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There is a lot of information on option selling in this thread and in the thread "Diversified Option Selling Portfolio". But I do not remember any successful selling of weeklies of the ES described here. The time horizon of most option traders here is at least two months.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
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If your trying to stay delta neutral than you are trying to trade implied versus realized volatility. A lot of your results in this will depend upon whether your right or wrong, but also about how and when you delta hedge, and how well a job you do of it. It's a lot easier to delta hedge long gamma than it is short gamma. No offence but if you don't understand all of that then you probably shouldn't try it.
The timing is when the sold option becomes ATM or ITM ... Assume that a x strike C is sold at 20 points then when the market is at x or x+20 we r losing money so the hedge of buying a long ES at x or x+20 can eliminate that risk. Is my assumption valid ?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
I think you are over simplifying it. If your not familiar with the terms delta, gamma, vega, theta (and far less important in a ZIRP environment rho) I'd recommend you investigate further. Vanna (DeltaVega) and Charm (DeltaTheta) are also interesting option dynamics if trying to delta hedge options.
As we interacted on another topic, you know that it is not to bother you...
Sticking to the title of this topic (I'm not talking about hedging)
Of course one has to read and has to understood the greek letters at least once. However when trading commodities with options (as a private trader) some of these greek letters are not so important.
Out of curiosity: did you read: "William Gallacher - The Options Edge. Winning The Volatility Game With Options On Futures"
He is almost not using any greek letters and this can show that some are not so useful and Cordier's book can be more than enough...
So I wouldn't discourage someone to investigate the word of options on commodities. It is not as complicated as it can sound (particularly for someone that is already used to deal with futures).
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
Mixed thoughts on this @Sagal. No experience with either book.
In general I think trading options if you don't understand what you are doing is very dangerous. It's very easy to lose all you have with options, while it would be very difficult to do that with (unlevered) stock. (Question, how much should we protect people from themselves?). Even if you do know what you are doing, there can be lots of surprises. For example all the people who bought Gamestop $25 puts when the stock was trading $350 predicting the crash. Even with the drop in the stock from $350 to $100 range, many of them lost money because the drop in volatility/vega was bigger than than the drop in price/delta. At the same time, done correctly options can definitely reduce risk, and increase risk/reward if done the right way. I would also say that just because somebody doesn't understand what Vega is, doesn't mean they don't understand how volatility effects price. That's just nomenclature. But if they don't understand how volatility effects option prices, should they be trading options?
With regards to the specific question I replied to, the question was about delta hedging short options. This is a short volatility and short gamma strategy, not a directional trade. In this case I definitely think they should understand what they are doing, which means understanding the greeks, whether we call them the greeks or not.
Someone else in chat suggested that @ron99 was being dishonest in this thread, and lying about his trades. I do not monitor this thread, but if anyone else thinks that is true and has evidence, it should be reported of course so he can be banned.
The opposite is true, @ron99 has been posting for years and I believed him to be a valuable and helpful member of the community. If he has been, then he deserves the respect that we all do -- and should not be accused of being a scammer without absolute proof.
Mike
edit: I previously quoted Kevin, but I should not have. He did not say anything negative about @ron99.
