(03-03-2015, 02:59 AM)daat99 Wrote: (02-27-2015, 02:21 PM)rapidacid Wrote: 3) I sell options on the following indexes: SPX, NDX, RUT. The last 3 months ( post October oil stuff ) have been pretty much printing money when selling something like an Iron Condor, which makes the most money when the price stays in a range.
Do you mind elaborating on this in the option strategies forum?
I tried something similar before with mixed (leaning towards bad) results.
I'm particularly interested in understanding how you pick your strikes and how much time you have between the trade and expiration.
I'll just reply here as its not too long.
I sell options on SPX, NDX and RUT because they're European style, which means they cannot be exercised early and I am in complete control of my post initiation strategy.
As you know, the delta of an option is a proxy for the percent chance the market is stating that strike will end up ITM. A delta of 1.00 means the option is already ITM, a delta of 0.1 means the market is stating there's only about a 10% chance the strike will end up ITM. A bit confusingly, when you read about options and delta you'll often see verbiage of "Delta 10", which actually means Delta 0.1, not Delta 10.00, which would be impossible.
For the most part, I sell my Iron Condors 6-8 weeks before expiration. So right now I'm selling April 15s. I do sell some 6m+ stuff as the premiums are huge, but mostly I keep it short.
I want super low risk when I sell these but still enough juice to get paid, so for an Iron Condor I look to sell the Delta 10 put and the Delta 10 call. By definition this means I'm usually buying something like a Delta 8 / 9 call / put. When analyzing the trade you usually see a profit zone that is quite wide, with about 77-80% chance of finishing completely worthless, which is exactly what I want ( ie. just collect the premium from selling )
As soon as I sell the IC, I immediately put in a GTC order to buy back the options for a smaller percentage of my sell price. For example, something like the RUT or SPX which recently has been a bit lethargic I'll immediately put in a GTC buy-to-close order of 50% or $0.50 if I sold the option for $1.00. For something like the NDX which has been a bit freaky lately I'll put the order in at ~66-70% of the value I sold it for.
This strategy takes a lot of the emotion out of the transaction. For the 6m+ stuff I'll sell at like 80% value as the premiums were much larger to begin with so the premium captured is usually more than the 6-8 week stuff even though I'm capturing a smaller percentage.
Paying attention to VIX is super important. You want to sell on the days when VIX spikes ( ie. on down days ). If the VIX spikes like 5%+ and you sell something, you may find your GTC buy-to-close order triggering within a week or so as the volatility juice decays. Easy money. Whole books are written just on that so I won't say more.
Looking at the deltas this morning I'd put on something like the SPX 2200 / 2205 / 1945 / 1940, but I'd wait until the VIX was way higher than right now as there's no juice available. By the time VIX ramps back up the deltas / strikes would probably change so its important to re-evaluate at all times.
![[Image: KrlQzZ8.png]](https://i.imgur.com/KrlQzZ8.png)