Any advice for my poorly designed options trading strategy

Quote from jdoucet:

This will NOT be a grand revelation to any of you but it was to me. :D For a years, I had an epiphany. I simply rolled my shorts up to another strike and one month further out. I thought, "there's no law that says I can't wait another 30days to take a profit or to recoup my capital. Why sit here and keep losing money" Now, I'm feeling better..I'm not losing money. I know it's simple but for me, I was in the mode of "having" to make a profit this trade no matter what, and then losing all of my capital. I'm learning more guys give!!!
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The only problem with rolling out...and I have no problem with doing it...is you really ARE booking a LOSS in the month you are rolling FROM...The credit is (should be) booked in the month your rolling TO. The trade off is the market can continue to move against you so your risk is time. You can of course do this until you are made whole but there are risks.

one really big risk is money. Say you have an IC on and don't close down your puts you will have a margin requirement for both months and may not have the cash to pull it off.
 
Quote from RichardRimes:


one really big risk is money. Say you have an IC on and don't close down your puts you will have a margin requirement for both months and may not have the cash to pull it off.
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That is exactly what happened to me a couple of times. Right now I'm strictly trading vertical spreads so I only have one side to worry about. Commissions are a lot less obviously. After I rebuild some capital, I may trade IC's again but that's at least six to eight months out.
 
Quote from RichardRimes:

uhmmmm and I would have to agree with everyone else and stick to shorter time frame stuff. I used to be a CC person and sometimes even sold 6-8months out...tsk tsk. Have mended my ways:) but I never did leaps....

edit...hey who can complain..your p&l YTD is positive. Let he who has not sinned cast the first stone.
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OT - just wondering why you stopped doing CCs and what you are doing now (in addition to calendars)?

I was just thinking of getting into CCs/naked puts for the income. 1-2% per month would do it for me.
 
FullyArticulate,

That's a really good summary of how one should approach selecting the option strategy for the outlook for the underlying. Many just pick a strategy just because it looks interesting w/o regard to the what ifs.
 
>> I thought, "there's no law that says I can't wait another 30days to take a profit or to recoup my capital. Why sit here and keep losing money" Now, I'm feeling better..I'm not losing money. <<

jdoucet,

I'm not sure what strategy you were referring to but in general, rolling is fine if the underlying cooperates. But if it doesn't, it can be a losing battle as the underlying loses more than the roll takes in (disparate deltas). You will lose money when the sh*t hits the fan :->)
 
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