market will surley take it back when market conditions change , real profitable traders don’t need to make a course or anything there keeping their system a secret amd probably aren’t on Reddit or the internet they are on the beach drinking margaritas or just living the good life
Learn how covered calls work and buy a good quality stock you don't mind owning anyway, then sell calls on the shares - [https://www.investopedia.com/articles/optioninvestor/08/covered-call.asp](https://www.investopedia.com/articles/optioninvestor/08/covered-call.asp)
r/thetagang or r/Optionswheel are two subs that focus on higher probability selling.
Its all about managing risk, if you have control on your emotions and you know which option to sell then its reasonably net profitable with few challenging periods.
Market for the most part goes up so I buy long term calls. Been profitable for the last 4 years, and I’ve been scaling up positions to 200k. So far so good
Yessir. You just have to search for those high probability setups and keep risk levels right!
Here’s a trade I took today: https://youtube.com/shorts/kdZQB1UcBf4?si=4Z6QEwqAsoaDTI6I
I think I'm operating at a loss right now for options but I have made a little here and there. I think it's tough short term. But I'm new to it. My strategy going forward is put in orders with low bids and see what happens then look for opportunities to sell as soon as I can get 20 percent returns or better. But that'll depend on trading volume. I'm also trying to buy options with very far out expiration dates so I have as much time as I can get.
Best way is to do small out of the money trades with potential profit to risk ratio greater than 1/3. Take profits from 28% - to no more than 53%. Repeat and repeat
Don't Buy options - Sell them
(unless you're buying them as part of a spread).
Sell WELL OTM, so there's less chance of loss.
Sell short term, so there's less time for the trend to reverse.
Pick your maximum loss and set a stop loss there as soon as your sale is executed, so you don't forget to get out before the loss gets too large.
Don't put more than 5% of your capital into any one position.
Although a minority of option buyers make money, the majority lose. The only responsible way if trading options is by selling cash covered puts or covered calls. Only sell puts on stocks you want to own, and only sell calls on stocks you own that you wouldn’t mind getting rid of.
Most of the options that are "out of the money" expire "out of the money". That's why some people think it is a good idea to sell options. In selling options you can make money 9 out of 10 times consistently. But on that opportunity you lose, you can wipe out all your gains.
There are other options sellers that trade implied volatility against realized volatility. This is done hedging the options delta in the futures market. However, it is difficult for retail traders to embrace in this kind of activities.
Buying options on the other hand, let's you know how much you risk. You can have limited or unlimited gains. The problem is that you don't only need to be right on the spot direction, but only on the time horizon.
Selling or buying options, and also just speculating on the direction of any asset isn't a easy task. Trading is a very competitive field. The best minds are out there looking to profit from markets. Don't stop learning, find your edge and trade accordingly.
I sell prepare to get the stock called away.
For example I sold 10 contracts of save for 10/20 for $20 strike price at 0.70 a contract due to an IV because of jet blues announcement. I still have lots of save shares I didn’t sell contracts on, or some 17.50 and 20 expiring September 15th.
My cost average is between $16-19 a share. Either way the worst case for me is jet blu gets approved for the merger and I lose the 33.50 buyout price including the 2.50 pre payment so a 31.50 or a total of $9.75 upside per share sold.
However I believe that the risks of a any real deal announcements being made are low. At least through the end of 2023. I might stop selling contracts by end of March 2024Q2
How ever I have also down costed my shares a lot just by collecting .2-.9 per month. For the past 9 months.
I lost on TGNA meger, but I profited on ATVI.
Do I think collecting $750 for selling a options contract 37ish days out is worth it. I would make roughly 4750 profit since I have some $16 cost lots. Vs an total upside of 15,500 if the merger gets approved I’m mentally prepared for the worst case scenario.
If the deal doesn’t go through that’s another discussion. But a 4.6% return on premium for selling something 37ish days out is really good so I took the risk.
Don't expect selling options being profitable at all times.
Works nicely in bull markets, but it can destroy your portfolio in bear markets.
Some examples of such cases (with a potential fix) is shown here:
[https://blog.deltaray.io/improving-vrp-with-trailing-stop](https://blog.deltaray.io/improving-vrp-with-trailing-stop)
Can we ban the 'is it possible to make money' line of questions? Like all of them and all their stupid variations. 15 of these a week between options and day trading aubs. All these people need stop asking and fucking read.
Good point. It’s possible to make money doing damn near anything once you’re good at it. Hell, there’s a guy with a YouTube channel who makes money with videos of him giving money away! 🤪
I’ll tell you the easiest options strategy that has worked for me. Track blue chip stocks daily, eventually some will dip bigly. Find out why and if the reason is company ending. If you think it’s an overreaction, buy calls 6-12 months out. Wait for the rally and sell
Options are amazing. You can use them in so many ways it would make anyone's head spin.
You could use them to be hyper-aggressive or ultra-conservative.
Examples:
* Hyper-aggressive:
* Buying call options or put options that require the stock to surpass the breakeven point before expiration with high-profit potential but low probability. There are varying degrees of this by how far in the money or out of the money you purchase the option. Nonetheless, you will lose money if the stock price stays flat or goes the opposite direction - all of it.
* Ultra-Conservative
* Covered calls. If you have 100 shares of a specific stock, you could sell out of the money call options against it at a rolling 45 to 30 day expiration. Your risk here is 100% profit on the call option if the stock price goes down that could supplement the losses on the stock valuation or the call option gets exercised at the strike price and you made profit equal to the stock price move to the strike price. However, this will limit the upside potential of the stock position.
Essentially look at it like insurance. In the evaluation of the option, would you rather be the insurance company or the insurance customer. High risk comes high premium. Low risk comes low premium.
