Directional Option trades

oldtime · Feb 28, 2013

Quote from rfriend73:

So the moral of the story is that spreads are the only way to long term profitability with options ? Dreamkiller..

well, that's just it. I don't want to kill her dreams, but she doesn't have what it takes to be a spread trader, and long options is not a very good vehicle for going directional because they time out

I don't know that much about it, so back to opies question, does anybody make money anymore just going long calls?

rfriend73 · Feb 28, 2013

Quote from sle:

"In options, it's either a slow bleed or a bullet to the head. Or, sometimes, it's both"

So, again...the consensus from the experienced traders on here is that options are not a viable long term trading vehicle..at least directionally, but spreads have some value for creating income.

rfriend73 · Feb 28, 2013

Quote from oldtime:

well, that's just it. I don't want to kill her dreams, but she doesn't have what it takes to be a spread trader, and long options is not a very good vehicle for going directional because they time out

I don't know that much about it, so back to opies question, does anybody make money anymore just going long calls?

What makes options the killers of accounts vs other highly leveraged instruments such as futures and forex where traders go directionally ?

Put_Master · Feb 28, 2013

Quote from rfriend73:

So, again...the consensus from the experienced traders on here is that options are not a viable long term trading vehicle..at least directionally, but spreads have some value for creating income.

Only if you are good at "price selection", and actually manage a spreads highly leveraged risk.
Otherwise, their only value is in emptying out your bank account.

rfriend73 · Mar 1, 2013

No thoughts from experienced traders about what makes directional option trading more likely to cause failure vs other leveraged instruments such as futures and Forex ? Using the often quoted 95% of traders fail, are option traders more likely than other markets ? Curious to hear from the veterans who have seen big blowups or successes.

oldtime · Mar 1, 2013

Quote from rfriend73:

No thoughts from experienced traders about what makes directional option trading more likely to cause failure vs other leveraged instruments such as futures and Forex ? Using the often quoted 95% of traders fail, are option traders more likely than other markets ? Curious to hear from the veterans who have seen big blowups or successes.

yeah, like they told me when I started out, get out of those options and over to futures, you have enough going against you without also time going against you

newwurldmn · Mar 1, 2013

Quote from rfriend73:

No thoughts from experienced traders about what makes directional option trading more likely to cause failure vs other leveraged instruments such as futures and Forex ? Using the often quoted 95% of traders fail, are option traders more likely than other markets ? Curious to hear from the veterans who have seen big blowups or successes.

Options aren't more likely to cause failure. One can make money trading anything if they know what they are doing.

Buying options because it provides you leverage on delta isn't knowing what you are doing.

cdcaveman · Mar 1, 2013

Quote from newwurldmn:

Options aren't more likely to cause failure. One can make money trading anything if they know what they are doing.

Buying options because it provides you leverage on delta isn't knowing what you are doing.

from lots of personal experience i completely +1 on that!

Put_Master · Mar 1, 2013

Quote from newwurldmn:

Options aren't more likely to cause failure. One can make money trading anything if they know what they are doing.

Buying options because it provides you leverage on delta isn't knowing what you are doing.

Yet another perfect statement.

Trading options. from my perspective, is all about being able to evaluate "probabilities".
Not from a formula perspective.
But from an analysis and common sense perspective.

That being, the probability of a stock moving in the direction, or non direction you desire, per unit of time.
The probability of your stock moving enough in your direction, or not moving too much, per unit of time.
The probability of your degree of leverage potentially getting you in trouble.
The probability of you being able to intelligently manage your trades, before they get into trouble.
The probability of you actually managing a trades risk, once they get into trouble, vs relying on HOPE.
The probability of earning your desired % return, per your prefered strategy, at year end.
The probability of getting into the right/wrong sector, at the right/wrong time.
The probability of the "blend" of greeks working in your favor by or before expiration... esp if buying options.
The probability of a sudden severe spike in IV and/or VIX making your trade(s) suddenly unmanagable..... due to their affects on bid/ask prices and bid/ask gap.

I think about all these "probabilities", and others, before I initiate any trade.... and what is my PLAN B.
That's why some trades are 10% otm and others 20%.
That's why some trades earn 10% and others 20%
That's why my degree of leverage fluctuates month to month, depending on how otm my current trades are, what sector they are in, how diversified my sectors are, how many stocks are expiring month to month, ect....
That's why I evaluate all trades for "recoverability".
Trading is all about evaluating "probabilities",... via an on-going and day to day basis. It starts BEFORE you initiate a trade and it doesn't end until the trade is over.