I think strangles are the most profitable and consistent trades but am reluctant to trade strangles on individual names mostly to the upside. Don’t mind selling puts but naked calls to the upside can get ugly if there is a buyout rumor or someone comes up with a cure for cancer (which would be awesome). When Heinz was picked up by Berkshire learned that lesson.
So after a few earnings trades that did not work out (GILD, EXPE but fortunately made it out at even on that one), I will probably be trading more jade lizards on individual names, especially around binary events like earnings. The extra credit from a strangle or jade lizard would make it more likely to break even or at least recover quicker and the extra credit improves returns over the long run. On indexes will continue strangles as there is less likely to be an unexpected gap to the upside. Also you can structure jade lizards so there is no risk to the upside.
I also think I need to add another 15% cushion to my margin trades. No margin calls but with the trades I have on don’t have much room to wiggle. IRA trades are always cash secured and never seem to cause adjustment issues. I like using some margin for the extra returns but have been using 50%. I think I saw a tastytrade episode that suggested only using 35% to keep from getting in trouble with margin. I think I will scale back a little to that level and see if I have less margin issues.
What level margin do those that trade with it use? I used to have a portfolio margin account and that seemed to be easier but that account was nearly wiped out Aug. 2015. I am finally getting close to portfolio margin again at TOS but not sure I want to convert. Those of you using portfolio margin at TOS how far do you dip into it? 50% or less?
I love the decay on weeklies but seem to adjust my longer trades a lot less. Seems like the best compromise between theta decay and having to adjust trades is 21-45 days. Consistent with the studies tastytrade did. Ladders seem to work really well for this. Others have any thoughts on timing of option sales, DTE for best theta decay/risk ratio?
I agree that having weeklies makes managing trades easier! But some monthlies have really good decay /CL and /GC as examples.
Finally will manage winners a little sooner. Again tastytrade has found 50% ideal for strangles but in some cases such as straddles 25% seems to be better. Maybe managing a little earlier say at 30-40% may allow churning the portfolio faster. Say 50% requires 4 weeks but managing at 35% may allow rolling to new trades in 2-3 weeks. I will experiment managing index, ETF, and futures trades doing this and see if the faster turn over improves profits and consistency.
Thanks everyone for the help and ideas, as mentioned the other day just closed out my most consistent 6 months of trading ever.
Have a great weekend!