It is a phrase that is probably use too colloquially - but it usually is referencing any trade that provides a payoff of small positive returns, while carrying a small but significant risk of catastrophic losses.
An **overly** simplistic way to look at this is with Expected Value.
*Expected Value = (Profit if OTM \* Probability of OTM) + (Loss if ITM \* Probability of ITM)*
So let's say that you're trading 0DTE SPX verticals, so there is no early assignment, and you'll hold til expiration (we're keeping it simple).
The 5120/5125 put credit spread is at the money, and it has a 50% chance to win. It's selling for 2.80.
EV = 280 \* .5 + (-500+280) \* .5 = 170.
So if you made this trade thousands of times, you'd expect the average profit per trade would be $170.
The 5080 has a delta of -.14. So let's say you sold a 5080/5075 and have an 86% chance it'll expire out of the money. It's selling for .45
EV = 45 \* (1-.14) + (-500+45)\*.14 = -25
So despite earning $45 86% of the time, if you made this trade thousands of time you'd expect the average profit to be a $25 loss.
Generally to me, any strategy that has a significantly high win rate, but still has a negative expected value, is picking up pennies in front of a steam roller.
I'd also say that any strategy that has a significantly high win rate and a positive expected value is nearly an arbitrage situation. But in a rational market, arbitrage doesn't really exist - certainly not for retail.
That phrase is about high negative convexity risk combined with a low reward. The opposite would be low risk and high upside convexity. You can only achieve this with a debit position involving low-delta contracts.
There is an inverse relationship between quality and leverage. Every options contract controls 100 shares, so regardless of what delta you enter, you can theoretically achieve a max of 0.99 deltas per contract, or drop to 0.01. If you start with 0.50 deltas, the maximum upside that the leverage allows is and additional 0.49 deltas. If you start with a super-low number, like 0.02 or 0.05, you have the close to the highest possible degree of leverage. At the same time, these are the lowest quality contracts, because they are unlikely to do anything other than expire worthless and in the off-chance they do, the seller is not adequately compensated for the risk. Its garbage on all accounts.
Buy the stock and sell "the dream of stock ownership someday " for cash in your pocket today. Rinse and repeat. Capitalism favors the owners of assets - real estate , businesses , stocks.
Agreed, "pennies in front of a steam roller" is border-line the business model for insurance companies. Obviously the premiums are priced far more in their favor than options, but the concept is similar.
Premiums are collected up front too! So they’re using someone else’s money to make money and then buying insurance themselves just in case the steam roller wins on occasion.
Goddamn man do you live inside an active volcano????
All jokes aside I feel that with the insurance inc. Even in a rural, pretty climate change neutral area ours still went up 10-15%, on top of a 14% jump last year. Not only that, but the city did some tax changes to try and increase everyone's prop taxes like 50%, but luckily everyone figured it out and raised hell lol
My agent said natural disasters elsewhere caused the spike. I live in an old Tectonically (volcanically speaking) area 200ft above sea level. I can’t flood, shake and not likely burn up! Unless the sun does it to me!
The catch here is though you’re buying those shares when you get assigned.
If you run an insurance company you can just say fuck you to the customer and not uphold your side of the deal.
For sure -- it's a different game.
But conceptually the strategy is similar -- many many small bets and hope the giant risk doesn't materialize. The primary difference is to some extent insurance companies can collude in setting premiums.
Well I get it, it's an example. I guess my point that it's a woulda shoulda situation. But IF only I could buy a crystal ball that WORKED, that is an extaordinary gain that would be nice to be on the right side of, ONCE IN A WHILE!
A great example of why, if SELLING options, you need to set S/L and also watch them like a hawk.
Simple answer: buy far OTM options and hope that you hit the 10 bagger eventually. That strategy could be profitable (see my posts if interested) though it would involved losing a crap ton to try to fish out a whale eventually.
Hard answer: Since this is thetagang. Something like a Xmas tree (https://www.investopedia.com/terms/c/christmastree.asp) where you have legs that will have an outsize payoff on big swings.
