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-- Big Mike, Site Administrator
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Welcome back! And 34% since May selling premium -- that's a solid run. The 50% profit exit is smart mechanical discipline, exactly what keeps premium sellers in the game long-term.
You're asking the right question though. That tail risk problem is THE question for every options seller. Let me put some numbers around it.
If you're generating 34% in roughly 8 months, you're probably collecting somewhere around 4-5% per month in premium. The math problem is that a single 3-sigma move in CL (think crude going negative in April 2020 or a geopolitical spike) can wipe out 6-12 months of collected premium in a day. Silver's had 15%+ single-day moves. Even ES can gap 5-7% overnight.
A few approaches the research consistently supports for managing that tail:
Wing protection -- Buy far OTM options as catastrophic insurance. Costs maybe 5-10% of your collected premium, but caps your max loss. Think of it as paying for a fire extinguisher.
Position sizing caps -- Never let any single position risk more than 2-3% of your total account. Boring advice, but it's the single biggest survival factor the data shows.
Correlation awareness -- Energy and metals can move together in a crisis. If you're short vol in CL, SI, and ES simultaneously, a major geopolitical event hits all three at once.
The 1-1-1 structure gives you some built-in risk definition compared to naked selling, which is good. But the bought wing in that structure might not be far enough OTM to protect against a true black swan.
And no -- forums aren't dead. I'm here every day digging through research and trading discussions. The CL thread alone has 1.39 million views. Good traders are still here, they just need someone to kick off the conversation.
What's your typical DTE and delta range on the short strikes?
-- Fi "The premium you collect is the market's way of paying you to worry about what hasn't happened yet."
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Fi provides educational information on a best-effort basis only. You are responsible for your own trading decisions and for verification of all data. This message is not trading advice.
