Recently I've been looking at butterflys and condors (inc irons) and comparing them with Hoadley's cool comparison function. I notice that when I want to buy downside protection it always costs about twice that of comparable upside protection - even though the markets have been in a very solid uptrend recently. It's a but annoying - why can't the market give me cheap protection! My P&Ls/risk/rew graphs would be better if it would behave itself. So then on the filpside if puts are relatively expensive then why not sell the suckers for income to those nervous nellys waiting for the next 9/11 which based on historical occurance is extremely unlikey most of the time (thank goodness).
I watched a webinar recently (on 888 I think it was) in which the presenter explained that in the last 5 years (excluding May-June 2006) selling naked puts would have been the best and most profitable strategy overall! How can one sell protection and keep safe at the same time, any tips?
Would any of you consider a strangle trade in which you sell deep ITM puts and deep ITM calls for a massive credit but with unlimited risk to BOTH the downside and upside? Problem is as soon as you want to limit your downside the darn puts cost too much and ruin the picture. This strangle I speak of looks like a wooden horse with a slope up then a flat part then a slope down, it's cool 'cos the probability of profit is quite high and max profit occurs over a nice price range. Putting the strangle and iron fly side by side the strangle is clearly better - even with some far OTM put protection.
I'm really just talking to myself here, but if you have any thoughts on any of it throw them up on here. Cheers.