Selling Deep out of the Money Options to Drive Up Your Odds of Success

  1. Hong Chai Wong Says:
    January 21, 2018 at 5:03 am

    Presumably one will be selling call or put options at Delta of 0.1 to 0.2 at 90 days to expiration to get a credit. Then buying them back at 30 days to expiration. Do you use credit spreads like in stock options? What is the typical profit one makes – percentage of initial credit

    • Michael Gross Says:
      January 22, 2018 at 3:43 pm

      Hong,

      I’d advise going out longer than 90 days in most cases. Yes, we do advise the use of credit spreads in the right situations. In our portfolios, ROI targets per trade typically run in the 30-50% range but can go higher, depending on volatility. (Risk involved of course)

      Regards,
      Michael

  2. Mike, selling deep out of the money 90 -120 days apply as well to individual stocks as well?
    Ron Dvorak

    • Michael Gross Says:
      January 22, 2018 at 3:40 pm

      Hello Ron,

      It can. However, commodities options offer some advantages not available in stocks. You may have some issues finding enough open interest going that far out in stocks. It really will depend on the stock.

      Regards,
      Michael

  3. Well done — a simple, but very important concept if one wants low(er) stress, long term success as a futures options seller.

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