Are There Any Successful Option Buyers ?

[Fundlord]

Im talking about those who use OTM options to heavily leverage themselves in hopes for large gain with limited risk.

From what I have read most people preach becoming an option seller and not be directional (tastytrade, Marty Schwartz). But you would need a much larger account to make decent money.

Gonna start reading this on Monday:

I know there will be a lot of talk in it about buying far OTM's in favour of selling options.

I want to allocate 25% of my account to buying options in hopes for a much higher R:R.

 

[cdcaveman]

I've read all nassims books... You have to find a way to define what cheap is when it comes to option purchases... it might mean cheap relative to another option in the series or in the calendar it might mean cheap in relation to the leverage you want for a directional trade... I bought some vix calls recently and did well... You have to be right about magnitude of direction not just direction with directional plays.. Not so easy... Even if your trading vol you are trading direction... Start very small... Buy some vix puts ... Or buy some risk reversals... Or otm cals...

 

[Fundlord]

I've read all nassims books... You have to find a way to define what cheap is when it comes to option purchases... it might mean cheap relative to another option in the series or in the calendar it might mean cheap in relation to the leverage you want for a directional trade... I bought some vix calls recently and did well... You have to be right about magnitude of direction not just direction with directional plays.. Not so easy... Even if your trading vol you are trading direction... Start very small... Buy some vix puts ... Or buy some risk reversals... Or otm cals...

What was the appreciation on the VIX calls if you don't mind me asking ? Because I bought some JANWK2 SPY195 Puts in a paper account when the index was trading around 1990, a day before expiration the puts were not even in the money but they were worth 400% more.

I still don't understand how an option goes from 0.33 to 1.48 when its not even in the money.

 

[Autodidact]

I want to allocate 25% of my account to buying options in hopes for a much higher R:R.

25%??? You need to read some basic books on probability, don't even need a bad losing streak to blow up using such risk.

 

[Fundlord]

25%??? You need to read some basic books on probability, don't even need a bad losing streak to blow up using such risk.

I don't mean 25% of my account per trade, I mean 25% of my trading capital will be put into an optionsxpress/tdameritrade account for this strategy.

My trade size will probably be 1% of my total capital. So 25 straight losing bets and I'm down 25%.

 

[WildBill]

I like slightly OTM calls or puts when you are right at support & resistance decision points. See if you can time the best premium costs against the decision. Usually you can make 50 to 80% profits just going for inside targets. Every once in awhile you get on the right side of a weekly option short squeeze and can make 200% or better.

 

[cdcaveman]

25%??? You need to read some basic books on probability, don't even need a bad losing streak to blow up using such risk.

It was obvious he didn't mean 25% up on one trade...

 

[Fundlord]

I like slightly OTM calls or puts when you are right at support & resistance decision points. See if you can time the best premium costs against the decision. Usually you can make 50 to 80% profits just going for inside targets. Every once in awhile you get on the right side of a weekly option short squeeze and can make 200% or better.

Is trading weeklys better as you can get roi since the options have little time value left thus making for a huge gain if right ?

 

[WildBill]

Is trading weeklys better as you can get roi since the options have little time value left thus making for a huge gain if right ?

I don't know about "better" but you stand to make more on the volatility.

Two ways to play it:

Risky: All in on a weekly.
Better: 25%-30% of trade on the weekly, remainder on later expiration dates.

Weeklies are all about catching the right combination of fear or greed, and better pricing, when price is running into supports or resistance.

 

[Autodidact]

I don't mean 25% of my account per trade, I mean 25% of my trading capital will be put into an optionsxpress/tdameritrade account for this strategy.

My trade size will probably be 1% of my total capital. So 25 straight losing bets and I'm down 25%.

Read it incorrectly, ya much more prudent