Exponential growth

Quote from Ankle Biter:

I think there might be some difference between turning $10k into $15k and turning $100k into $150k as far as liquidity goes, but the difference in psychology is enormous. No matter how prepared or how emotionally stable you think you are, you're virtually guaranteed to discover things about yourself that you would rather not know. Your long-term success depends entirely on your willingness to successfully come to terms with your own emotional make-up.

For example, if you're greedy you either need to get control over that or you need to put systems in place that prevent your greed from destroying your account.
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As far as being overwhelmed when the numbers get bigger, you're right, I can't predict for certain that I won't.

But I've planned for that and I'm ingraining a variation of a success strategy I've heard top pros using. Completely disconnecting the numbers on the screen and real money.

It's all a game and we're playing for points.

Also, I'm electing to ignore absolute values and concentrate on % of equity.

I hope that by starting early, I can firmly entrench these beliefs.

As far as motivation goes, I'd like to think greed doesn't enter the equation. Freedom and time are the most precious commodities I'm after.

And as I mentioned earlier, contribution gives the burning desire.
 
Quote from DonnaV:

I might re-phrase that to say "a smart woman learns from her mistakes. A wise woman learns from the SUCCESS of others. :)

When I see success I try to dissect and analyze how that success is achieved and if it can fit into my mode/mentality. To be honest I don't really learn from other people's failures...I seem to only learn from my own.
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I agree wholeheartedly.

Success breeds success.

And I agree, it's far more difficult to learn from other people's mistakes than from your own.

But it's a lot less painful...
 
agreed it really is risk control..knowing the risk and when to cut the loss. I haven't had as much problem cutting losses as doing "dumb" trades out of boredom or other poor reasons...at least I will recognize "God that was dumb" and get out :)
Quote from Cache Landing:

Interesting point. I guess the emphasis for you would be to make sure that those failures remain as small as possible. Myself, I've had both big and small failures in trading. I wouldn't say that I have many failures now. Losses are the nature of the beast. A failure would occur as the result of a poor analysis and failure to execute a proper trade. This would result in a larger draw down in my account for a single trade than I should technically be able to lose.
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The REAL reason we as human beings don't learn from other's mistakes is that we tend to rationalize we are better, our situation is somehow "different" blah blah blah..." I would never be THAT stupid"!.:eek:"
Quote from Neoxx:
It is however FAR less painful:D and you breath a deep sigh of relief...whew


I agree wholeheartedly.

Success breeds success.

And I agree, it's far more difficult to learn from other people's mistakes than from your own.

But it's a lot less painful...
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One thing that I think is interesting is how good everything looks on paper. I think that is why many mistakes are repeated. The person warning others not to do something is speaking from experience, while those not listening are trusting in a theory. They then tell themselves that the one offering the warning must have done it wrong because the theory on paper proves that it will work.

This is especially true with options. There are so many ways to lose money with options, that a written theory often times doesn't consider one of the critical factors (or doesn't weigh it heavily enough). An experienced person has seen the damage caused by that missing factor, but rarely will someone take his/her word for it.

As an experienced option trader I hope to be descriptive enough in my responses, that I might make it clear why something might not be a good idea. Believe me, I've tried almost every strategy that seems to make sense.
 
Cache,

What do you think of this idea-

Buying deep ITM LEAPS and selling ATM weeklies?

A variation of a diagonal calendar spread I suppose.
 
I'm not Cache obviously but something to think about with your diagonal: Large slippage,b/a spread in ITM Leap is likely. If you run the numbers, probably not much better return than risk free and that is IF you're right on direction. Would be interested to see some examples of what you're thinking of.

MoMoney

Quote from Neoxx:

Cache,

What do you think of this idea-

Buying deep ITM LEAPS and selling ATM weeklies?

A variation of a diagonal calendar spread I suppose.
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Quote from momoneythansens:

I'm not Cache obviously but something to think about with your diagonal: Large slippage,b/a spread in ITM Leap is likely. If you run the numbers, probably not much better return than risk free and that is IF you're right on direction. Would be interested to see some examples of what you're thinking of.

MoMoney
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I'm going to have to agree with Momoney to some degree. With many companies, the b/a spread is going to be minimal compared next to the price of the deep ITM leap, but it is still much higher than front month. Being as large as it is, you might run into problems frequently. What little you make on the short leg might be consumed by a bad fill price when you sell the long leg.

It's lame, but my answer is that it's going to depend completely on the company that you are considering it for. It will only work with any degree of consistency on high volume (both stock and options) companies. If they trade high volume, this will drastically minimize the spread problem. You then need to look at the delta and IV of the leaps. Delta needs to be VERY close to 100 and IV should be LOW. On the short leg, delta will be close to 50 and you want the IV as high as possible.

If the above criteria aren't met then you'll be running into problems frequently. Essentially, you are making steady money if you are right on the direction. If you are wrong, the leap must move in tandem with the underlying. Even then you might lose a little because of b/a spread and commissions.

You thinking about a specific company? It would help to be able to use specific numbers.
 
I forgot to mention one more thing. If you are REALLY right on the direction (i.e. the underlying moves big the opposite way of your short leg), the losses incurred by the long leg will overtake the gains from the short leg. You'll still have to implement stops.

From my perspective, considering the risk/reward, there are better strategies. Just my opinion though.
 
I meant to say buying a deep ITM LEAP, then selling an ATM weekly/monthly, every single week/month.

I called this a diagonal calendar spread in the original post, but another way to think about it would be as a covered call strategy.

Didn't have any particular stock in mind, but if I do, I'll post specifics.
 
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