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RON, do you have an alternative strategy for the time ES will be bearish? I mean, not just a correction but a change of trend. I know it could last between 6 months and 2 years so it could be nice if we could find something similar to that so easy strategy.
I do not expect that to happen in the short term, but you never know
Can you help answer these questions from other members on NexusFi?
Doing some searching of this thread to learn more about how margin increases/decreases over the life of the option and found this post.
@ron99, do the majority of losses related to this style of trading come from being wrong (direction/strike/etc) at expiration or mainly from margins going against one's position too much?
From what I have been reading, it seems like the main risk is margin going against one's position, even if one is "correct" that the price will close on the right side of the strike for that option.
Beginners to option selling think that as long as futures don't hit their strike then they are good to go. But that is rarely the case. Not having enough excess to ride out losses in premium and increases in margin is the main problem.
IMx3 is a good start to having enough excess. IMx4 is even better but you will give up profits for the safety. Personal preference of amount of safety will decide risk and reward.
Thank you for taking your time to answer my questions, along with everyone else's!
From the studying I've done, I believe IMx3 would be right up my alley.
I'm going to be opening up an options on futures account soon to explore this style of trading in real time soon. I'll post here and in my journal some of my first few trades.
@ron99 and others, what's a good rule of thumb for a "large" movement in margin? Are we talking doubling if the underlying goes heavily against you, tripling, quadrupling? I'm beginning to understand how this methodology works, just trying to get a grasp on exactly how much margin moves can affect a position.