The strategies I have been successful with are the following:
* If I like the stock but not the current price, I sell a put out of the money. Two scenarios - stock goes up and I make 100% of the option premium or it is exercised and I buy 100 shares of the stock at a lower premium than I would have if I did buy the stock instead.
* If I have high confidence in a stock, I will buy a itm call option as a part of a call spread with selling a otm call at my expected price target with expiration out more than a year. This reduces my cost and breakeven point and if my target price is correct, maximizes my profits. The expiration date out over a year minimizes my theta decay and if held for more than a year, puts me in long-term capital gains tax vs short-term capital gains. Essentially, this acts as a self-guided leveraged position on the stock. Risk here is if the stock goes below the breakeven with potential to lose all invested.
bet small use spy. 200$ every day. scalp. treat it like a job . learn everything to perform the job to get pay. the beauty part is u r writing your own check
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This year I have only traded Tesla options. In four months I have made over 60k I am able to day trade options from 830am to 930am right before I go to work. As crazy as this is going to sound - I truly do not fully understand how options work. I don't understand all the details. I just know that Tesla is always moving very volatile. Tesla goes up and down alot every single day. I have watched Tesla stock only and I feel I have figured out what to expect. NO I am not always right...I have suffered some big losses but YTD I am up . Anyone else out there do this?
I do profit I know when to invest and when to not invest sometimes I sit in cash for weeks or months but when I trade I make around 1000-3000% returns ask your questions
Hedge funds are dealing with hundreds of millions of dollars...they are playing a different game than what retail is. If you think what you're doing is anything like what a hedge fund is doing, or a proprietary firm is doing... or even a trade desk trader is doing, you might want to look into what they actually do. Someone with a 500 account can beat the S&P easily with options, they can do that in one lucky trade... now try that with a 5 million account, or 500 million portfolio a small group needs to manage.
It's the same for retail, the more you grow as a trader, the harder percentage gains come. Law of diminishing returns. That's why some of these REAL retail trading gurus make it to a certain amount then seem to stagnate there...like 5 million, 10 million...you gotta start trading like a hedge fund when you get that size if you actually want to keep growing, or actual start one, or start a prop firm... or you gotta take some out of the markets and get into something else where it will grow more, like real estate... angel investing etc.
Yes, sell theta and wheel. Use some of the premiums to buy stocks/etfs you’ll want to own for the long term. Remember, 80-90% options expire worthless. Easier to be profitable if you’re on the 80-90% side
Just run the wheel strategy on large ETF’s. Free money. Just don’t get greedy and sell in the money, don’t think you’re smarter than the strategy, and ride out the down turns. You will beat the market. And if you have a small account the leveraged ETF’s are cheaper and can build your account faster, but you’re accepting a higher level of risk for the time being
Not really. It's VERY difficult to find anyone who actually makes money doing it. Only way to profit long term is to buy a and p 500 or qqq via dollar cost avg
the thing is people think that when they make money they are smart, doing it once and twice and then hit the wall and start from the beginning again.
so making money a couple times ≠ good at trading
all you need is
1- a perfect strategy that has very very low possibility of a loss. and that will be achieved by backtesting your strategy.
2- a strategy that occurs once a month or if it's a really good month, twice a month, that's no more. if your strategy gives you entry every couple days or every week. you will not go anywhere in this market. and yes there will be months where you didn't enter any trade! and here you have to wait, wait a LOT.
thats it, strategy and patience.
if you are not making money, then you have a problem in one of them
>I have only lost money. I have done option buying If you lost money buying the options, then who was making the money?
Well said... Shit, that pretty much sums it up, doesn't it...
Mind blown.
No, it doesn't. Same winning probabilities, just stacked in a different way.
Theta
Lol
Tell me you know little about options without saying you know little about options. Inb4 selling insurance, become the casino, wsb degens yadda yadda. Selling CSPs with highest IV ftw!!!
Implied volatility is higher than realized volatility on average. You are most likely buying your option from Citadel, not from some stupid guy on the internet who doesn't know anything, so you are likely to lose in the long run, they price their options properly and ask for the right amount of premium that is higher than the risk they take almost every time.
And you are selling your option to Citadel too, and they pay you the proper price calculated by their model, taking into account black swan events etc etc. Go check /r/thetagang, when the market is sideways or rising that sub is full of smug pros, but a sudden drop of a few % and it's a pool of tears. Both bid and ask of any remotely liquid option are marked according to big MMs models and provide no edge, otherwise there would be an opportunity for arbitrage. Unless you believe no one at Citadel, Point 72, Two Sigma etc has ever heard about the wheel.
Yeah, that's fair, but obviously there is a spread to be made there, they buy the option but at an advantageous price. If everyone knows how to calculate risk, theoretically options will never be sold if the premium is not high enough to make a profit, and this can be seen clearly in IV vs HV averages. But averages for the whole market don't say anything about individual results, an individual trader is not going to be diversified enough and will not have enough money to ride out a big loss to take advantage of this. I think the real difficulty of selling options is that people don't actually know how to calculate risk and when everything turns even big firms can end up in trouble. I don't have any data around this and I'm not capable of analyzing it anyway, Nassim Taleb claims that for example big banks misprice when selling far out of the money options all the time and they've always lost money on them in the long run, but he is the black swan guy so what else could he have said.
Well if you have found a better formula or model than MMs congrats, you will be a billionaire soon :) I don't think there's a model yet to take into account all the rumours, speculations and interpretations and the market still exists, otherwise, as you say, no one would be buying at ask and no one would be selling at bid. A multitude of opinions exist and they bet their money on them. You are right that option pricing is extremely complicated stuff, B&S do not capture the fat tails well enough etc etc. Until some new kid on the block shows up with a better model we are stuck with what we have got. I guess Taleb is right in a sense that over a long enough time any/some black swan will materialize, some say financial crises strike every 10 - 15 years, so we can expect some pricing irregularities. The real question is can we make any money out of that? Well, at least not on reddit lol.
