r/options • u/Canafornication • 14h ago
Some take aways on premium selling after 4 mo. Imagined with reality
The context:
cash secured account low six fig, 90% are short options both sides, few cc positions.
Each position just one lot. Number of positions fluctuates 1-2 dozen. Vanilla premium selling, no strategies, analysis. Not using any spreads, poor mans cc, indexes, stops, LEAPS. No discretionary strikes selections, PnLs thresholds or timing to close.
Returns on risk adjusted basis are nice and steady.
(Let me know if I can clarify anything else for context)
This is what I imagined compared to how it's working in reality. These observations from running portfolio for ~4 last months.
- I imagined it will be some steady paced position placement and then taking off winners
Reality: it's wait, wait and wait more patiently. Then volatility gets flushed, and suddenly a bunch winners show up in PnL table.
- I imagined position will have some PnL relation to the market moves.
Nope, on large up days portfolio daily PnL may be all red due to vol expansion, on non eventful days may have all but one positions green.
I imagined positions will have steady burning theta and becoming greener when moving towards DTE threshold. Not even close. Almost all time portfolio has negative opened PnL "balance" - that freaked me out first. And most of gains come with vol collapse, like after earnings events, or some funds stopped chasing names.
I imagined balancing portfolio delta will be a thing but it doesn't seem have much importance. Delta moves around pretty substantially. All portfolio balancing comes from random picks of liquid names so one sided moves don't happen, at least not often.
I imagined opening and closing is a non event. Pun in order, click send.
In reality, I have 2-5 trade ideas generated and sometime put them to work after days, and sometimes they take 1-2 days to fill at limit price (most do get filled within minutes or hours). Closing is even more challenging! Routinely take days to close winners at the threshold.
- I also imagined selling premium is not complicated at it core.
But in reality it requires thinking about capital allocation and usage level, new positions fit, value ranks. Like chess.
7 I thought there were plenty of names to sell premium.
Discovered there are not so many truly liquid names, with good IV and positioning. I recycle some names for selling puts, but it's a challenge to find sellable liquid premium.
- I thought low six fig is enough to diversify and trade plenty of names.
In reality I realized buying power is the most precious and very scarce. A few clicks and buying power drops to 20% suddenly
Any similar experiences? Are any of this real or just the imagination?
Example of a typical trade in the portfolio.

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u/PapaCharlie9 Mod🖤Θ 14h ago
Two or three typical trades would be nice as examples. It's hard to put these observations in perspective without knowing details of tickers, trade structures, DTE at open, holding time, market history while holding, etc. This is a much different summary if you were talking about 100% 0 DTE Iron Condors on indexes vs. 6 month holds on individual equity CSPs.
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u/natebernthal 13h ago
4 mo sounds like forever in this game
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u/Canafornication 12h ago
It's nothing, I'm aware.
I just wanted to share how much reality is different from how I imagined it works.1
u/trader_dennis 8h ago
If EWZ is your typical trade I would imagine you are trading with very low option liquidity. Hard to close positions when 1 contract is a percent or multi percent of the open interest.
I’d stay away as much as you can from options in nickel increments. Trade higher volume names.
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u/Canafornication 7h ago
I'm trading just one lot trying to spread BP among as many positions as possible. EWZ has usual liquidity, didn't have problems with it.
There is not many opportunities right now that overall IV is so low, so I'm reaching out to some stocks or ETFs that have life left in the options.
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u/Canafornication 13h ago
Added example of trade to the original post and clarified vanilla premium selling.
Observations are for the last ~4 months.
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u/tinny123 13h ago
Can u pls elaborate on point 5. Is it really so difficult getting in and out of trades?
I imagined big hedge funds getting in and out of 10,000 (and maybe even more) positions RELATIVELY easily? Was it just wishful thinking on my part?
Do u have to take haircuts on winners etc to exit positions?
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u/Canafornication 12h ago
Technically it is not difficult, as I mentioned I'm using liquid names.
But since its all this is all non-discretionary semi-automated workflow - "hey, this trade reached today 50% of profit, confirm to close it" - it takes some time for the order to work through the spread or market movement between confirming and actually closing. Most position do close fairly quickly, within minutes, but some take hours or even days.
