best options strategies for advanced beginners

[taowave]

Sorry for the late reply
I typically roll options up or down,depending where the vert is trading..

Ild consider turning the trade into a calander,but would most likey turn it into a diagnol..

I dont want to be right on direction,i.e Long and get short if I turn the position into a calander..

Suppose you are a directional trader who wants to be longer term invested, in my view one can use the longer expiration and convert the postion somewhat when you want to 'take tempory profits', or expect slower momentum* after a relatively large move. Or use t/g for creating spreads/calenders. Do you disagree with this?(really curious)


* ofcourse the assumption one can anyhow predict this beyond random, which can be a futile attempt

 

[newwurldmn]

Suppose you are a directional trader who wants to be longer term invested, in my view one can use the longer expiration and convert the postion somewhat when you want to 'take tempory profits', or expect slower momentum* after a relatively large move. Or use t/g for creating spreads/calenders. Do you disagree with this?(really curious)


* ofcourse the assumption one can anyhow predict this beyond random, which can be a futile attempt

Expressing this view is easy.

be long the stock (no theta and favorable tax treatment) and then overwrite when you think the “momentum” will slow. Buy puts if you think there is short term downside (but these trades rarely workout in my opinion).

calendars are only useful if you have a view on the forward vol (ie quiet now and noisy later).

 

[Zwaen]

Expressing this view is easy.

be long the stock (no theta and favorable tax treatment) and then overwrite when you think the “momentum” will slow. Buy puts if you think there is short term downside (but these trades rarely workout in my opinion).

calendars are only useful if you have a view on the forward vol (ie quiet now and noisy later).

True, but don’t calendars have a risk cap as opposed to ‘long stock’? Especially stocks, which can have gaps.
Then one could say these gaps down and their P(x) are discounted in the long leg, the other side would be more smoothness of equity returns?

 

[Zwaen]

Sorry for the late reply
I typically roll options up or down,depending where the vert is trading..

Ild consider turning the trade into a calander,but would most likey turn it into a diagnol..

I dont want to be right on direction,i.e Long and get short if I turn the position into a calander..

I think you can adjust this with the ratio of the long position versus the overwrite, keep delta in check. This will change ofcourse when underlying moves. And you want to roll the longer term options bc of spreads

 

[newwurldmn]

True, but don’t calendars have a risk cap as opposed to ‘long stock’? Especially stocks, which can have gaps.
Then one could say these gaps down and their P(x) are discounted in the long leg, the other side would be more smoothness of equity returns?

You want to be long for the long term. Why are you hedging for a gap down? If it’s a “just in case” then trade less size.

 

[Zwaen]

You want to be long for the long term. Why are you hedging for a gap down? If it’s a “just in case” then trade less size.

The general idea is to cap the downside (relatively more then the upside) trying to better the risk/reward and to size up a bit more. Or do you say it’s better to search it in diversified assets?

 

[newwurldmn]

The general idea is to cap the downside (relatively more then the upside) trying to better the risk/reward and to size up a bit more. Or do you say it’s better to search it in diversified assets?

if you are bullish then you should inherently think the stock has favorable risk reward. The market isn’t going to give you odds because the market will be fear biased.

Any structure that will give you favorable odds will be at the expense of your view (ie the delta switches to negative or you are short gamma or you are paying drag against your thesis)

Just my opinion anyway.

 

[Zwaen]

if you are bullish then you should inherently think the stock has favorable risk reward. The market isn’t going to give you odds because the market will be fear biased.

Any structure that will give you favorable odds will be at the expense of your view (ie the delta switches to negative or you are short gamma or you are paying drag against your thesis)

Just my opinion anyway.

Thanks, appreciate it

 

[ironchef]

Buy puts if you think there is short term downside (but these trades rarely workout in my opinion).

Tried this in the past, didn't work for me. I had to go fairly long expiration to find some value.

I think the market is efficient, most short term moves are priced in.

 

[Haywood]

Really, what if that happens without warning and the stock opens down 20%?

Instead of always implying that selling cash-secured puts and covered calls is a fool's game, why don't you tell me how to do it? I have a significant cash account that's been successfully traded for the last 3 years using CSP and CC., but learning a better way is desirable. My trades are 95% short-term (one to two-week expirations) small premiums, but it adds up on a decent amount of money. The naked puts do concern me. That is why I trade about 10 major companies with many years of history. The likelihood of a major portion going to zero is small. I'm always interested in learning a better way.

Thanks

Thanks