Generating Profit Using Option Selling Strategies

In this paper, option selling strategy is discussed which is different from traditional equity and commodity trading strategies. Option selling strategies can achieve various non-linear Profit & Loss (P&L) graphs instead of traditional linear P&L graph. Option sellers make money through taking advantage of time value of option. Option sellers collect premium as time elapses. Selling straddle is proposed in this research. The strategy is back-tested using Hang Seng Index (HSI) Option data. The return of the proposed strategy is compared with HSI and its performance greatly outperforms HSI. The great profit generating ability of option selling strategy is verified in this paper.