Here is my take about options , just trade SPY weeklys , thats all you need , forget about the spreads , all that complicated BS , it doesn't take a lot of money to trade SPY weeklys.
Account Destruction.
- Thread starter PurpleOne
- Start date
Man, im loving it just sitting and sipping J&B w/seltzer. God bless this country , good whiskey and who cares about recession.
I personally have never really looked at the weeklies but I would imagine that would make Vega a little less important but it seems like that would make Theta a LOT more important since there is not much time for all of the extrinsic value to decay. I would also imagine that spreads would still be beneficial here, either as a hedge or to reduce Theta exposure. I could be wrong though, as mentioned, weeklies are not what I normally do.
You see , forget about vegas and deltas , as I said keep it simple buy oversold weekly market and sell over bought market , sell fridays as well , and you will make the money.
LOL always confirm your order before pressing send. I used to have the confirm option off, until one day I was short some equity (I forget now what it was) and wanted out quickly, so I reached up and clicked a button thinking I was closing my position. I sat back thinking whew dodged a bullet there. I went for a smoke and came back about 10-15 min later, only to realize that I had accidentally clicked "sell" instead of "buy" and was now short double the amount that I was instead of being out of the trade. After that I turned the confirm option back on, the extra 2 seconds it takes to double check the order has cost me less $$ than that one mistake did.
Thanks for input from everybody on thread I'm learning a lot and it is helping me out from a mental perspective as well. Trying to immerse myself in learning as much as I can before and if I decide to start trading again. A couple of questions.
Is there any exact position size when selling premium in relation to account size that will make losses manageable even if short strike is violated?
When managing deltas if I have offsetting deltas initially should I should I keep the neutrality for life of spread?
Is there any exact position size when selling premium in relation to account size that will make losses manageable even if short strike is violated?
When managing deltas if I have offsetting deltas initially should I should I keep the neutrality for life of spread?
Size should be determined the same no matter what the trade is. You should first predetermine what % of your account you are willing to risk per trade (usually 1%-2% of total account size). Then determine the entry and exit points for your trade to determine risk/reward ratio, you should go for 3:1 or better ratios. Then determine size for the trade by dividing the max loss for the account by the max loss for the trade.
Example (based on the above I assume you have a $75k account. So lets assume you are willing to risk 1% per trade. That is $750. So you start looking at a trade where your for loss exit point would cost you $75/contract. Then you would trade 10 contracts. If the max loss per contract was $100 then you trade 7 contracts. If the max loss per contract was $325 then you trade 2 contracts. It does not matter if you are buying or selling premium. However in all of these cases you want to make sure the profit potential is at least 3 times the risk. That's $225 for the $75 risk, $300 for the $100 risk and $975 for the $325 risk. By doing this it allows you to break even even if you lose 2 out of every 3 trades and allows for small bad streaks that don't "destroy" your account.
I am not sure what you mean. Are you talking about true Delta neutrality on a non-directional play? Are you talking about Gamma scalping? Or perhaps just low starting Delta on a directional play?