Which option strategy to apply for this market outlook?

[Felipe]

Wow! Blowing my mind here. No wonder ive almost blown my account. Dunno if that's a good thing though as everyone seems to have done it before.

Any of you guys from Perth? I am extremely interested in getting to learn more in the options world.

I work away, 3 weeks at a time even roster. But commit every waking moment at home...and work haha learning about options trading. I am certainly drinking from the cool aid. I just can't grip a string of wins...

BUT, if you do the exact opposite i have done the last 7 months, your gonna do great

Have you guys seriously learnt to be so good all on your own? I done a course (I can feel the eyes rolling) it was with options21. A continued mentoring, hour a week.

But i just can't get it right. Drop me a line guys, I'm looking for a solid network to learn from, my account is still. ...kinda healthy....21k.....down from 76k...I know. Idiot!

I started a thread "help im running out of options", have a flick through it. Finding this thread here feels like there are some good traders here. ...

Hope you find the time to help out.

Regards

Felipe

 

[minwa]

Hmmm...with due respect minwa, mentioning tasty trade with your exalted list of spruikers is a drawing a long bow, is it not?? None of them trade or teach to trade like tastytrade. None of them are transparent like tastytrade. For starters tastytrade is not asking anyone for a penny for whatever they are doing for their viewers. Unless I get evidence to the contrary, I consider them to have that rare in trading world commodity "integrity"

http://www.valuewalk.com/2016/06/karen-bruton-super-trader/
https://www.thestreet.com/story/135...ing-strategy-relied-on-fraud-sec-alleges.html
http://www.tennessean.com/story/new...hemed-gain-millions-ill-gotten-fees/85211006/
https://www.sec.gov/litigation/complaints/2016/comp-pr2016-98.pdf

Turns out Karen (Tastytrade's heavily promoted guest) did not make any profit since 2014, just been rolling positions and reporting realized trades only - leaving out unrealized open losses (which must be very big with short options). Again, this calls to question the credibility of Tastytrade..they really should have done their research/verify Karen's performance before having her on and "teach".

I suspect they knew about it..at least Tom did but still had her on anyway, because having a hero(ine) retail trader that retail traders can relate to just encourages their audience - their targeted customers for their brokerage firm - to sell options.

 

[Sakti]

From what I can gather from her interviews, Karen's strategy mainly consists of selling 2 SD naked puts and selling 1 SD naked calls and closer DTE at smaller ratio. It's no surprise that her strategy has been successful since 2009 as it's been a huge bull market, until it's faced with huge drawdowns. Assuming the same strategy, her portfolio would've got hammered August 2015 and Jan 2016, as she apparently does not beta weight her portfolio.
This is a good wakeup call for naked options sellers out there.

My question is, what would be the 'best defense' (assuming there is such a thing), for these situations.
As she doesn't carry enough deltas on the call side, would shorting futures help minimize the loss and in effect prevent the blowout? I just believe that managing a losing position is vital for naked out there, so it would be great to get some advise from experienced options traders in this forum.

Cheers!

 

[hamli]

From what I can gather from her interviews, Karen's strategy mainly consists of selling 2 SD naked puts and selling 1 SD naked calls and closer DTE at smaller ratio. It's no surprise that her strategy has been successful since 2009 as it's been a huge bull market, until it's faced with huge drawdowns. Assuming the same strategy, her portfolio would've got hammered August 2015 and Jan 2016, as she apparently does not beta weight her portfolio.
This is a good wakeup call for naked options sellers out there.

My question is, what would be the 'best defense' (assuming there is such a thing), for these situations.
As she doesn't carry enough deltas on the call side, would shorting futures help minimize the loss and in effect prevent the blowout? I just believe that managing a losing position is vital for naked out there, so it would be great to get some advise from experienced options traders in this forum.

Cheers!

What has worked for me is trading different asset classes. When markets go down big, stocks become more correlated and tend to move down as well - so diversification across different companies/countries doesn't really protect you that well in these black swan evens. I invest across equities, cash market, metals, agriculture, currency.

Also keep your positions small when VIX is low. And scale in when VIX is high. Not much else you can do.

Currently, I'm investing time into learning more about other strategies (tech analysis to improve intra-day trading) and products. I think its important to be flexible with strategy/product to suit market conditions... each thrive under different conditions.

 

[minwa]

hint: be alert at end of July to first week of Nov

Spikes at first week of Nov this year.

 

[OmegaTrader]

View attachment 68719

Spikes at first week of Nov this year.

What I am thinking

What do you think of a straddle

Or

Cash and call strategy


coming up soon???












I know ETO spread is quite high for longer contracts+ brokerage+there is no volume except market makers on the long term contracts.

But you are on the exchange not OTC if that counts for anything.


Historical Volatility around 12-13% seems reasonable.

Now it is 11.3% quite low in historical terms.


Rates are low 1.5%, maybe a bit lower but already down there

Dividends are dividends, On the one hand if downward price then dividend yield increases, but companies may suffer, so neither here nor there as in straddle this should counteract by call and put.

But if downward movement hopefully IV will spike....


Alternatively go for a yearly contract and cash and call.

Cash and call well you hope dividends to be lower than expected.

Fixed rate at about 2.8% , call is around 5-6% of asset price.

eg if xjo=5000,

Yearly call may be equivalent of 250-300 points cost

=5-6%


So for 2.2-3.2% you get pure price speculation with asymmetry.

Asymmetry helps you sleep with no extra losses,

But there is no dividends or taxation advantages,

But retail cash rate is above risk free rate used in most option calculations, normally....

and you are buying at a relatively good implied probability.



In the end I am hoping that either implied volatility spikes back up or actual volatility for the year is more than 10-11%

Or

That cash and call is superior, because retail cash rate is higher and calls are cheap because of low implied volatility


I think time to pull the trigger at around 10-11%.

Toying with it ....