Your stratergie to join the Millionaires Club.

hi young gun.. how much of your $250k is left today?

Interesting strategy Young Gun. I'm about to start trading options but I'm thinking of doing it slightly different to you. I'll buy a 12 month put at the same time I write 1 month naked puts. Once I get exercised on my 1 month naked put I'll then start selling covered calls.

What do you think of this strategy? This way I get income but also am covered if the share price drops through the floor.

Cheers.

Backtest it first.

waste of time... backtesting this stratergy before this crash would have shown a nice profit in a raising market.. now with the market crashing, you would have lost a fortune...

The strategy for back-testing is not to just test it out over the past few months or years - especially if it is obvious we are in a rising market. It is quite possible to back-test most systems using much more historic data from a range of market conditions to see how your trading system would have reacted.

While it doesn't guarantee success in the future - it does help you understand how your strategy is likely to perform and allow you to fine-tune things.

I'm not even going to reply to that

I was just wondering if anyone has been trading CFD's based on Wall Streets movements over the last few months?

Seems to me like it would have been a great way to make money over the last few months, and is largely creating a very predictable market, at least when it comes to days were there are big swings.

I'm very tempted to get into them myself.

Hi Chris,

I'm more tempted with the local Zurich Equity Income Fund. Certainly not as exciting as CFDs but I don't need the excitement in my life.

Cheers,

Dan

PS This is general information, before making an investment decision speak to your FPA registered Financial Planner.

I've been trading the big wall street investment banks all the way down during 2008. Not with CFDs but with options. Many are so close to $0.00 I've had to stop trading them. Not much room left to manoeuvre when they go below $10.00.

G'day All,

My first post, so please indulge me. Many people use an option writing strategy on overseas markets to pick up the 2-3% style of profit. The general strategy is to write an option, call or put, well out of the money in the last month or so of the options life. Options loose the majority of their time value (Theta) in the last few weeks prior to expiry, assuming they are a fair distance from strike.

This strategy has worked very well for many years, but things have been a little different over the past 12 months. Market volatility has been through the roof, and positions which would previously have been a safe distance for writing can take some heat. For people trying to double their premium by writing strangles, volatility has been such that on occasion they have had to roll the position on both sides of the strangle!

Still, the profit target is still achievable, but the strategy needs a bit of a tweak. For example, instead of trying to profit from time decay, write positions further out (say, a few months), but a long way from strike. Then, use some of the premium to purchase inside hedges. While adding wings to your trade will decrease profit, hedging is a very good idea in the current market.

Cheers, joel
PS: This is not financial advise of any sort, but my personal opinion. If you want advice, send me an email at joel.harrop@alphabroking.com.au