Why deep out-of-the-money naked put sales have such astounding returns at Ameritrade
It starts with the fact that options in general have a very bad name. Most people don't understand them, don 't know what the margin requirements are and what the risks are. And there are very substantial risks to the BROKERAGES as well that don't exist with stocks. If an investor loses money in even the most speculative stock, that's just tough - the investor is out the money. But if there are big losses in options, investors have found that if they sue to try and recover losses on grounds of unsuitability, surprisingly many arbitrators will rule in their favor and will force the brokerages to cough up part or all of the losses.
For that reason, brokerages these days are VERY reluctant to grant authorization for advanced options trading such as selling NAKED puts. While almost anyone can get authorization to sell FULLY CASH-COVERED puts the margin requirements are very onerous. The ONLY way that sellers of the cash-covered puts can reduce their margin requirements is to BUY lower-strike puts at the same time they are selling the higher strikes.
Those buying the lower strikes are essentially giving money away since these options are really worthless or semi-worthless. But the cash-covered put-sellers buy them anyway because they just have to lower the margin requirements. So what happens is that there are all of these cash-covered put sellers who are acting strictly in their best interests. However, this ends up having a crazy result because all of the buying of the lower-strike options dramatically jacks up the prices of those ostensibly worthless and semi-worthles options.
So then along comes someone like me or my group of investors and we SELL these jacked-up options using the one brokerage in the country that has far-and-away the lowest margin requirements on naked puts. We have the field practically all to ourselves as only 1% of put sellers have the authorization to sell NAKED puts which entail much much lower margins and therefore much higher pr,
Even among the few people who have naked put authority, they just don't see the returns that I do if they trade with other firms. That's because Ameritrade is the ONLY brokerage in the land to offer naked put margin requirements that are at the floor levels set by the SEC and the options exchanges. Every other frim sets arbitrary minimum margin requirements that are two, three and even five times as high as Ameritrade. So obviously the returns at these other firms will only be a half, a third or a fifth of what they are at Ameritrade.
And eve at Ameritrade where the returns are so much higher, I am told that hardly any other clients there are interested in selling deep out-of-the-moneys.
I consider my Eureka moment of two years ago to be one of the greatest financial market discoveries IN HISTORY!. Almost nobody else in THE NATION can earn the kind of returns in non-crashing markets that I do or can do it as safely as I can.
I am truly aghast that so few people of this board seem to even be interested in this. Anyone who thinks that this is too good to be true or can't be true is out of his or her mind. Because the truth of the matter is that it's absolutely true and I continue to shiow investment after investment where I'm able to garner other-worldy returns in a strategy that is infinitely SAFER than buying and holding a stock. By selling very deep out-of-the-money naked puts I have far far greater safety than buyers of the stocks. And while you might think that such deep out-of-the-moneys can't be selling for much, that's where the fully cash-covered put sellers come in. They HAVE to buy these options unless they want to put up such huge margins that it renders their put-selling unattractive.
I myself am just amazed that I seem to be about the only one to have figured this stuff out but what can I say. I HAVE figured it out, it gives me the Keys to the Kingdom and it has been a complete life-changer for those who can now have 25% and 30% returns.
Eat your heart out, detractors. I know that I'm the last person on earth that you would have wanted to make such a monumental discovery but indeed I'm the Chosen One. Chosen to actually find the methods to beat the market in virtually all cases but all-out crashes such as 2008/2009.
In the event of such a crash, I'm going to lose more money than anyone else doing what I'm doing. However, I still do much better than virtually anyone in flat markets, market corrections, garden-variety bear markets and even bear markets in the 30% range. It's only CRASHES where I come a-cropper.
I still wonder why so few people here seem interested in earning consistent returns of 25% or more in all but market crashes. Just for the record, my portfolio earned 58% in the flat market year of 2011, itearned 42% last year and I'm well on my way to earning an overall return at least in the 40's again this year. What other person but me can earn 40% or more on his entire portfolio three consecutive years? The first time perhaps it's luck. Two straight years is quite a surprise but THRR years in a row can't be due to anything but SUPERIOR METHODS.