Quote:
Originally Posted by robertmark
The problem with Amzn, tesla, nflx, particularly with straddles, even strangles, is that you can easily get your face ripped off. However, selling a five lot atm put in ED, or Pfe, can easily net you $1.00 per contract, or $500.00 Is it a lot of premium, no, but, if you can create 3-5% per month, that annualizes out pretty good. It's a better bet than the financial planner who puts you into products that make him $$$$$$$$$ even though you lose your A$$.
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Robert, I was an options floor market maker for 20 plus years, I made markets off floor in currency derivatives for years too, trust me I get it. I don't use a financial planner for anything related to the US equity markets.
Looking at your strategy, lets use 4% return to represent your 3 to 5% per month. 4% per month times 12 months is 48% return. Lets be realistic, no one is making 48% return selling premium. If I look at your call on PFE and I look at the 1 month option which expires on March 1st. The at the money put, stocks at 42.5 so the 42.5 put, the closing bid was .69 cents, so you can't even sell a 1 month put for a buck, in fact its barely over 2/3rds of a buck. Statistically speaking you're going to get assigned 50% of the time on that put (at the money .5 delta) So you're not even going to collect your 69 cents half the time. ED was a little better, you could have sold the 1 month at the money put for a buck. Then again its a higher priced stock so that bucks not a great a return.
I haven't done the math but I would say statistically you're going to get your face ripped off more often selling the at the money PFE 1 month put then you are selling 1 AMZN pre earnings 1 day straddle. Do that 4 times a year. The straddle at 85 bucks implies a 5% move either way, anything less and you win.
The biggest difference is the numbers are so much smaller on PFE and ED it wont feel like you're getting your faec ripped off when you're wrong. The percentages will tell a different story.
Either way you're going to end up owning a truck load of those stocks trying to sell puts for a buck.
I am not knocking you, its just that having so many years experience, I've had the chance to do the math a few more times then most people.