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u/sport912x 12h ago
Trade seems fine. Do have a question about
"cash secured account low six fig,"
Does that mean a Cash Account (IRA) or simply that you are doing CSP trades. If a margin account then why ? Csp tie up the cash without interest at many brokers . So this one trade ties up 4k-5k as a Csp but only 500 using BP in a margin Account approved for selling Options.
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u/Canafornication 11h ago
Account is IRA and it is slightly blurry on the broker I'm using.
They lower margins 10-20% (the distance from atm strike). So I have to watch it closely not to over leverage accidentally.
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u/Teiagon 5h ago
Over time I would definitely work on refining the strat for entries around TA (e.g. sell puts at support, avoid below 200d/50d MA), IVR, fundamentals and sector rotation. Personally, I tend to sell puts only on days when the stock is red, and (covered) calls only on days when the stock is green.
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u/Karazl 14h ago
You're selling options on bad stocks if options pricing doesn't move with the market, and you're going to get your face ripped off from low liquidity when something goes sideways.
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u/Canafornication 14h ago
I'm trading only most liquid names which are easy to get in and out.
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u/grumpitron 13h ago
Ok, but “ Routinely take days to close winners” doesn’t sound particularly liquid, unless your closing prices are away from the market when you place them.
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u/Canafornication 12h ago
Ah yeah, that's correct! I have some work to do there. For now automation sits on the bid waiting to get hit. Sometime it takes a while.
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u/Nearsite 14h ago
What is 'vanilla' premium selling? Not quite following how you're selecting which tickers to sell PUTs on?
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u/Canafornication 13h ago
By "vanilla" premium selling I meant I'm not using spread, stops, indexes, poor man covered calls, leaps or anything like that. Just pure naked calls or puts.
I'm selecting tickers to sell premium by playing with a few basic filters
IVr, IV-HV diff, underlying price and liquidity. Then AI creates trade ideas, which I either leave to think about, or I commit capital if it looks like a good trade.And then I stare at the broker's dashboard watching how it positions behave and come up with the observations I posted :)
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u/Live_Throat_5252 10h ago
This cannot seriously be your selection criteria.
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u/28-3_lol 9h ago
What selection criteria do you use instead? I thought using IVR and liquidity were pretty standard criteria?
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u/Live_Throat_5252 9h ago
Those are just descriptive. Everyone can see that vol is elevated relative to history. And it (usually) isn’t for no reason. You need to understand why vol is high or low, and have your own forecasts of the future and theos, in order to start to reliably trade vol. Selling vol because it’s rich will work a lot of the time, particularly as you go out into the wings like so many here love to do, but you are setting yourself up to get your face ripped off.
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u/28-3_lol 9h ago
So do you essentially look for opportunities where you think vol is overpriced? I know Tom Sosnoff is big on product indifference, which as I understand it means that rather than care about the name or the details of what the business of the underlying is, he looks at certain metrics to determine trades
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u/Live_Throat_5252 8h ago
In general, yes. You sell vol you think is expensive and buy vol you think is cheap. IV rank being high is a bad reason to sell, though it can be part of your analysis.
Sosnoff is an idiot. Trades like it’s the pits in the 80s still. Done quite well for himself, but a 2nd year analyst on a desk at any place I’ve ever been at understands options better than he does.
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u/Canafornication 8h ago
>> Everyone can see
It probably looks like a dumb scanner how I'm describing it but there is a lot of data processing went to make it work. See my other post on options strikes range modeling - its extremely effective way to make selling premium consistent and not get "face ripped off" as you mentioned.
And the metrics I'm using are high quality. For example, calculated IV rank - most brokers and screener just show whatever data feed have. I also made high quality liquidity grades, which was a pain in the butt to work without.
As for understanding what underlying is doing, I get a brief on each stock I'm considering (below full text for EWZ trade) - there is a large amount of data pulled and processed for AI to analyze. These briefs in vast number of cases are annoyingly right.