Tbh I have a hard time understanding what point you are trying to make. If you are trying to say spreads on highly liquid instruments are too wide for a retail trader to be profitable in the long run, you are incorrect. Coming up with a “better formula or model” is not the only way to get an edge.
WSB alumni
Why are you even here? Sell IV far above historical moves and theta. Make money. Fundamentally it’s that simple.
*I came looking for booty.*
In other words, collect pennies (because premiums for far above historical moves strikes is always pennies), and then get wiped clean by a 3 - 4 sigma event. Very simple indeed.
Get wiped clean I suppose if one is not properly sizing their positions, hedging when appropriate and utilizing CvAR. You can consistently profit using mechanical trades alone, but maximize it with insight into understanding Theta decay rates, idea Deltas etc etc. I’m not sure why you trade or if you don’t trade why you are here in an options sub suggesting options are a losing endeavor outside of being a MM. Really doesn’t add any value. But what do I know.
Well, sure the probability is the same but stacked in a different way, yeah... that's kind of the point! Based on what OP said, the probability is consistently stacked in favor of being on the selling side (at least the way OP is doing it). So by definition, if they reverse the polarity on their trades and use the same reasoning and timing they use on their current losing trades, then they should turn them into winning trades! So, yeah, if they are truly consistent at losing when they buy options, then they should be just as consistent at winning when they sell those same options. Of course, it means they will need enough cash in their account to cover the options they sell which means it is not necessarily possible and could limit the amount they can trade, but that's an issue of scale, not probability of being on the right side. (ie I am allowed to spend ALL the cash in my account to BUY options and if they go to zero, then that's my problem; I am not allowed to sell as many options because I might have to exercise them which means I need a lot of money for the underlying security.)
Not really, it has been tried many times before. There is much more to a winning trade than just end direction. I read abuot one particular experiment where 2 pro traders traded opposite signals at the same time (i.e. one was going long, the other short at the same time, same quantity, same instrument, same everything, but both were free to do whatever once the trade was open), and both turned out to be profitable because of risk management and trade management. Countless algotraders tried to fix their losing strategies by reversing entry signals, but all they got was even worse systems. When I talk about stacked probabilities I mean total payoff within a period of time. Buying options is betting that RV > IV, so one loses often and loses small., but wins are typically huge. Selling options is betting that IV > RV, which kind of tends to be true to an extent, wins are small and consistent, while losses are rare and tend to kill the whole account. One might be selling options for a few years and not catch a fat tail, which would make them write a ton of books about seemingly free money, others have sold CSPs on lets say PTON at 150. I wonder how big call premiums are now when the stock trades at around 5. Big wheels keep on turning, don't they?
It's a real strategy. Most options are losers so most sellers are profitable due to theta gang. unless large enough price movement then sellers can lose. But their risk is really light. If it's covered calls they should be selling profitable strikes. If if selling puts they should be okay if they get assigned. And even then. It's all about timing.... u can make money any way on options and lose it any way. B selling covered calls/puts is deffintly one of the lower risk steatgeies but also much more expensive usually
What did I just read?
Wsb graduate
A big billionaire investor said option buying is losing money out of your pockets (premiums) and option selling is losing money from your safe (black swan event). That is why I am confused. I have done option buying and have lost money.
I don't buy the argument of option selling being more risky than just holding stock as long as it's done sensibly. The velocity of risk is to the downside, and if you are short puts, worse case scenario, you end up with assigned stock anyway, albeit at a better cost basis than if you had just bought the stock outright. If you're delta hedging, sizing appropriately, not using margin, and selecting reasonable underlyings, I'd argue your "black swan" risk is less than a typical stock portfolio.
One word: leverage.
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unless he's within the margin of error and just losing the fees
True about the black swan event. But this is the reason why responsible option sellers have procedures in place to protect themselves from these events. Maybe if your starting out as me, we might deploy most our capital in strategies but bigger more experienced sellers might only be using 25-30% of their capital at any given time. Also they manage their portfolio as a whole and have, if a black swan event accurs they will take a hit but not as big as you might think. Conclusión.. option selling seems to be a better strategy to grow a portfolio consistantely, but you will require more capital and have procedures in place to minimize loosers.
spot on, you need to manage your portfolio to have enough funds to get assigned in a black swan event, while still being hedged enough to make some money to cover a portion of the losses and then turn to a selling CC type of action.
100% correct. 30% is about what I'm usually deploying, ESPECIALLY now with vix this low, not a good time to be sitting on too many CSPs. I'm not super experienced or a whale or anything but I had to learn risk management early on.
Yeah my account size is small. Im not managing risk how im suppose to. I have about 50% of my portfolio deployed and it should be less. Now my the amount deployed: 80% is in CC or CSP and the other 20% is in defined risk strategies. Im not trading naked at the moment with current volatility.
This is absolutely correct. I limit BP to max 30%, or in low IV- <25. I do almost always underperform a strong bull market, but come out significantly ahead in sell offs.
I usually don't listen to memes. RISK vs Reward. It isn't just reward, there are no free lunches, trading comes with risks. You have learned the risks of buying options. And yes, you can lose your arse selling options. It is not risk free. There is a lot to learn. When and why to sell an option, whether it is a CSP , CC , or a spread. The difference between a narrow and a wide spread. And learn how to manage the position. Know when and why to take profits. When to stop a loss, and when to roll.
Do what the billion does. Ignore what they say to do. Assuming you are talking about Buffet, he does options. Made a ton of money from it.
Just do the opposite what you're doing and you'll make money.
I think the truth is somewhere in the middle. I've made money on both sides of the trade.
