The method is selling option premium on currencies. Option buyers have a 10% success rate, so the option seller who grants the option has a 90% success rate. Many forex traders never consider selling options and this article is all about selling option premium...
So if you can have a 90% chance of success selling forex options, why don't more traders do it?
The answer is - most traders prefer the idea of buying an option with unlimited gains and limited risk, and a low chance of success, to being on the other side of the option which offers a capped small gain and unlimited risk, with high odds of success.
If you want to be an option seller you have great odds - but you must be mindful of the risk and the way to control it is as follows.
- Sell option premium on high volatility up or down against the prevailing trend
- Spread your risk across several positions
- Use time decay to your advantage and sell near expiry when time is decay is killing value
Selling option premium is not for traders who are not confident, have a small account or don't like risk - it's a game for people who know what their doing. An option may have 90% odds of expiring worthless - but that's at expiry and prices can of course move "in the money" for the buyer in that period, or move against you.
If however, you don't mind trading tops and bottoms and can calculate over bought and oversold scenarios, you are confident in, it's one of the best ways to make money long term. Sure, you have a capped small gain but these mount up over time and can build serious wealth long term.
There are not many opportunities to trade with 90% odds of success - but that's what selling option premium gives you and for traders who are confident in their marketing timing, the rewards long term are huge.
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Does the method really works for intraday traders ...
By: chim | 26-10-2007
Does the method really works for intraday traders ? It seems like breakout strategy ?
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