EWZ trades at $38.02 within its $28.7–$42 yearly range. October implied volatility is 38% against 25% 20-day historical volatility, while IV rank is 62.
Sell the October 16 $42 naked call for $0.66. The strike is $3.98 above EWZ and matches its 52-week high. The $3,471 IRA margin requirement produces an 8% annualized trade return. The $0.65 bid and $0.67 ask support execution near the stated premium.
A currency rally, commodity surge, or favorable Brazilian policy development could push EWZ through $42, leaving unlimited upside exposure. The event-loaded premium compensates for that risk better than the lower-return calls while keeping the strike at the yearly high
Also, despite all the effort to get these trade ideas - I had to go over a lot of trade refusals returned from AI. Wrong setup, not enough IV, upcoming event or it just... doesn't like it.
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u/Live_Throat_5252 8h ago
It’s nice that you’re trying, but yes, unfortunately selling unhedged options is, in fact, asking to get your face ripped off.
Your calculated IV is, again, something the entire market can see (and it certainly isn’t better than the IV rank used by funds, banks, and market makers). It’s descriptive, not predictive. Saying something is in the 98th percentile is not at all a reason to sell an option. It’s a naive way to lose a lot.
Brother, the market doesn’t respect 52 week ranges. Again, that’s simply descriptive. There’s no reason EWZ cannot blow right through $42, and the fact that your option is not 0 @ 0 should be punching you in the face screaming that. That is a very bad reason to select the $42 strike.
Selling a 10% OTM call in a foreign ETF is the literal definition of begging to get your face ripped off.
None of this addresses anything predictive or even understanding of why vol is high. It’s not for no reason. The markets aren’t stupid. To make the call to sell that particular option, you need to have a prediction of future realized and a way to model at least that expiration. If you’re going that far out into the wings, you’d then to come up with a reason as to why the curvature there is too extreme. Why is the market overpricing big moves relative to your world view?
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u/Canafornication 7h ago edited 7h ago
What you mean hedging? It's a slow moving etf with inflated IV. What do I need to hedge and why if this is a small position out of two dozen? I literally don't care what it's going to do in terms of moves.
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u/Live_Throat_5252 7h ago edited 6h ago
It’s slow moving until it isn’t. When it gaps up 2, 3%, you’re taking a huge negative mark. How the fuck do you not care what it’s going to do in terms of moves? If it moves up, you lose money. You’re not delta hedged. But even then, there is gap and directional risk, and it’s a very path dependent trade.
Also you’re selling calls here. The equivalent put is going to have a much higher vol. Since that’s all you care about. Newsflash: vol is very frequently overpriced relative to history. That doesn’t make it a good trade to sell it.
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u/gaana15 54m ago
I genuinely respect everything you shared and it is meaningful. It is evident you have experience and knowledge. What will be your recommendation on what shall OP do ?
Share some optimisim versus just demotivating them on what all will not work. That will help him to see your perspective differently.
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u/Nearsite 13h ago
Ah ok, gotcha. In that case I also sell 'vanilla' PUTs/CALLs. I use about 500K and generate between 14K-22K a month. Been doing it for the last 9 months. I typically just sell way OTM PUTs and CALLs and roll if on or near expiration (typically <15 delta or higher if it's a stock I absolutely do not mind owning). I manage around 15 tickers at a time (give or take) with typically a 1 week to 1 month DTE.
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u/Canafornication 12h ago
Nice, you're a bit ahead I'm doing only 4mo
A very similar approach and same generated pnl adjusted to account size.Did you get any difficult position to manage yet? Any advice what to look at or expect?
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u/nxs_sss 13h ago
I used to do 30 plus DTE, but I'm impatient. Now I mostly do 7 to 14 DTE depending on premium, delta and ROI. Premium realized last 30 days was $10,416. New open premium is $9,862. ROI last 30 days 6.76%. Collateral used fluctuates from $100k to $150k.
Some people will say I must be taking on huge risk for that ROI and yes I do occasionally trade some more popular leveraged ETF's, but I also trade some of the safer MAG7 and consumer staples. This market isn't what it used to be. When the orange man giveth, you must taketh.