How to Sell Options Like a Wall Street Trader (My 4 Golden Rules)
Summary
Lance shares his four golden rules for safely selling options, emphasizing that high win rates often lull traders into complacency. He advises selling only after volatility spikes, at strikes you would genuinely want to be assigned, in conservative sizes to handle non-linear risk, and with expirations matching your thesis. Using examples like TIGR and Bitcoin, he illustrates how to capitalize on extreme sentiment while avoiding the "no man's land" of calm markets.
Topics discussed
Introduction: The danger of selling options and the 4 golden rules
The home insurance analogy: Why complacency leads to blowups
Rule 1: Sell options only after volatility has blown out
Rule 2: Only sell at a price you would be happy to be assigned
Rule 3: Size positions for the amount of shares you are willing to hold
The risks of oversizing: Non-linear moves, margin calls, and psychology
Rule 4: Match option expiration to your thesis window
Case Study: Selling TIGR calls after the October 2024 surge
Case Study: Bitcoin range break and the danger of 'no man's land'
Bonus tip: Why shorting calls is infinitely more dangerous than puts
Conclusion: Risk management, longevity, and final takeaways
Listen ad-free on Castria