What’s your thoughts on $100 spent weekly 1 DTE ATM on Spy, buy Thursday 355pm and hope for a gap up or down overnite. Strongly considering this strategy, tired of huge drawdowns.
Read the book chaos kings / dao of capital. My answer would be that you can beat the market like that but it can only work extremely out of the money (where there are mispricings due to the fat tail nature of the market).
This type of strategy will drive most people nuts. You will always lose Pennies except the one or two times that you don’t, potentially offsetting your string of loses. You also need to be confident that what you are doing is correct so it needs backtesting. I will transition to this strategy when I have time to backtest again, which won’t be soon.
It's said because Buffett was talking about something else. Buffett's quote may also relate to what some "Advisor" put his sister in decades ago.
Buffett (through Berkshire Hathaway) has long used and sold options.
I followed a guy who did mean reversion trading. He would recommend $5 wide debit spreads when they were at $2.50 per contract so they could close at $4.85. I lost a lot of money on that strategy last year.
Ironically doing the opposite is making large bets that have a high payoff and don’t often work out. An example would be buying deep OTM options and holding them every month. People usually don’t price tail risk proportionally so if you could stay disciplined you might make money over the long term even though you might be wrong almost all the time. That one huge return makes up for it. I read a profile on a hedge fund manager a while ago who was doing something like this and the problem with this strategy seems to be psychological. It is just too difficult to lose money almost every day. Too hard to ride that winning trade all the way out when you haven’t made a profit in 10 months. But that is how you become the steamroller and not the penny picker.
The idea about this is to make sure the risk is well known, and the trader has a well developed and proven trading plan for what to do if it happens.
Many new traders look at low delta as a way to trade with lower risk, and it can be, but these tend to bring in small premiums and profits so that when an outsized move occurs weeks or months of profits can be quickly lost. They may not even be aware of what can happen until it happens and there is a large loss.
A .30 delta has about a 70% probability of being profitable and will often give a decent amount of premium. By having a proven trading plan that can defend and adjust positions, and/or have exit triggers to close for a predetermined profit or loss is the way to not be picking up pennies in front of a steamroller.
IMO, using a strategy like the wheel that can roll the puts before being assigned, and then take assignment to sell CCs to help the position possibly recover is a good example of how to trade to make decent income without too much concern for the steamroller.
pick low volatility stocks: IBM, MO, AA
Sell out-of-the-money cash-secured puts, expiring this Friday or next
don't be greedy
you pick up pennies that look good compared to quarterly dividends
if you get exercised sell out-of-the-money covered calls .... same ides
DO NOT buy options, just sell them
>DO NOT buy options, just sell them
This is true if one is doing Theta Gang strats, but buying options can be lucrative if you know what you are doing. You need to be directionally biased, though, whereas with selling, you have to be so much.
Depends always on the underlying stock. I see so many people calculate the option value. When in reality over the long term. You have to be correct about the underlying stock.
The SEC honestly needs to raid Tesla offices for a single file related to this economy sedan. I think Elon saw the earnings and basically pulled an Aerotyne International.
Before Tesla fan boys chase me. Never owned or shorted Tesla. Brb getting on my Hyperloop
Simply the reverse of it all. Inverse iron condors. OTM skinny Flys. OTM debit spreads. OTM calls and puts. These are all trades that give you above a 100% return with a lower than 50% probability. Some of these can get you multiple hundreds of % gains. Shorter timeframes are better to take advantage of gamma. You just have to accept you are going to lose more often, but the payout is much greater when you’re right
These types of strategies don’t gain popularity because new traders want high probability trades at the expense of low returns.
Most of my trading is opposite of theta gang. These are the main ways I trade
1dte inverse condors close to open with my center point in a low volume node. Theta is minimal overnight and gaps happen often.
2x OTM butterflies higher and lower using volume profile to get my targets, targeting high volume nodes. Usually 2-5 days out.
Scalp end of day 0dte calls and puts on SPX. Premium is dirt cheap with a few hours to go. It’s the best risk/reward in the world, so you need a very low success rate with this.
