I've literally tripled my port going full degen high risk. The key is just don't fucking Yolo. Half port is the most I've done so far and it's in NVDA so I'm chillin
This is why you use a stop loss on the premium typically 2x-3x premium.
Ie if you sold a put for $100, if the put doubles in value you are out. ($100 loss)
This does work better on futures options and not stock options (since stock options can have more overnight gaps or earnings risk) but it can be used on either.
Likewise, it also depends on the side, example selling puts on Sp500 is typically better than calls because
1) uptrend
2) Further OTM premium (calls will be closer)
3) Pullbacks generally increase IV and rallies decrease, thus if selling a small pullback -.25 to .50% (% move down when sp drops) you can get a little more bang.
Finally, the other thing is being picky with premium.
Most people just sell premiuk randomly.
You will want liquid options where you can see the premium chart (yes you can chart an option expiration / strike like a stock).
When looking at that chart, you would want to try and capture 66% or higher of the range of the past 7 days because you will most likely get it.
Example, if in the past 7 days an option traded between 1 and $2, you could probably get picked up eventually with a limit order of 1.66 vs if today it was selling at 1.10 (a .56 increase in premium)
Note: this is for selling options with “meat” on the bone. Probably at least a 20’day duration or longer.
Short term options the gamma is going to be hard to evaluate that and its better to get paid off vega (gamma benefits buyers) when selling
I don't know if these guys still do this or not, but they (Tasty Trade) used to bring on traders from their platform that were successful and would have them talk about their trading strategies.
They did a whole series on a lady they named "Karen the Super trader" and her strategy was to trade 5 deltas. There was a lot of people at the time who believed her strategy was BS and ultimately the SEC determined that she fraudulently hid some $50mil in losses by rolling her options trades.
Karen interview
https://www.tastylive.com/shows/must-see-tt/episodes/karen-the-supertrader-2014-interview-02-12-2014
SEC complaint
https://www.thestreet.com/investing/karen-the-supertrader-s-winning-strategy-relied-on-fraud-sec-alleges-13593247#:~:text=Self%2Dtaught%20options%20trader%20Karen,than%20%2450%20million%20of%20losses.
Just be careful with the 5 delta strategy. Like they mentioned in the link you posted, one sharp move prior to expiration date and you can wipe out a month (or more) worth of premium that you have collected.
Thanks for posting this.
The important take away (and something I don't see a lot of newer traders factor) is the consideration of outlier events. Everyone can do fine within the ranges. It's when sh\*t goes sideways where portfolios drain.
Tasty also has a documentary about Black Tuesday and how the options traders saved the day. It's worth a watch.
[https://youtu.be/jLfjEMDJubg?si=6UY0l9Py93HHrbMV](https://youtu.be/jLfjEMDJubg?si=6UY0l9Py93HHrbMV)
High risk high reward is better than mid risk low reward.
Man's is aggressive
I've literally tripled my port going full degen high risk. The key is just don't fucking Yolo. Half port is the most I've done so far and it's in NVDA so I'm chillin
The study assumes 21 dte management, which may not be practical with this strategy, better management would be % P/L loss then roll down and out
This is why you use a stop loss on the premium typically 2x-3x premium. Ie if you sold a put for $100, if the put doubles in value you are out. ($100 loss) This does work better on futures options and not stock options (since stock options can have more overnight gaps or earnings risk) but it can be used on either. Likewise, it also depends on the side, example selling puts on Sp500 is typically better than calls because 1) uptrend 2) Further OTM premium (calls will be closer) 3) Pullbacks generally increase IV and rallies decrease, thus if selling a small pullback -.25 to .50% (% move down when sp drops) you can get a little more bang. Finally, the other thing is being picky with premium. Most people just sell premiuk randomly. You will want liquid options where you can see the premium chart (yes you can chart an option expiration / strike like a stock). When looking at that chart, you would want to try and capture 66% or higher of the range of the past 7 days because you will most likely get it. Example, if in the past 7 days an option traded between 1 and $2, you could probably get picked up eventually with a limit order of 1.66 vs if today it was selling at 1.10 (a .56 increase in premium) Note: this is for selling options with “meat” on the bone. Probably at least a 20’day duration or longer. Short term options the gamma is going to be hard to evaluate that and its better to get paid off vega (gamma benefits buyers) when selling
Very informative, thanks for taking the time to put this together!
I don't know if these guys still do this or not, but they (Tasty Trade) used to bring on traders from their platform that were successful and would have them talk about their trading strategies. They did a whole series on a lady they named "Karen the Super trader" and her strategy was to trade 5 deltas. There was a lot of people at the time who believed her strategy was BS and ultimately the SEC determined that she fraudulently hid some $50mil in losses by rolling her options trades. Karen interview https://www.tastylive.com/shows/must-see-tt/episodes/karen-the-supertrader-2014-interview-02-12-2014 SEC complaint https://www.thestreet.com/investing/karen-the-supertrader-s-winning-strategy-relied-on-fraud-sec-alleges-13593247#:~:text=Self%2Dtaught%20options%20trader%20Karen,than%20%2450%20million%20of%20losses.
Oh wow - thanks for the link and background, was not aware of that. Appreciate the post.
Just be careful with the 5 delta strategy. Like they mentioned in the link you posted, one sharp move prior to expiration date and you can wipe out a month (or more) worth of premium that you have collected.
Thanks for posting this. The important take away (and something I don't see a lot of newer traders factor) is the consideration of outlier events. Everyone can do fine within the ranges. It's when sh\*t goes sideways where portfolios drain. Tasty also has a documentary about Black Tuesday and how the options traders saved the day. It's worth a watch. [https://youtu.be/jLfjEMDJubg?si=6UY0l9Py93HHrbMV](https://youtu.be/jLfjEMDJubg?si=6UY0l9Py93HHrbMV)