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After a very lucrative exit I was looking at options chains and saw that I could make six figures every month, selling monthly expiring options that were far OT

After a very lucrative exit I was looking at options chains and saw that I could make six figures every month, selling monthly expiring options that were far OTM enough to make me feel like I wasn't crazy. However, even then, it's not even close to being my best option because the tail risk, however small, is there — and when things come down to the wire I'm going to get ulcers, win or lose. Albeit, if you actually do want to sell or buy at market price (and are patient about it), you can use option premiums to get just a little bit more money for something you were already going to do (the goal being to get assigned, on purpose).

f430 6y ago
let me take a guess you can tell me if I'm warm or cold. assuming you risk 10% on your broker's account with 90% tied up in fixed income or t-bills or stocks. assuming you stand to make 100,000 USD per month selling far OTM options presumably on indices or blue chips. you are worth $10 million and above.
- arolihas 6y ago
  If he’s feeling that much stress he’s probably risking more than just 10%.
  - sombremesa 6y ago
    That's right! It'd be more like 50% (of my N.W.) risked. Haven't had time or motivation to move assets anywhere so 90% of my money is in taxable brokerage.
    - f430 6y ago
      wait so you keep most of your money on something like Interactive Brokers??? I guess when they give you better rates than any retail banks this makes sense.... but I'd feel nervous even with 2FA.
      - sombremesa 6y ago
        It's not actually money, it's securities. I use Schwab. With cash, I prefer to put it in Marcus, but their rates have really gone down so much I need to look into private banking.
- deleted 6y ago
  [deleted]
esoterica 6y ago
> After a very lucrative exit I was looking at options chains and saw that I could make six figures every month, selling monthly expiring options that were far OTM enough to make me feel like I wasn't crazy. That's the classic picking up pennies in front of a steamroller trade. You'll make $100k a month for a few years and then one day you will lose $10m in a single day.
zelly 6y ago
Selling covered calls is a widely used strategy, especially when the underlying doesn't give dividends. There's nothing wrong with it. As for the tail risk, that's what buying options is for. Look at the rest of the options chain and use your imagination.
- sombremesa 6y ago
  That's true — there are ways to cap the loss. I haven't played around with this market enough to have good intuition about that sort of thing, but maybe I'll use the simulator in the ToS platform to see how I'd do.

f430 6y ago

let me take a guess you can tell me if I'm warm or cold. assuming you risk 10% on your broker's account with 90% tied up in fixed income or t-bills or stocks. assuming you stand to make 100,000 USD per month selling far OTM options presumably on indices or blue chips. you are worth $10 million and above.

arolihas 6y ago
If he’s feeling that much stress he’s probably risking more than just 10%.
- sombremesa 6y ago
  That's right! It'd be more like 50% (of my N.W.) risked. Haven't had time or motivation to move assets anywhere so 90% of my money is in taxable brokerage.
  - f430 6y ago
    wait so you keep most of your money on something like Interactive Brokers??? I guess when they give you better rates than any retail banks this makes sense.... but I'd feel nervous even with 2FA.
    - sombremesa 6y ago
      It's not actually money, it's securities. I use Schwab. With cash, I prefer to put it in Marcus, but their rates have really gone down so much I need to look into private banking.
deleted 6y ago
[deleted]

esoterica 6y ago

> After a very lucrative exit I was looking at options chains and saw that I could make six figures every month, selling monthly expiring options that were far OTM enough to make me feel like I wasn't crazy. That's the classic picking up pennies in front of a steamroller trade. You'll make $100k a month for a few years and then one day you will lose $10m in a single day.

zelly 6y ago

Selling covered calls is a widely used strategy, especially when the underlying doesn't give dividends. There's nothing wrong with it. As for the tail risk, that's what buying options is for. Look at the rest of the options chain and use your imagination.

sombremesa 6y ago
That's true — there are ways to cap the loss. I haven't played around with this market enough to have good intuition about that sort of thing, but maybe I'll use the simulator in the ToS platform to see how I'd do.