Video on Selling Deep out of the Money Options to Increase Odds

  1. Hi Michael,
    thanks again for your great guidance!
    My trading plan is based on selling options with a delta of 15 (-15) where I receive premiums between 400 and 600 USD on average. Would you say I should rather try selling a multiple number of options with a delta of 5 (-5) with a lower premium? (e.g. 4 of those options with a premium between 100 and 150 USD each). Do you have any experience or even backtests which would be more profitable in the long run?
    Thanks a lot and best regards,
    Thomas

    • Michael Gross Says:
      August 9, 2017 at 2:49 pm

      Thomas,

      Delta is only one factor we consider when selecting an option to sell (and not always the most important). That being said, while we tend to seek out slightly lower delta and/or slightly higher premium, your current plan sounds like it is on track.

      Best of luck in your trading.

      Regards,
      Michael

    • Chris Aubrecht Says:
      August 25, 2017 at 12:48 am

      Thomas,

      I have been selling futures options for several years and basically try to ensure my deltas are near yours (10-15). I would advise against going all the way to a 5 and selling multiples of those because you would likely be starting with too large of a position (in my opinion).

      Depending on the market, I generally write singles in my strangles, but for those with less of an ATR for volatility measurement, I may write 2 or even 3 (mostly with grains/meats). This has worked well for me.

      Then, rather than automatically jumping out at 2X premium, 3X premium, etc. you have some flexibility on rolling your more dangerous options out later in a multiple (ie. buy your 1 1300 GC call and sell 2 1330 calls, buy back your 1140 GC put and sell 1 or 2 1200s… you get the idea). If you start off at the beginning with 3 or 4 to a side, I’d highly recommend sticking to getting out at 2X premium because you’ve already got a lot of capital potentially tied up in the position.

      Also, I ensure always having 4-7 different markets expiring each month, preferably from at least 3 different sectors or more. It helps when you’re getting nervous about market X getting volatile when you have A, B, C, and D that are still wasting away nicely!

      OptionSellers is a GREAT resource and I have to say that Mr. Gross and Mr. Cordier really come across as trustworthy guys. I look forward to letting them control some of my nest egg while I continue to learn and have fun on my own as well!

      -Chris

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