I prefer naked options of the index and stocks for obvious reasons. I would like to know some strategies to remain profitable with it.
Note: I choose first out the money (strike price) option irrespective of time left to expiry.
As I stated in another post, I tell everyone that wants to speculate with options, not to. They are statistically priced to whereas either buyer or seller you should not win or lose. Therefore if anyone suggests a 'guaranteed' strategy to make money with options, I advise you not to listen.
Reality though is most people that buy options lose their premium and never do it again, and those that sell options tend to win at first, believe they found the secret to free money, and don't realize that given time, a disaster of epic proportions is just around the corner.
Better to stay with equities and transact in a smaller volume.
Buying an option is a bet on direction and/or a volatility increase. To make money this way, premium increase from these two factors must exceed the time decay. You'll also need a disciplined risk mitigation strategy should price move against you..
Time is not on your side. Success is based on timing and direction. If you are adept at picking underlyings that move quickly, the most bang for the buck comes from near-term options. If you're like most people and your picker isn't that accurate, buy longer-term options so that you'll avoid accelerating time premium decay as expiration approaches.
Pay attention to implied volatility. Avoid inflated options unless you are very adept at timely picking. Fat premium should be sold but that's a different story.
Options are a zero-sum game (ignoring B/A slippage and commissions). In order to win by either buying or selling them, you need an edge. Without that, kiss the coin goodbye.
When long near-the-money or out-of-the-money options, you typically need the underlying to make a strong move in the right direction to be profitable, and time decay works against you. The main determinants of your risk are your profit target, stop loss, and implied volatility. Avoid buying richly valued options (implied volatility higher than usual). If the underlying does not move as you expect, sell well before expiration so you salvage some time value.