Maskien  das die masjien se leer Research shows that about 80% of all options bought expire worthless at expiry. It is therefore evident that selling options will enable the option seller to be correct 80% of the time.

Large margin for error

The advantage of selling far out of the money options is that the underlying price can move “against” the seller to a large degree without being wrong at the end. That is why the price range in which a profit can be realised is much wider than would be the case if one was to be an option buyer or hold a long futures contract. Pin point entries and perfect timing is not essential to make a success of this strategy.

Time decay

Time is certainly on the option seller’s side. The more time goes by the more value the option loses. Time decay towards the last part of the option’s life cycle is at its highest.

Effective Risk management

Selling naked options far out of the money is a proven and profitable investment strategy. There are however numerous ways to improve the “margin for error factor” when it comes to selling options. Strategies like spreads and strangles are effective ways of managing risk when selling options. Although the risk of option selling cannot be nullified we will always put transactions on that offer the most effective margin for error factor.