My first lesson as a newbie: Never buy/write at market. Always use limit order.
Best option strategies to learn ....
- Thread starter tradingpoker
- Start date
Ok good to hear, but I am guessing I should not put these orders through via the market option?
If you are trading a highly liquid instrument and the option market is .01 wide,I would place market orders.
If the market is .15 or more wide,I would lean towards a limit order.It really depends on my level of urgency.
IMHO,newbies try to squeeze out pennies splitting markets,and when the market moves against them,they cough up dollars..
If the market is .15 or more wide,I would lean towards a limit order.It really depends on my level of urgency.
IMHO,newbies try to squeeze out pennies splitting markets,and when the market moves against them,they cough up dollars..
Highly liquid, narrow spread usually means very efficient market, hard for newbies to make a buck. At least that was my experience as a newbie.
If there is no liquidity and wide markets,a newbie will get punished unmercifully in transaction costs. It not like the newbie is a market maker buying on the bid and selling on the offer.
Yes sir, all true.
Lesson #2 for us newbie: If we play with thinly traded options, learn to have patience and don't buy/write unless we can get near mid of bid/ask.
I found I had a better chance of making money if I could get mid of bid/ask in thinly traded options. Even though win was < 40%, convexity resulted in net positive outcome for the past 7 years.
Is it skill? Nah, all could be attributed to the bull market. I could essentially achieved the same result trading the underlying using margin!
But playing with options is more fun, makes me feel like a pro when I tell my friends I am an option trader.
Best regards,
i should have mentioned never to use limits when legging into/out of a spread.. Its one thing to put in the limit order to execute as a spread,but when we choose to leg one side to save .05, you may find yourself coughing up 1 dollar on the exposed leg that got away from you..
All true.
Lesson #2 for us newbie: If we play with thinly traded options, learn to have patience and don't buy/write unless we can get near mid of bid/ask.
I found I had a better chance of making money if I could get mid of bid/ask in thinly traded options. Even though win was < 40%, convexity resulted in net positive outcome for the past 7 years.
Is it skill? Nah, all could be attributed to the bull market. I could essentially achieved the same result trading the underlying using margin!
But playing with options is more fun, makes me feel like a pro when I tell my friends I am an option trader.
Best regards,
Question to you. Unless you are buy-and-hold investor, don't you think there is still skill involved? Especially with options, where timing makes a huge difference, there is got to be skill involved, no? Maybe similar to a swing trader but more difficult due to timing constraints?
According to this newbie, short answer is no. Of course the devil is in the details.
Don't forget options have expiration, so you have to keep "trading". The big picture dominates and like @dozu888 said, for the past decade, if your guess is bull market, you will make money.
Since this is a leverage play, you will have horrendous drawdowns like in 2018 Dec which I still have nightmares.
Thank you for the coaching.
I only trade single legs, so it hasn't affected my trades but as I learn to trade combination, definitely I will remember not to do that.