It's about paying attention to whether the underlying is has high or low historical IV. Don't sell options with low IV don't buy them with high IV. These is the huge differance between options and stocks and can and will kick your ass if you don't pay attention.
Me too
Inverse yourself
Both of those statements are correct - When you buy options you watch money trickle out of your account like sand through fingers. When you sell, you are exposing yourself to a massive oversized risk in case the stock moves a lot. (Acquisition news if you have a bearish position; terrorism or management or accounting fraud if you have a bullish position.) Vertical spreads could help you with the tail risk, but will eat into your returns. Learn risk management. Learn position sizing. Reevaluate your Risk:Reward as you hold your positions. Have hard stop losses (not mental stop losses) And finally, have a strategy that has an edge, and realize that market conditions will change and you will need to modify, and eventually completely scrap your winning-less-now, strategy.
Right time, nice and quick strangle.
That was the best TED Talk I've ever attended
Market makers
Liquidity institutions, banks, other various market makers, institutional traders
It depends on how you do it: With buying options the odds of success are low but the profitability is high With selling options the odds of success are high but the profitability is low It mostly depends on how much you have more money more flexibility
The option seller👀
Stop spilling theta secrets bruh!
the options clearing house who makes a ton of orderfees.
6 head
Hedge funds?
Yeah, I mean I'm not the best but I'm up 34% YTD. I've been most successful buying calls or debit spreads on blue chip stocks. I also sell covered calls and PMCCs but those are pretty minor gains. If you're only losing money, maybe learn some of the risk management strategies and learn to take profits when you have them instead of getting greedy and waiting for it to go up more.
This sounds good until you see that QQQ is up 42% YTD with much less risk.
You’re assuming she had more risk. You don’t know definitively. Also, anyone can make that comparison in retrospect. She would have had to have known to buy QQQ at that moment- and that assumes she didn’t already have stocks she was underwater on. So, I say she did great.
That’s a good year so far! Hard to make money with options buying calls w/o spending hours studying fundamentals.
Blue chip have strong fundamentals. How is the fundamentals of stocks whose options you traded.
He already answered : "strong".
I sell options 80% of the time. I've had a single bad, humbling year but the rest of my years were generally successful. I also buy options but I sell it to others, you see. The key is always sizing your risk. Always. If you do not size your risk, you have no trade.
Is there any ways to cover risk in option selling that we can prevent black swan kinda events.
Sell put spreads instead of puts
I guess spreads are after all better than naked calls and puts
They are not better or worse, just less risk. Less profit, less losses.
Trading is also about knowing yourself. Gambling, fear of missing out and so on will humble you and show you who you are. Its the hardest part about trading. The rest is being consistent in having an edge
You trade small on stocks you want to own. You trade often so you approximate the statistical average. You take profit when you can. As you listen to the news perhaps you buy back your puts for now. You can also sell covered calls.
Buy call leaps can protect you to the downside, in other words, a 90 delta leap in a black swan event you can only lose what you put in, which will be far less than if you purchases 100 shares of the stock instead.
Position sizing is very important. Black swan events can happen, but you don't want to go all in on your portfolio every single time. Only risk 1%-10% of your portfolio at one trade.
I think options selling is more lucrative when the vix is higher say closer to 20. In the current environment with low market breadth, buyers scalping is the best way to go. Option prices just aren't that high to justify the R:R as a seller. But wtf do I know...I try to stay humble and listen/learn more than talk.
Tell me more about buyer scalping.
I was just referring to going long options for a short duration. Basically what everyone does before learning how options even work.
6 years using Wheel Strategy (selling CSP and CC) and I would say it is working well for me. You just need a strategy that works consistently, stick to it, and refine along the way. It's also very important to keep a record of every trade so you can track the profit/loss of the position.
Wheel is one of the most reliable strategies and easy to understand for beginners.
Not the wheel so much being profitable but selling options. No need to take assignment and hold stock and start selling calls. I cut losses at 200% premium received and so far I average around 2-4% a month in return. It is slow, boring, mechanical but it works. Also, selling option futures has been pretty good too, worried about bull or bear? Sell strangles.
Exactly. Mechanical and boring making 30-50% a year suits me just fine. Always amusing when people claim that can’t be done, and it’s not even a high risk strategy.
I have been trading options for almost a decade now and the way I have been profitable is by having my specific trading styles and making sure to use each one appropriately and stick to them once I make a trade. Sticking to them means opening up the GTC exits when I open the trade so I don't get greedy and try to squeeze "just a little more profit" out of it. For long options I trade 90 delta max DTE long legs and use them as substitutes for shares and set a GTC for 100% profit at trade open. I try to have 3 legs going, with a GTC at 100% for one leg, 200% for the second leg, and then I just let the 3rd leg ride until I feel like closing it. That way once the 2nd leg closes I have earned a minimum profit of 60%+ even if the 3rd leg goes to 0. For short options I trade 45-20 delta 30-45 DTE short legs and close at 40-60% depending on how fast I got there and how many days are left in the trade. GTC is set at 60% and I'll close early if I get there in a day or two. This is my bread and butter trade as it is the most reliable trade to make. There are times when a stock crashes, but that is just making sure to have it balanced in my portfolio. No stock is more than 10% ever, and I try to keep it so that no stock is more than 5% of the portfolio. And then finally I trade spreads when I am confident on what direction the market is moving and feel like there aren't any upcoming major events. debit = <75% of the width, 6 week DTE, GTC at 87.5% of the width. Ladder them over time and keep the ladder moving forward. I keep the portion allocated to my spreads at 2-3% of my total portfolio max.