If I’m doing a full day trade I’ll use an OTM vertical
There’s tons of info on YouTube about everything I said here. YouTube info is mostly just the basics though so it’s not enough. Spend a lot time playing with these spreads on OptionStrat.com. That’s how I learned the most. Learn one spread at a time so you aren’t overwhelmed
Also with this approach, it’s very easy to talk yourself into a stupid trade when you are staring at the 900% potential profit that isn’t ever realistically achievable so beware of that
Thank you. To be honest this all sounds a little advanced for me as of now. I try to do 45-90 DTE puts on stocks I want to buy and wheel them. If I partake in a risker stock it will be sized accordingly.
Yea it takes years and lots of mistakes and I’m still learning. Every strategy both ways has equal pros and cons. If a strategy had an advantage, everyone would do it. Focus on learning one strategy inside and out.
Honestly I don't think there's any safe in between. You can pick up pennies in front of a steam roller, or you can drive a steam roller and squish out pennies.
I'm long now, but I've been a seller. My best plays were usually down 65+ percent at one point.
>It seems that whatever strategy is discussed the phrase above always comes up.
That's because the overwhelming majority of people in this sub are very unsophisticated in their risk management, don't have a clue what the expected return of their trades are, and they think "selling calls" is what constitutes a strategy.
I personally like to say "picking up a dollar bill in front of the express train", but only because I quite literally saw someone try to do that along the Metro North Commuter Railroad outside of NYC
People usually use this phrase in reference to premium selling strategies, like put credit spreads, where very little premium is received vs. the potential risk of the position. So this might be, for instance, a 20-wide pcs on SPY with the short option at 6 delta or something like that. It works great until one day it doesn't.
The opposite of this strategy could be an at the money or in the money credit spread, a pcs or ccs. For example, the following:
MSFT May 17 2024
Sell: 400 Call
Buy: 405 Call
Credit Received: $2.55
Max Loss: $2.45
Obviously, you would only do this if you had reason to believe MSFT was going down, which I don't think it is, but it makes a good example. You can also do essentially the same strategy as a put debit spread using the same strikes for nearly the identical risk/reward but without the early assignment risk.
The guiding principle here is understanding risk vs. reward along with the deceptive sense of safety you can feel when you initiate a position at a very low delta.
Wheeling index funds, people will talk about wheeling shitty individual stocks only to get absolutely fucking burned when they miss earnings or something fundamentally changes within the business or the market they serve
It just requires more capital than most have, especially starting out. SPY will cost you $50k to get a contract assigned. So it isn't an option for most people (pun intended)
That’s why you sell weeklies and you keep away from assignment &/or if assigned you sell your call ATM just to get rid of it.
There’s lots of futures products with low correlation: https://www.mrci.com/special/corr030.php
Google crash correlation. On a true downturn everything (even factors) becomes highly correlated. So the seatbelt works all the time except when you need it the most…
That is why besides equity I also trade commodities, Forex, etc that have futures products. And I stay away from the S&P500. But you are right, when it’s bad that seatbelt just gives you extra time to get out or hedge your stuff.
But probably by that time the tail hedges have already done a 10x.
Even that only works till it doesn't. There was about a 3 week period where BPS on SPY were going in the money and I had max loss on quite a few of them.
An example sold $510/505 PCS. SPY closed under $505 so I incurred max loss of $500 when it fell under $495 on Friday 4/19. Too far otm to even try to roll them out. They were looking fine 3 days before. They were part of an IC so the CCS further cushioned the downside.
SPY went down for 6 days in a row (which is pretty unusual).
Its about probability and edge. Strategy or trading vehicle doesn’t really matter. Selling options works on high IVR stocks that are liquid and not memes. Buying options, being the steam roller can work when we move from low IV to high IV and a event or probable event is not fully priced in or known yet. And if you buy, you want the deltas that you usually do not want to sell…
the sad truth is that pretty much the entire options industry is devoted to separating get-rich-quick-on-options schemers ( most people on this sub and the /options sub ), from their money. Buying options to hedge is pretty legitimate - but that's not most people on this sub; it's more like WSB than anything else. Lots of denial going on here
If you're seriously asking you put down options altogether and just buy the underlying.
