Is consistent option income possible?

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smiso24

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Is anyone making consistent income from option trading? I am learning about various option spread strategies and would like to know if anyone can tell me what kind of monthly returns I could expect on a percentage basis...
 
Hi,

Basically, when trading options you are trading two things: movement in the underlying and Implied Volatility (for the experts out there, I realize this is a simplification and would be happy to discuss different pricing models).

I do not know what you are studying, but please read these three books:

Natenburg : Amazon.com: Option Volatility & Pricing: Advanced Trading Strategies and Techniques: Sheldon Natenberg: Books

McMillan: Amazon.com: Options as a Strategic Investment: Lawrence G. McMillan: Books

Taleb: Amazon.com: Dynamic Hedging: Managing Vanilla and Exotic Options (Wiley Finance): Nassim Nicholas Taleb: Books

If you want the standard university reference for Degree/Masters you need:

Hull: Amazon.com: Options, Futures, and Other Derivatives with Derivagem CD (7th Edition) (Prentice Hall Series in Finance): JOHN C HULL: Books
 
Only Collars and Conversions have been working recently. But actively managed. No more easy money. For years I have made my monthly income on Spreads but with these VIX numbers that strategy has just gotten whipsawed so be careful!

I personally dont trade it but Some are saying Deep ITM, 1-3 months out, trading the QQQQ as daytrade plays are working.
 
Read this for an exercise in how not to trade options.

Watch the SPAN margin skyrocket into 6 figures. You can almost hear the silence as the guy disappears.

http://www.trade2win.com/boards/options/23221-plain-vanilla-options-trades.html

The most hilarious bit for me is where he claims that he has already closed out the trades as the margin hits a peak, but then tries to backtrack when they expire worthless. :LOL:

The guy's name is Socrates.

Still worshipped in some quarters!
 
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I have a friend who started option trading in a big way about 3 years ago. For the three years to date he had made around £100k+ each year (including 2008). He basically wiped out 2008's profit in a few days. This was mainly due to lack of capital & balls. He was contemplating borrowing £200k to run the positions. As it turns out this would have been very profitable, but he chickened out and took the hit instead.
 
of course there is a surefire way of consistent income.

it's just that most of us prefer a challenge so we ignore the sure things and trade the more difficult markets/instruments/methods/styles. Just for the hell of it like.
 
I was responding to the original poster who posed the question whether it was possible to make consistent income using options.........

I guess you didn't read between the lines, but I was suggesting that consistent income in a surefire way is what trading aims for but can seldomly be achieved
 
Diversification is the key to all Investing.
$$$Diversify By Strategy!$$$
Not underlying stock or asset class.

Options income needs to be diversified as well. Take Iron Condors = Market Neutral got its but kicked when high Vol kicked up '08. Credit Spreads did pretty good in those times. As well as DITM trend followers in Mar09 and Feb10.
 
You seem to have drawn all of the crazed hermits out of their caves by your query. They are the people who never trade anything but sit b y their computers watching old " Rocky ' reruns and picking their noses. Actually you can find plenty of books out there that will teach you the basics and t hen there are a number of honest services that sell sufficient information to enable you to earn 20% or better each year, if you are patient and apply the techniques being used, not your own wild idea. When you acquire some experience you can easily do this on your own.
 
wiseearl said:
You seem to have drawn all of the crazed hermits out of their caves by your query. They are the people who never trade anything but sit b y their computers watching old " Rocky ' reruns and picking their noses. Actually you can find plenty of books out there that will teach you the basics and t hen there are a number of honest services that sell sufficient information to enable you to earn 20% or better each year, if you are patient and apply the techniques being used, not your own wild idea. When you acquire some experience you can easily do this on your own.
Click to expand...

Welcome to the forum WiseEarl. Which Option strategy do you prefer?

My bad 5.5 years and this is your first post???
 
Yep Possible. Selling now with these VIX numbers are unreal premiums. Easy money for Spread traders
 
dlf99 said:
possible - only when you sell deep out of the money call/put options on index
Click to expand...

Please don't do this. If those options move into the money at todays volatility you can kiss goodbye to all the margin in your account. You better have a hedging strategy for such circumstances.
 
luckyd1976 said:
Yep Possible. Selling now with these VIX numbers are unreal premiums. Easy money for Spread traders
Click to expand...

Easy but risky. If you had written Jun expiry ATM Puts in late april at 5800 you would be sitting on a huge loss now.
 
consistent income is possible by working hard !

work hard and u will get 11 winner out of 12 trades
 
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