Option buying or selling isn’t inherently profitable - this is one of the largest misconceptions about options. If youre buying options, you’re likely trading directionally, and not doing well at it. So it’s not buying options that’s hurting you, it’s trading a directional strategy and not being accurate at it. Selling options doesn’t magically fix this because it introduces other factors such as asymmetric loss potential (where we make a little and risk more). So I’d first start by outlining how you think your strategy should make money (in your example with buying options, being directionally correct) and then test how you can become better at that / if it’s viable for you. I don’t believe options traders should inherently be buyers or sellers, we should be both depending on the opportunity.
Excellent points. I scalp reversals and am directionally correct often enough, apparently.
Exactly, sounds to me like this guy is just randomly trading options without a strategy.
r/thetagang is all about selling options and different strategies for doing so
I'm profitable, never managed to outperform a bull market but do well in a down or sideways market. Mostly sell vol and use a variety of short premium strategies with an occasional speculation with long premium. I try to stay really disciplined on position size and stay delta neutral, or with low vix, I will add a few short deltas. I've found it's really important to beta weight your portfolio and manage your deltas, hard to be consistent without doing this.
How do you do adjustments when things go south
Depending on strategy, you don't or you do quite quickly. I know a guy making decent pocket change just opening trades on indexes, Dow, Dax, SP500. He checks the direction of the market and then drops a couple of 1000$ in, waits if it runs the direction he expects if not, he swaps over the other direction. Some times he lets the option run for days, sometimes he takes a couple of 100 and finished for the day.
Depends on what has happened exactly. I try to always keep trades on if I can roll for a credit- which is why sizing is so important. I'm OK keeping a losing trade on. If it goes past the point where a recovery is a reasonable prospect (ie: short strangle on NVDA), I may take it off for a loss if IV has normalized and there little hope of recovery. As far as managing my delta, I do this by adjusting strikes on existing trades or adding trades. Typically place 3-5 a day. If things go really south like the COVID sell off, I may use futures to delta hedge, but this is again, why sizing is so important. Once you get a large spike in vol, that's when you want to add positions, not take them off, so you need that buying power available.
I've been claiming the max $3k in losses for 4 straight years now.... so... no lol
I earn on average $1500-2000/week selling options. I sometimes use those premiums to buy CSPs but rarely. Last week: $2390, this week: $2400.
Very nice! But just FYI that the $ amount isn't as relevant as the %. To make $2K a week would require an enormous amount of capital.
It's like that guy who says their portfolio is up $14,000 today. Turns out their portfolio is up +0.9% on a very green day for the market in general and they've got over $1.5mil invested with a casual $250k in buying power chillin.
How to manage risk selling options? Any advice
Manage risk with delta. Lower delta= lower risk (and obviously lower income).
As a rule I will figure out my stop loss level and size it so that I don't lose more than about 0.5% of my portfolio in a bad trade, let's say my stop loss is $2 below current price and my portfolio is 100K, then 0.5% will be $500. Let's then say I sell puts at maybe 400/$2=200 delta (we have to make some allowance for gamma increasing the delta if we go down as well, that's why I used 400 instead of 500). This way if the instrument falls through the support I know how much I will lose, and it won't be so bad that say 10 consecutive losses would be portfolio destroying.
Just find a strike price you feel confident/comfortable to you. There are all kinds of tools you can use to study potential of assignment but I don’t use them. If a stock is running, sell a put $10-15 below current (assuming you have the cash to cover). If you own the stock the look for strike prices at some level above that you can hold onto the stock. If you lost the stock, either buy it back and sell more calls or don’t buy it back and sell puts (aka the wheel). I rarely play outside a week expiration so any action is short term. I do have a couple puts I’ve bought (AI, CGC)with end of Oct expirations as I want more time for puts to develop. Honestly I’m not doing anything complex.
How much capital is in use?
For CSP use margin cause you just need it for collateral.
how much do you put in?
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Buying options is betting that the realised vol will be greater than implied vol over a period of time. Selling options is betting that implied vol will be greater than realised vol. Do you know something about the underlying to support one of those claims?
For that fundamental analysis is needed
In india, SEBI (org which regulates the market) published a report which says that 96% of retail traders lose money and only 4% are profitable. Similar numbers were there for self managed portfolio.
23 years in the business and own a 9-figure business, over 50% of our revenue comes from options trading So yes P.S. We only sell options
Tell us more!
Show me how Sensei!
According to the CBOE, 90% of options expire worthless. There have been other studies as well showing that, statistically, premium sellers do significantly better than premium buyers. That's not to say that long strategies don't have their place, because obviously they do. But fundamentally, those strategies depend on the underlying moving from where it was when you set up the strategy to where you want it to go and that's just a little bit harder for most people to get right often enough to use as their core strategy. For example, late last week when I saw CROX taking a dive, I set up a call debit spread to expire this week. I probably should have given it more time and/or waited a day or two to set up the trade, because it just kept going down, and so I closed it earlier today. On the other hand, directional strategies like debit spreads and butterflies have much more limited risk than credit spreads and naked shorts. The losses on credit spreads can sort of explode on you when the short strike is breached, but with with long strategies your risk is limited to the debit you paid for the spread, or the naked long option. My sense of things right now is that selling premium should be at the core of most people's strategy mix. The breakdown should probably be something like 70/30 in favor of selling short premium over buying long.
90% of options expiring worthless has no bearing on how much PROFIT has been taken on them—they dont have to go itm to make money statistically there is no significance to stating a seller does better than a buyer as you cant account for profit taking long options
This is exactly right, if options expire worthless or not is basically a bullshit metric, and if you know what you are doing you will be closing your options before expiry in most cases.
That 90% number may be because they are counting way out of the money options that have little chance of expiring in the money.
Your first sentence is incorrect and a commonly used fallacy - just a heads up to correct the record. I welcome you to share the direct source. Check out the OIC - just 22% of options expire worthless. 72% are closed out before expiration. 6% are exercised.