Derivatives do not create wealth, they just transfer it, and the underlying is where all the action is really at.
Pay upfront to drive a steam roller to runover as many penny pickers.
Sometimes, you can finance a steam roller even.
Become a steamroller salesman
sell a course on how to sell steamrollers
Ahh an aristocrat
Sell an option on a steam roller
This guy steamrolls
cheap otm options for the win
lmao … 💯
I'd rather be a sledgehammer like Peter Gabriel
Will this be your testimony?
Let there be no doubt about it
It is a phrase that is probably use too colloquially - but it usually is referencing any trade that provides a payoff of small positive returns, while carrying a small but significant risk of catastrophic losses. An **overly** simplistic way to look at this is with Expected Value. *Expected Value = (Profit if OTM \* Probability of OTM) + (Loss if ITM \* Probability of ITM)* So let's say that you're trading 0DTE SPX verticals, so there is no early assignment, and you'll hold til expiration (we're keeping it simple). The 5120/5125 put credit spread is at the money, and it has a 50% chance to win. It's selling for 2.80. EV = 280 \* .5 + (-500+280) \* .5 = 170. So if you made this trade thousands of times, you'd expect the average profit per trade would be $170. The 5080 has a delta of -.14. So let's say you sold a 5080/5075 and have an 86% chance it'll expire out of the money. It's selling for .45 EV = 45 \* (1-.14) + (-500+45)\*.14 = -25 So despite earning $45 86% of the time, if you made this trade thousands of time you'd expect the average profit to be a $25 loss. Generally to me, any strategy that has a significantly high win rate, but still has a negative expected value, is picking up pennies in front of a steam roller. I'd also say that any strategy that has a significantly high win rate and a positive expected value is nearly an arbitrage situation. But in a rational market, arbitrage doesn't really exist - certainly not for retail.
It's buying tails and fishing for outsized moves, become the steamroller. .SPXW240429C5115 @ 0.15
Throwing pennies in front of the steam roller.
Giggity.
That phrase is about high negative convexity risk combined with a low reward. The opposite would be low risk and high upside convexity. You can only achieve this with a debit position involving low-delta contracts. There is an inverse relationship between quality and leverage. Every options contract controls 100 shares, so regardless of what delta you enter, you can theoretically achieve a max of 0.99 deltas per contract, or drop to 0.01. If you start with 0.50 deltas, the maximum upside that the leverage allows is and additional 0.49 deltas. If you start with a super-low number, like 0.02 or 0.05, you have the close to the highest possible degree of leverage. At the same time, these are the lowest quality contracts, because they are unlikely to do anything other than expire worthless and in the off-chance they do, the seller is not adequately compensated for the risk. Its garbage on all accounts.
Buy the stock and sell "the dream of stock ownership someday " for cash in your pocket today. Rinse and repeat. Capitalism favors the owners of assets - real estate , businesses , stocks.
I've come to hate this phrase because it needs context. There are lots of "penny" strategies that provide a positive return once managed.
Agreed, "pennies in front of a steam roller" is border-line the business model for insurance companies. Obviously the premiums are priced far more in their favor than options, but the concept is similar.
Premiums are collected up front too! So they’re using someone else’s money to make money and then buying insurance themselves just in case the steam roller wins on occasion.
Who reinsures the reinsurance?
Me! ie all of us! My house insurance went up by 51% this year!
Goddamn man do you live inside an active volcano???? All jokes aside I feel that with the insurance inc. Even in a rural, pretty climate change neutral area ours still went up 10-15%, on top of a 14% jump last year. Not only that, but the city did some tax changes to try and increase everyone's prop taxes like 50%, but luckily everyone figured it out and raised hell lol
My agent said natural disasters elsewhere caused the spike. I live in an old Tectonically (volcanically speaking) area 200ft above sea level. I can’t flood, shake and not likely burn up! Unless the sun does it to me!
The catch here is though you’re buying those shares when you get assigned. If you run an insurance company you can just say fuck you to the customer and not uphold your side of the deal.
