Anyone here trade options?

[utrecht]

Wow. I don't even know how to respond to that. Your friend sounds like a complete and utter fool, but at least he has a cool story to tell his grandkids.

[ERD50]

Quote:

Originally Posted by utrecht Wow. I don't even know how to respond to that. Your friend sounds like a complete and utter fool, but at least he has a cool story to tell his grandkids.

Yes, not monitoring an account while on a high % of margin is pretty crazy.

Sorry, I didn't mean to distract from your posts with option war-stories. Options and margins are tools. Tools can be used correctly or carelessly.

I've also occasionally bought a relatively small amount of deep ITM calls when I felt like speculating on an issue. It's much the same as using margin, the premium effectively replaces the borrowing cost. Premiums on deep ITM calls are pretty low, and your max loss is defined. A deep ITM call will move in-sync with the underlying issue (minus the premium), and you just pay a %, plus that small premium. This allows one to speculate in an IRA, where you can't do margin. Obviously, this is dangerous on a large scale, but if you want to play with a small amount w/o liquidating something else, it is an option (no pun intended).

-ERD50

[1st Tee]

Quote:

Originally Posted by utrecht I'll be opening a new batch of trades early next week. I'll paper trade the calls on the high side of the bracket just to see how they react compared to the puts.

Are you still trading, positioning for the downside?

I'm just protecting my capital, waiting for this to play out.
Never been good at trying to catch a falling knife.

[utrecht]

Yes, still trading.

[Micho5]

I have just read through this whole a bit older thread, utrecht thanks for all the valuable information written in it. Are you still selling your mechanical weekly puts on SPY? How has it been going for you in the past 4 years?

Actually there was recently a paper made by prof. Bondarenko that analyzes and compares the strategies of selling monthly puts on SPY (index ticker PUT) and weekly puts on SPY (index ticker WPUT). Here is the paper itself: http://www.cboe.com/micro/buywrite/put-oleg.pdf

And here is an article that summarizes the findings of the paper: https://www.indexologyblog.com/2016/...-wput-indexes/

Long story short, simple B&H of SPY had the best longterm return (but only due to the bullish past few years!) but selling monthly puts had the highest sharpe ratio, followed by selling weekly puts and B&H of SPY had the lowest sharpe ratio of these 3. So actually it seems that utrechts strategy of B&H and using margin for selling extra puts is a pretty clever strategy to get some additional profit (of course for higher risk, but as the risk adjusted return of PUT and WPUT has been better than B&H of SPY one should be better off doing this strategy than not doing it). Also trading costs probably change a bit the expected returns of this strategy.

In the graph that charts selling weekly puts it seems that past 2 years didnt actually bring in any profit and the strategy would be breakeven - how have you been holding up?