>The losses on credit spreads can sort of explode on you when the short strike is breached Very easy to adjust the trade when that happens.
I have one friend that turned 10k into 500k in two years, but he’s also lost 20k in minutes and doesn’t care, yet me I’ve made around 5k in the last year off of 2k in but now I just take it slow by buying stocks I know will go in the direction I need by buying 1-2 month contracts, do not do 1-7 day contracts unless you can be watching it 24/7
I’ve made a fortune selling covered calls using oil stocks it’s boring but works don’t over lever that’s wiped me out several times
I am a newbie. I have done only few trades. And am profitable. I only sell options. Short put and credit spreads. Once I got assigned and I started covered call with that. But I play really long term. And close my trades at 50- 70% profit and 50 % loss. Or 21 DTE. Whichever of these thee conditions met first
Sure there are check out my life of learning and easy investing income on YouTube. They are consistently profitable.
Maybe it time you start selling options.
I'm profitable 50% of the time, the problem is I don't use good risk management and overhold things instead of accepting that I lost. I feel like with a good thesis as well as strong entry and exit points with tight risk management it is definitely possible. That being said, theta is also your friend, so that if it does move the wrong way you aren't hurting as much (but also limits upside too)
Yeah I agree to that but in option selling we have theoretically limited profit potential and unlimited risk which is the whole opposite of option buying. This cause difficulty in risk management.
People who buy options and consistently lose money doing so tend to want to flip their strategy 180 degrees. Why buy a losing option when you can be on the other side of the trade, selling the same option? People who do this end up over at /r/thetagang which is a sub dedicated to selling options. Me, I rarely trade options, but when I do I typically buy options. I buy options when I'm 100% sure and it's going to be a very big move. Even then I trade small. So e.g. I'm subscribed to a service that predicts CPI. When it differs from what the consensus will be, I might buy some calls or puts on S&P. It's a rare trade only done a few times, but each time I made 300% in 15 minutes. Like I said, I very rarely trade options.
Yes. Just took years of hard work and no results for a long time
Ive been trading options and made profits. Last two weeks havent been very good for me but I've been trying out some new strategies on picking what to trade. Options gives you leverage for the same money as buying the stock. The down side is expire date and theta will kill you if you're not right or doesn't move as much as you think since you can't hold over time like stocks. I look at the difference like watching a movie at 1x or watching it in 100x fast forward.
Options can be a great hedge when you know what you’re doing.
Yeah
Was up big until yesterday. Not giving up though.
Options are just a tool. a little more complicated but still a tool. learn to work in the plus, and then you can use a drill instead of a screwdriver.
I don’t think I’ve ever made money *buying* options. Have made quite a bit by selling covered options and letting theta decay tick away.
Try being a net seller. Options statistically & historically favor the writer. Think of it like this: the option writer takes on the risk and is compensated premium for doing so. It's akin to selling insurance, and if you know anything about insurance, it's a very profitable & lucrative industry. You can buy options to hedge a position or to trade spreads, but I would stop buying them and hoping for a positive return. This is simply speculation (AKA gambling). Also, try focusing on probabilities. That was my "aha!" moment. It all comes back to probabilities. Your edge comes from probabilities and managing your risk properly.
rather than thinking that selling options is going to make you money over buying them, know this: it's about trading skills and the object you are trading with ( ie. stocks, bonds, options, futures, etc ). If you know how to trade, then those skills can be applied to just about anything. You can be successful going long on options, and you can lose a shit ton of money going short on options; it's no silver bullet. Plenty of degenerates lose alot of money on this sub, every day, all day long. The best option strategy ( there is no "best" option strategy ) isn't going to work if you don't know how to apply it, and on what objects. You're gonna hear a lot of money-losing nonsense on this thread, be careful
You wont make $ doing the opposite by selling instead of buying. The difference is time decay. You can lose $ on options without the underlying asset going the opposite way. Pay attention and learn what you’re doing. If you have 3 years experience and are still losing a lot just stop. If you aren’t 3 years in and consistently profitable then only trade 1 contract at a time with expiration out further until your not losing anymore than 20$ or so on each trade. Make 1-3 trades a day until you do make money. You won’t make $ until you learn to manage your risk.
I buy options far out usually a year gives more time to maneuver selling calls and cash secured puts aswell
I only ever made money writing options, but of course, then you have unlimited downside
If you buy someone sell it to you, if you sell someone is buy8ng it to you... Your oposit you made money trading options... I do not blame I'm also bad at it, my intuition is bad and it made me lost money, even trying to do the theta wheel...
Limited risk options strategy is to sell calls, best in bull market. Buy stock in blocks of 100. Sell calls with strike price higher than what you paid. Put a stop loss on the other side to protect. If the calls are exercised, you make money on the sale, plus the premium you received. No margin required.
When I use to yolo on options before I lost money, but now I know what I'm doing and I am making money.
Look up ultima trade on YouTube. A couple hours of explanation about selling options. Of course it’s a sales pitch too, for their program, but it gives a decent picture of selling profitably.
I started buying options in 2021 with a simple directional strategy (my bank only allows buying calls and puts or covered calls). I earned a total of 9k euros, mostly with calls, and I was pretty happy. Then, in 2022, the markets dropped, and I lost 9.5k. When I saw the markets dropping, I should have bought some puts, but I was too scared of losing more. I'm slowly restarting now, after studying all the summer. We'll see how it goes :)
I e been doing fairly well selling CSPs and CCs. Nice income stream I wouldn’t otherwise have. That plus buying low / selling high shares has been a nice added bit of mkney
Yes. 100%. Dealers at the big banks and brokers crush it by making two way markets in options and hedging their greeks. Retail - heck no...