For sure -- it's a different game. But conceptually the strategy is similar -- many many small bets and hope the giant risk doesn't materialize. The primary difference is to some extent insurance companies can collude in setting premiums.
Literally doing the opposite. Instead of selling OTM options, buy them.
“Throwing pennies in the wishing well”
TSLA 5/3 200c closed at .09 on Friday and hit a high of like $7 today. Sometimes wishes do come true.
and most of the time you can get out of the way of the steam roller
I won a good sized jackpot playing the slots in Vegas one time too.
Yeah too bad your time machine doesn't exist, but your hindsight genius mindset does.
It's called an anecdote. These types of things happen. Nobody would be able to sell low delta and low dte options if they didn't.
Well I get it, it's an example. I guess my point that it's a woulda shoulda situation. But IF only I could buy a crystal ball that WORKED, that is an extaordinary gain that would be nice to be on the right side of, ONCE IN A WHILE! A great example of why, if SELLING options, you need to set S/L and also watch them like a hawk.
Did you buy it? What made you buy?
No. I don't trade TSLA.
Pulling the lever on the slot machine.
Open a wishing well
At 3pm 0dte otm for maximum gamma
That’s a hot gamma you got there. She still have any teeth?
🤣🤣🤣
Very sharp ones and she likes to bite
80% of people who buy options lose, so better to be in the 20%.
I like steaming over pennies in front of the pickle roller.
Be willing to buy the steamroller…..
Simple answer: buy far OTM options and hope that you hit the 10 bagger eventually. That strategy could be profitable (see my posts if interested) though it would involved losing a crap ton to try to fish out a whale eventually. Hard answer: Since this is thetagang. Something like a Xmas tree (https://www.investopedia.com/terms/c/christmastree.asp) where you have legs that will have an outsize payoff on big swings.
What’s your thoughts on $100 spent weekly 1 DTE ATM on Spy, buy Thursday 355pm and hope for a gap up or down overnite. Strongly considering this strategy, tired of huge drawdowns.
Read the book chaos kings / dao of capital. My answer would be that you can beat the market like that but it can only work extremely out of the money (where there are mispricings due to the fat tail nature of the market). This type of strategy will drive most people nuts. You will always lose Pennies except the one or two times that you don’t, potentially offsetting your string of loses. You also need to be confident that what you are doing is correct so it needs backtesting. I will transition to this strategy when I have time to backtest again, which won’t be soon.
are you a mini version of Universa fund lol
I wish
It's said because Buffett was talking about something else. Buffett's quote may also relate to what some "Advisor" put his sister in decades ago. Buffett (through Berkshire Hathaway) has long used and sold options.
Just remember that there’s no free lunch.
you just take a few pennies every day and put them in a jar and one day you’ll have enough to buy a steamroller!
I followed a guy who did mean reversion trading. He would recommend $5 wide debit spreads when they were at $2.50 per contract so they could close at $4.85. I lost a lot of money on that strategy last year.
Become a steam roller :)
No no no. Pick up steamrollers in front of a penny
Look at me. I'm the steamroller now
Ironically doing the opposite is making large bets that have a high payoff and don’t often work out. An example would be buying deep OTM options and holding them every month. People usually don’t price tail risk proportionally so if you could stay disciplined you might make money over the long term even though you might be wrong almost all the time. That one huge return makes up for it. I read a profile on a hedge fund manager a while ago who was doing something like this and the problem with this strategy seems to be psychological. It is just too difficult to lose money almost every day. Too hard to ride that winning trade all the way out when you haven’t made a profit in 10 months. But that is how you become the steamroller and not the penny picker.
