One that I saved many years ago was on another forum and it was posted by Stuart A. Johnston perhaps ten years ago. He subsequently wrote a book, "Trading Options to Win."

With the advent of the weekly T-Bond Options, I have been having good luck selling T-Bond option premium and it was his philosophy that got me started.

Here is the post:

Susannah -- OK, try this...and it's remarkably short...well, short for a long-winded guy like me.
What's that famous statistic about the percentage of losing traders? 70, 80, 90%? I forget, and it's not important to this discussion except that an unfortunately very healthy majority of traders end up losers. However, let's consider the methodologies of this large number of traders.

Now, ANY methodology **can** be successful over any given period -- not a doubt of it. Nor is it my purpose here to bash 'technical analysis', 'fundamental analysis', or Arch Crawford's 'astrological' methods.

The question is and must be: can one find a methodology which is GENERALLY and preferably **steadily** profitable, over time and a broad set of mkt conditions, and over a broad selection of mkts?

The answer is 'yes'. Once again, let's look at what 'the dog didn't do in the night-time', to borrow from Conan Doyle's famous short story.

If 70, 80, 90% of traders LOSE, would we not be well advised to avoid their methodology? Hmm? Seems fairly reasonable, wouldn't you agree? Let's get down to it -- what is the ONE absolutely guaranteed constant in ALL trading?

The mkts will be open? Nope -- if fire breaks out at the exchange, or there's a power blackout....can't count on that. Much simpler: merely that time passes at the rate of 1 day per day -- and that is the ONLY absolutely guaranteed constant in any mkt. You disagree? OK, fine -- I'd like to hear your counter-example.

So, now we're down to avoiding the methods of the average (losing) trader, and agreeing that time passes at a fixed and well-known rate. Does this suggest anything? I hope it does.

Let me embellish this a bit. What is the famous and fearful caveat offered a thousand times to new, used, and in general ALL options traders? "Don't sell naked options! You're exposed to unlimited risk! UNLIMITED!". Correct?
Horse puckey. Utter and complete nonsense.

The only thing that changes when you write a naked option is the RATIO of potential profit to loss. You have EVERY bit the same "unlimited" dollar risk in selling a naked option as you have when buying or selling a future. When trading a future, though, you've also the "unlimited" profit potential, and this is very likely the origin of the canard about "unlimited" risk in writing naked. The necessary condition for success in writing options is to manage the EXPECTATION of the trade, NOT the risk/reward ratio, and there are any number of ways to do this.

Now, let's recap a little. Most traders lose. Most traders trade mostly futures (I've no stats on this, but it seems almost a given). Of those traders who **do** trade options, most are buyers, and of course a subset of the losing majority.

If you disagree with any of this analysis, I've no quarrel whatever. Perhaps I failed to make the case well. Would welcome your counter argument(s).

If, however, you find the analysis above somewhat persuasive, well then, it's perfectly clear what sort of methodology you might, with profit, examine.

I'll put it bluntly. I'm a **LOUSY** trader, period, stop, end, no qualification whatever. Nonetheless, I'm still highly profitable using an option writing methodology.

Ask yourself one other question, if you would. What is the source of revenue of insurance companies? Do they not sell us nice shiny policies, for which they charge a premium? Hmm, selling premium, are they? Do they not assume -- better yet, DEFINE -- the risk which they take? Next time you pass a commercial construction site, check the billboard out front. Where it says "Financing provided by" (or equivalent words), you'll see the name of an insurance company, or a re-insurer. Wager you $20.00 to a cold beer on that!

Willie Sutton robbed banks because, in his words "That's where the money is". That was then, this is now. Sell premium, because that's where the money is today.

Worth considering, perhaps?

Good trading to you!

Stu