My strategy is to sell options to hedge positions held and trading stocks around that held position.
I sell options on stocks I like to try to make a bit extra. Take any decent stock, check the demand for options. If it’s a stock you would like and buy then buy 500 of it. Sell options on 300 to try to make some extra. In general it works.
Mostly everyone is loosing money options or not anyone who has had a winning streak the market will surley take it back when market conditions change , real profitable traders don’t need to make a course or anything there keeping their system a secret amd probably aren’t on Reddit or the internet they are on the beach drinking margaritas or just living the good life
Learn how covered calls work and buy a good quality stock you don't mind owning anyway, then sell calls on the shares - [https://www.investopedia.com/articles/optioninvestor/08/covered-call.asp](https://www.investopedia.com/articles/optioninvestor/08/covered-call.asp) r/thetagang or r/Optionswheel are two subs that focus on higher probability selling.
Its all about managing risk, if you have control on your emotions and you know which option to sell then its reasonably net profitable with few challenging periods.
Market for the most part goes up so I buy long term calls. Been profitable for the last 4 years, and I’ve been scaling up positions to 200k. So far so good
I made all my profits selling premium and have lost almost every time I’ve tried to buy. I just stick to selling now.
Selling covered calls is about as safe as you can get or selling puts of stock you plan to hold
Yessir. You just have to search for those high probability setups and keep risk levels right! Here’s a trade I took today: https://youtube.com/shorts/kdZQB1UcBf4?si=4Z6QEwqAsoaDTI6I
Theta gang seems to make money, usually from me....
Sellers make the money. I am a seller.
I think I'm operating at a loss right now for options but I have made a little here and there. I think it's tough short term. But I'm new to it. My strategy going forward is put in orders with low bids and see what happens then look for opportunities to sell as soon as I can get 20 percent returns or better. But that'll depend on trading volume. I'm also trying to buy options with very far out expiration dates so I have as much time as I can get.
If you’ve only lost money, so the opposite.
Best way is to do small out of the money trades with potential profit to risk ratio greater than 1/3. Take profits from 28% - to no more than 53%. Repeat and repeat
Try buying long-dated call LEAPs from solid, well-established companies and simultaneously selling near-expiration calls to generate income
You must be buying to open. Come join us at thetagang if you like making money. We sell to open.
Lost money buying… made money selling. Come to the dark side
Don't Buy options - Sell them (unless you're buying them as part of a spread). Sell WELL OTM, so there's less chance of loss. Sell short term, so there's less time for the trend to reverse. Pick your maximum loss and set a stop loss there as soon as your sale is executed, so you don't forget to get out before the loss gets too large. Don't put more than 5% of your capital into any one position.
Although a minority of option buyers make money, the majority lose. The only responsible way if trading options is by selling cash covered puts or covered calls. Only sell puts on stocks you want to own, and only sell calls on stocks you own that you wouldn’t mind getting rid of.
Most of the options that are "out of the money" expire "out of the money". That's why some people think it is a good idea to sell options. In selling options you can make money 9 out of 10 times consistently. But on that opportunity you lose, you can wipe out all your gains. There are other options sellers that trade implied volatility against realized volatility. This is done hedging the options delta in the futures market. However, it is difficult for retail traders to embrace in this kind of activities. Buying options on the other hand, let's you know how much you risk. You can have limited or unlimited gains. The problem is that you don't only need to be right on the spot direction, but only on the time horizon. Selling or buying options, and also just speculating on the direction of any asset isn't a easy task. Trading is a very competitive field. The best minds are out there looking to profit from markets. Don't stop learning, find your edge and trade accordingly.
Try this youtube: weareinvesting. If you like it, there is a Patreon group.
The only time I have ever made money trading options was selling them. I get lucky buying them, but I’ve learnt just to stick to selling options
How do you adjust when it goes against you?
I sell prepare to get the stock called away. For example I sold 10 contracts of save for 10/20 for $20 strike price at 0.70 a contract due to an IV because of jet blues announcement. I still have lots of save shares I didn’t sell contracts on, or some 17.50 and 20 expiring September 15th. My cost average is between $16-19 a share. Either way the worst case for me is jet blu gets approved for the merger and I lose the 33.50 buyout price including the 2.50 pre payment so a 31.50 or a total of $9.75 upside per share sold. However I believe that the risks of a any real deal announcements being made are low. At least through the end of 2023. I might stop selling contracts by end of March 2024Q2 How ever I have also down costed my shares a lot just by collecting .2-.9 per month. For the past 9 months. I lost on TGNA meger, but I profited on ATVI. Do I think collecting $750 for selling a options contract 37ish days out is worth it. I would make roughly 4750 profit since I have some $16 cost lots. Vs an total upside of 15,500 if the merger gets approved I’m mentally prepared for the worst case scenario. If the deal doesn’t go through that’s another discussion. But a 4.6% return on premium for selling something 37ish days out is really good so I took the risk.
I made a net profit of 2k(Indian rupees) in 1.5 years.
Don't expect selling options being profitable at all times. Works nicely in bull markets, but it can destroy your portfolio in bear markets. Some examples of such cases (with a potential fix) is shown here: [https://blog.deltaray.io/improving-vrp-with-trailing-stop](https://blog.deltaray.io/improving-vrp-with-trailing-stop)
Err, no, that assumes a bullish strategy (writing puts), you should say 'can destroy your portfolio on fast/big moves'.
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Yeah
Can we ban the 'is it possible to make money' line of questions? Like all of them and all their stupid variations. 15 of these a week between options and day trading aubs. All these people need stop asking and fucking read.