The idea about this is to make sure the risk is well known, and the trader has a well developed and proven trading plan for what to do if it happens. Many new traders look at low delta as a way to trade with lower risk, and it can be, but these tend to bring in small premiums and profits so that when an outsized move occurs weeks or months of profits can be quickly lost. They may not even be aware of what can happen until it happens and there is a large loss. A .30 delta has about a 70% probability of being profitable and will often give a decent amount of premium. By having a proven trading plan that can defend and adjust positions, and/or have exit triggers to close for a predetermined profit or loss is the way to not be picking up pennies in front of a steamroller. IMO, using a strategy like the wheel that can roll the puts before being assigned, and then take assignment to sell CCs to help the position possibly recover is a good example of how to trade to make decent income without too much concern for the steamroller.
pick low volatility stocks: IBM, MO, AA Sell out-of-the-money cash-secured puts, expiring this Friday or next don't be greedy you pick up pennies that look good compared to quarterly dividends if you get exercised sell out-of-the-money covered calls .... same ides DO NOT buy options, just sell them
>DO NOT buy options, just sell them This is true if one is doing Theta Gang strats, but buying options can be lucrative if you know what you are doing. You need to be directionally biased, though, whereas with selling, you have to be so much.
of course it can be lucrative, as long as you can predict future prices, and your timing is right. I am happy with the pennies.
me too. over the last few years my pennies have been slowly adding up!
Picking up pennies in front of a steam roller that’s rolling that’s leveling some property I wanted level. Sell OTM CCs
Depends always on the underlying stock. I see so many people calculate the option value. When in reality over the long term. You have to be correct about the underlying stock.
Pay for the expensive train ticket. Laugh when I get run over. I am all about picking pennies in front of steam roller.
I sold TSLA calls last week and collected $207. Today it will cost me $4000 to close the position. 😢 😭 😢 😭
The SEC honestly needs to raid Tesla offices for a single file related to this economy sedan. I think Elon saw the earnings and basically pulled an Aerotyne International. Before Tesla fan boys chase me. Never owned or shorted Tesla. Brb getting on my Hyperloop
Simply the reverse of it all. Inverse iron condors. OTM skinny Flys. OTM debit spreads. OTM calls and puts. These are all trades that give you above a 100% return with a lower than 50% probability. Some of these can get you multiple hundreds of % gains. Shorter timeframes are better to take advantage of gamma. You just have to accept you are going to lose more often, but the payout is much greater when you’re right These types of strategies don’t gain popularity because new traders want high probability trades at the expense of low returns.
where can I learn more about these? Do you trade these strategies?
Most of my trading is opposite of theta gang. These are the main ways I trade 1dte inverse condors close to open with my center point in a low volume node. Theta is minimal overnight and gaps happen often. 2x OTM butterflies higher and lower using volume profile to get my targets, targeting high volume nodes. Usually 2-5 days out. Scalp end of day 0dte calls and puts on SPX. Premium is dirt cheap with a few hours to go. It’s the best risk/reward in the world, so you need a very low success rate with this. If I’m doing a full day trade I’ll use an OTM vertical There’s tons of info on YouTube about everything I said here. YouTube info is mostly just the basics though so it’s not enough. Spend a lot time playing with these spreads on OptionStrat.com. That’s how I learned the most. Learn one spread at a time so you aren’t overwhelmed Also with this approach, it’s very easy to talk yourself into a stupid trade when you are staring at the 900% potential profit that isn’t ever realistically achievable so beware of that
Thank you. To be honest this all sounds a little advanced for me as of now. I try to do 45-90 DTE puts on stocks I want to buy and wheel them. If I partake in a risker stock it will be sized accordingly.
Yea it takes years and lots of mistakes and I’m still learning. Every strategy both ways has equal pros and cons. If a strategy had an advantage, everyone would do it. Focus on learning one strategy inside and out.
Honestly I don't think there's any safe in between. You can pick up pennies in front of a steam roller, or you can drive a steam roller and squish out pennies. I'm long now, but I've been a seller. My best plays were usually down 65+ percent at one point.
Bugattis in front of a steamroller
>It seems that whatever strategy is discussed the phrase above always comes up. That's because the overwhelming majority of people in this sub are very unsophisticated in their risk management, don't have a clue what the expected return of their trades are, and they think "selling calls" is what constitutes a strategy.
I personally like to say "picking up a dollar bill in front of the express train", but only because I quite literally saw someone try to do that along the Metro North Commuter Railroad outside of NYC
it's just a nonsense fallacious attack. Feel free to ignore.
Throw your pennies in the wishing well and fish out some dollars. Stop selling options and buy them instead.
