This video covers why I prefer option premium selling strategies. This video is brought to you by http://www.success-with-options.com
Comments
Is that MattRach 2007 as the intro song?
Just something important to note is the relative implied volatility. When Implied volatility is in the upper end of the rang it is better to sell premium because you will profit off of the Implied Volatility contraction.
I like Option strategies that sell options also. Iron condors or variations are a favorite. Yes, TOS is a great broker and they provide you with streaming real time data and great analysis tools.
@Zdogs22 I do explain this in a couple of different locations. Have a look at the vertical spread video that is also hosted on YouTube. I can't put the link here but go to my website (link shown above) and locate this video in the right column of any page. Also, look at the text description under options strategies.
@successwithoptions Can you explain more how buying a farther out of the money call can protect me, or is this explain on your site? I just want to better understand how I can avoid being called on shares of stock I don't own when I am engaging in spreads. Thanks!!
@cooksecurities I think you decision may come down to frequency of trading. If you've read the reviews on my website, you will note that even today, OptionsXpress doesn't provide a convenient tool (even with Xtend) for quickly setting up more complex options trades such as vertical spreads, calendar spreads and iron condors. While better than before, still doesn't rival the tos desktop platform (in my opinion).
@Zdogs22 You're right, you have a couple of choices here. First, you can buy your call back at any time (probably for a bit of a loss). Second, you can allow yourself to be assigned, which for a short call means you would need to sell someone 100 shares. Third, you can protect your risk by buying a farther out of the money call to create a call spread. See the website for a discussion of my favorite premium selling strategies.
So I have a question. How does it work if you sell an option (say a call) and then the stock price rises above the strike? Are you obligated to buy the shares or can you buy out of the call that you sold so you dont get assigned and dont have to buy the shares. Thanks!
@cooksecurities I trade with thinkorswim. Back when I opened my account, they were offering a pretty good deal. I don't know if that rate still applies or not.
I pay $1.50/contract. So a 1 contract iron is $6 and I take in $80-90 typically. That's roughly 7% of the credit I have to give back for commission. It's all about probabilities and return on investment. Naked calls & puts are ok but tie up too much capital in margin. By the way, I'm not against any premium selling strategy as they all usually move the probabilities to the seller. Thanks for the comments.
to many fees with iron condors, strangels...just sell put or call....set your risk management rules (=risk tolerance) before entering the position and stick to it. i don´t kill a fat proceeds with spread strategies