extend my trades

[nikkktrader]

Hello everyone, sorry for my broken English I'll try my best. I trade options (on commodities and stocks) since the late '90, just buying (no naked selling no complex strategies). On average I profit from my operations but currently I am experiencing frustration and losses regardless my view on the underline is most of the times right.

My selection criteria on the option is pretty plain, according to "my risk management model" if I want to allocate (and able to lose) in a single trade (on average 1000 usd), I just get the option (or number of for cheap stocks) that I can afford with my capital with a residual life of not less than 20 days, regardless if it is in the money or how far from the strike it is (but no more distant than 20%, according to the price movement that I expect for the underline), without any consideration on time decay, delta or even IV.

As I said my predictions on the underline are decent (let's say 65% right), on the medium term, but options expires and buying longer maturities I would strongly limit my leverage and capital efficiency.

So I’d like to hear advices on how to "buy time" or improve this aspect on my trades, even by using complex strategies, thanks

 

[MrMuppet]

simple: vertical spreads

 

[David's faith]

buy time sounds like calender spreads.

 

[nikkktrader]

@The One whose post was erased:
i do not trade using TA, on average I trade swing (few weeks), last trade were march calls on natural gas, bought 3 of them strike at 5.7 usd for 670 usd each when NG was at 4.7 usd. And prior to this was puts on the t-note...similar pattern, jumped in too soon then kicked out by expiration

 

[MrMuppet]

@The One whose post was erased:
i do not trade using TA, on average I trade swing (few weeks), last trade were march calls on natural gas, bought 3 of them strike at 5.7 usd for 670 usd each when NG was at 4.7 usd. And prior to this was puts on the t-note...similar pattern, jumped in too soon then kicked out by expiration

ok, let's get some facts straight. You're the typical retail trader who buys options for leverage. Nothing wrong with that, but I bet you haven't ever looked at the price of options opposed to the underlying volatility.
Instead you make a price prediction, buy the option and hope your prediction becomes reality fast.

Right now you are buying overpriced options and you lose money because the market moves less than the option implies. The more you go out in time the more elevated the problem becomes. So either you:

a) learn about realized vol, implied vol and risk premia, buy options, when they are cheap compared to realized vol and avoid trading them when they are expensive

b) learn complex positions in order to hedge out vega risk but cap your upside in return

 

[trendmomentum]

Hello everyone, sorry for my broken English I'll try my best. I trade options (on commodities and stocks) since the late '90, just buying (no naked selling no complex strategies). On average I profit from my operations but currently I am experiencing frustration and losses regardless my view on the underline is most of the times right.

My selection criteria on the option is pretty plain, according to "my risk management model" if I want to allocate (and able to lose) in a single trade (on average 1000 usd), I just get the option (or number of for cheap stocks) that I can afford with my capital with a residual life of not less than 20 days, regardless if it is in the money or how far from the strike it is (but no more distant than 20%, according to the price movement that I expect for the underline), without any consideration on time decay, delta or even IV.

As I said my predictions on the underline are decent (let's say 65% right), on the medium term, but options expires and buying longer maturities I would strongly limit my leverage and capital efficiency.

So I’d like to hear advices on how to "buy time" or improve this aspect on my trades, even by using complex strategies, thanks

20 days out pure directional play, right? Consider creating a synthetic long but buy the next maturity call and keep shorting the current put. Obviously you need to model it and see what your risk tolerance is.

 

[MrMuppet]

20 days out pure directional play, right? Consider creating a synthetic long but buy the next maturity call and keep shorting the current put. Obviously you need to model it and see what your risk tolerance is.

nah...that's just plain stupid, if you don't know how term structure and spot/vol correlation trades.
In quiet markets you sell a cheap put, buy expensive calls and have excessive downside risk. In markets like now, you buy elevated calls and sell fair priced puts and you'll get rekt as soon as the market trades towards the upside and vol dumps on you.

If you think about trading a combo, you better just trade the underlying. Less commissions, less bid/offer spreads and less hassle managing a position

 

[easymon1]

jumped in too soon

What triggers an entry?

 

[smallfil]

Hello everyone, sorry for my broken English I'll try my best. I trade options (on commodities and stocks) since the late '90, just buying (no naked selling no complex strategies). On average I profit from my operations but currently I am experiencing frustration and losses regardless my view on the underline is most of the times right.

My selection criteria on the option is pretty plain, according to "my risk management model" if I want to allocate (and able to lose) in a single trade (on average 1000 usd), I just get the option (or number of for cheap stocks) that I can afford with my capital with a residual life of not less than 20 days, regardless if it is in the money or how far from the strike it is (but no more distant than 20%, according to the price movement that I expect for the underline), without any consideration on time decay, delta or even IV.

As I said my predictions on the underline are decent (let's say 65% right), on the medium term, but options expires and buying longer maturities I would strongly limit my leverage and capital efficiency.

So I’d like to hear advices on how to "buy time" or improve this aspect on my trades, even by using complex strategies, thanks

As an options buyer myself, I would suggest to you that you buy more time. Go out 3 months or even longer in the options you buy. There is less time decay because it decays at a slower pace. Also, buy deep in the money options as you only need the stock to move a little bit before you start making monies. Trade in the direction of the major trend. Set your mental stop losses as trends do end at some point. Have the discipline to exit your positions when your stop losses get hit. Risk no more than 2% of your capital on any trade. As the trade moves in your favor, remember to trail your stop losses to protect your profits.

 

[xandman]

20% out? There is barely any gamma in those options. So, there is not a lot of convexity from being right in your calls. Everything is relative, so you might want to select the option based on its delta and just size accordingly with your number of contracts.

Just note that there will be more theta decay. So your timing will take greater importance, but never greater than direction.