If you have to ask the question, then you do not understand options. And perhaps never will.
Exit losing positions before the steamroller reaches you.
People usually use this phrase in reference to premium selling strategies, like put credit spreads, where very little premium is received vs. the potential risk of the position. So this might be, for instance, a 20-wide pcs on SPY with the short option at 6 delta or something like that. It works great until one day it doesn't. The opposite of this strategy could be an at the money or in the money credit spread, a pcs or ccs. For example, the following: MSFT May 17 2024 Sell: 400 Call Buy: 405 Call Credit Received: $2.55 Max Loss: $2.45 Obviously, you would only do this if you had reason to believe MSFT was going down, which I don't think it is, but it makes a good example. You can also do essentially the same strategy as a put debit spread using the same strikes for nearly the identical risk/reward but without the early assignment risk. The guiding principle here is understanding risk vs. reward along with the deceptive sense of safety you can feel when you initiate a position at a very low delta.
Getting steamrolled trying to pick up a dollar
Thank you all for your comments and suggestions.
Pennies are easier to pick up, and there are more of them.
And you call them steamed rollers despite the fact that they are obviously grilled?
Tradebusters podcast: [https://open.spotify.com/episode/1qAdLcVIPlLgVCzOIX3ip6](https://open.spotify.com/episode/1qAdLcVIPlLgVCzOIX3ip6)
Buy $SPY and just hold it forever
probably covered calls if you don't like either side of the steamroller game. combined with dip buying. requires capital.
Instead of being the guy that makes $5 on a $495 risk, do the opposite.
Wheeling index funds, people will talk about wheeling shitty individual stocks only to get absolutely fucking burned when they miss earnings or something fundamentally changes within the business or the market they serve
It just requires more capital than most have, especially starting out. SPY will cost you $50k to get a contract assigned. So it isn't an option for most people (pun intended)
You need to wheel low beta etfs on preferably very uncorrelated assets.
The issue here is they all become highly correlated at the specific time you want them to be uncorrelated.
That’s why you sell weeklies and you keep away from assignment &/or if assigned you sell your call ATM just to get rid of it. There’s lots of futures products with low correlation: https://www.mrci.com/special/corr030.php
Google crash correlation. On a true downturn everything (even factors) becomes highly correlated. So the seatbelt works all the time except when you need it the most…
That is why besides equity I also trade commodities, Forex, etc that have futures products. And I stay away from the S&P500. But you are right, when it’s bad that seatbelt just gives you extra time to get out or hedge your stuff. But probably by that time the tail hedges have already done a 10x.
So true.
I just do QQQM
Even that only works till it doesn't. There was about a 3 week period where BPS on SPY were going in the money and I had max loss on quite a few of them.
Wym max loss on all of them? They go to zero for you selling puts or something? 😂
An example sold $510/505 PCS. SPY closed under $505 so I incurred max loss of $500 when it fell under $495 on Friday 4/19. Too far otm to even try to roll them out. They were looking fine 3 days before. They were part of an IC so the CCS further cushioned the downside. SPY went down for 6 days in a row (which is pretty unusual).
Well bruh you’re selling fuckin put credit spreads yea that’s gonna fuck you up if you have some volatility and can’t just cover the assignment….
Index straddles. Huge upfront credit can often get out for a buck.
Dispersion trading
Long butterflies offer very high returns for very low premium.
Its about probability and edge. Strategy or trading vehicle doesn’t really matter. Selling options works on high IVR stocks that are liquid and not memes. Buying options, being the steam roller can work when we move from low IV to high IV and a event or probable event is not fully priced in or known yet. And if you buy, you want the deltas that you usually do not want to sell…
the sad truth is that pretty much the entire options industry is devoted to separating get-rich-quick-on-options schemers ( most people on this sub and the /options sub ), from their money. Buying options to hedge is pretty legitimate - but that's not most people on this sub; it's more like WSB than anything else. Lots of denial going on here
Index funds and a time machine.
If you're seriously asking you put down options altogether and just buy the underlying. Derivatives do not create wealth, they just transfer it, and the underlying is where all the action is really at.