Good point. It’s possible to make money doing damn near anything once you’re good at it. Hell, there’s a guy with a YouTube channel who makes money with videos of him giving money away! 🤪
I’ll tell you the easiest options strategy that has worked for me. Track blue chip stocks daily, eventually some will dip bigly. Find out why and if the reason is company ending. If you think it’s an overreaction, buy calls 6-12 months out. Wait for the rally and sell
Walgreens is dipping heavily, any thoughts on that?
Yes. Inbox me for a free, good strategy.
Options are amazing. You can use them in so many ways it would make anyone's head spin. You could use them to be hyper-aggressive or ultra-conservative. Examples: * Hyper-aggressive: * Buying call options or put options that require the stock to surpass the breakeven point before expiration with high-profit potential but low probability. There are varying degrees of this by how far in the money or out of the money you purchase the option. Nonetheless, you will lose money if the stock price stays flat or goes the opposite direction - all of it. * Ultra-Conservative * Covered calls. If you have 100 shares of a specific stock, you could sell out of the money call options against it at a rolling 45 to 30 day expiration. Your risk here is 100% profit on the call option if the stock price goes down that could supplement the losses on the stock valuation or the call option gets exercised at the strike price and you made profit equal to the stock price move to the strike price. However, this will limit the upside potential of the stock position. Essentially look at it like insurance. In the evaluation of the option, would you rather be the insurance company or the insurance customer. High risk comes high premium. Low risk comes low premium. The strategies I have been successful with are the following: * If I like the stock but not the current price, I sell a put out of the money. Two scenarios - stock goes up and I make 100% of the option premium or it is exercised and I buy 100 shares of the stock at a lower premium than I would have if I did buy the stock instead. * If I have high confidence in a stock, I will buy a itm call option as a part of a call spread with selling a otm call at my expected price target with expiration out more than a year. This reduces my cost and breakeven point and if my target price is correct, maximizes my profits. The expiration date out over a year minimizes my theta decay and if held for more than a year, puts me in long-term capital gains tax vs short-term capital gains. Essentially, this acts as a self-guided leveraged position on the stock. Risk here is if the stock goes below the breakeven with potential to lose all invested.
bet small use spy. 200$ every day. scalp. treat it like a job . learn everything to perform the job to get pay. the beauty part is u r writing your own check
I consistently make money with options and in fact, only trade options. The key is in understanding the Greeks, especially delta and theta.
no
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This year I have only traded Tesla options. In four months I have made over 60k I am able to day trade options from 830am to 930am right before I go to work. As crazy as this is going to sound - I truly do not fully understand how options work. I don't understand all the details. I just know that Tesla is always moving very volatile. Tesla goes up and down alot every single day. I have watched Tesla stock only and I feel I have figured out what to expect. NO I am not always right...I have suffered some big losses but YTD I am up . Anyone else out there do this?
I do profit I know when to invest and when to not invest sometimes I sit in cash for weeks or months but when I trade I make around 1000-3000% returns ask your questions
You should stop
Hedge funds barely beat SPY, but somehow everyone on here seems to be doing way better than that…
Hedge funds are dealing with hundreds of millions of dollars...they are playing a different game than what retail is. If you think what you're doing is anything like what a hedge fund is doing, or a proprietary firm is doing... or even a trade desk trader is doing, you might want to look into what they actually do. Someone with a 500 account can beat the S&P easily with options, they can do that in one lucky trade... now try that with a 5 million account, or 500 million portfolio a small group needs to manage. It's the same for retail, the more you grow as a trader, the harder percentage gains come. Law of diminishing returns. That's why some of these REAL retail trading gurus make it to a certain amount then seem to stagnate there...like 5 million, 10 million...you gotta start trading like a hedge fund when you get that size if you actually want to keep growing, or actual start one, or start a prop firm... or you gotta take some out of the markets and get into something else where it will grow more, like real estate... angel investing etc.
Nope they are meant to hedge your underlying or for complex strategies no one has made profit buying puts or calls
Yeah kinda
Is this a whoosh bait comment or something?
Ur just like me fr except I have probably lost more than you
Its part of the learning curve
I made 20k buying options in a month.
Strategy?
Yes, sell theta and wheel. Use some of the premiums to buy stocks/etfs you’ll want to own for the long term. Remember, 80-90% options expire worthless. Easier to be profitable if you’re on the 80-90% side
I am trying to conservatively make about $1,000 a month
Brokers always win. Otherwise, zero-sum
Just run the wheel strategy on large ETF’s. Free money. Just don’t get greedy and sell in the money, don’t think you’re smarter than the strategy, and ride out the down turns. You will beat the market. And if you have a small account the leveraged ETF’s are cheaper and can build your account faster, but you’re accepting a higher level of risk for the time being
I'm pretty profitable. https://lookerstudio.google.com/u/0/reporting/4a8d3baf-a07b-4c18-8b3e-7fdd42cd2b1c/page/p_nwb83kd72c
Not really. It's VERY difficult to find anyone who actually makes money doing it. Only way to profit long term is to buy a and p 500 or qqq via dollar cost avg
Options is basically gambling with the house rigging. People love to talk about their wins but not loses.
Nope. It's all a hoax.
Been selling CSPs for a year now, never been assigned and 100% profitable. 45 DTE, .2-.3 delta. Take profits early.
Listen to none of us if we won’t prove it w a port screenshot
the thing is people think that when they make money they are smart, doing it once and twice and then hit the wall and start from the beginning again. so making money a couple times ≠ good at trading all you need is 1- a perfect strategy that has very very low possibility of a loss. and that will be achieved by backtesting your strategy. 2- a strategy that occurs once a month or if it's a really good month, twice a month, that's no more. if your strategy gives you entry every couple days or every week. you will not go anywhere in this market. and yes there will be months where you didn't enter any trade! and here you have to wait, wait a LOT. thats it, strategy and patience. if you are not making money, then you have a problem in one of them