This system sells naked options and therefore will one day blow up when sudden volatility hits the market. The equity curve looks nice and smooth because that's the result from the steady premium income. Until one day...boom. This is a classic "risk under carpet" system where a long period of seemingly smooth gains is inevitably followed by a big blowout. You have been warned.

This is a typical assumption by an amateur trader, we have been trading this strategy through 3 market crashes, the latest is August 2011 and you can look at the equity curve on Collective2 that we did just fine during that correction, as we sit glued to the screen all day we are willing to accept a 5%-7% drawdown if a flash crash occurs and that is well worth the 25%-50% we have been earning annually for the last 11 years, if you want to look at the 2008 market crash you can see all the mid and short term technical were signaling down and we were selling calls and making money riding the crash all the way down, a trader and investor by the name of Warren Buffet sells puts as part of his income for the fund he manages, we welcome you to join “Options 787” when you are ready to start making money.

Hi, there is only a one year record on C2, so I cannot comment on your claims for the previous 2 years. August 2011 was not a "crash". The fact that you regard this period as a "crash" indicates that you are not considering more extreme events. How much would you lose on a QQQ put spread typical for the system if the NASDAQ gapped down 100 points on a Monday morning? Even if you immediately closed out the position, how many previous months' profit would be eradicated in this example?

How do you manage changes in volatility or direction that go against your positions? Do you have limits to close out the open call/put spreads?

We will answer your QQQ example, today the nasdaq is down 50 points and the qqq’s are down 1 point from 64 to 63 and the 60 put is down 20 cents, now for your scenario lets double that to 40 cents and we want to get out, at $160K account size on C2 we are trading 7 to 8 lots per trade, so we take a $300 loss and move on, ok more extreme now-the nasdaq falls 200 points at the open so we lose $600 and close some calls for profit and move on, and if combined our positions lose 5% of portfolio value in an extreme overnight crash then we accept it and keep going-no big deal, if you have any other questions we would love to answer them just send us an email us so we don’t write back and forth on this forum.