For those of you that trade options

C

cashmoney69

1. If you never traded options, do you still think you'd be where you are today (just as profitable / unprofitable)?

2. What is your primary option strategy?...to speculate or to hedge?

3. Have you lost more money learning how to trade options rather than stocks..or any other investment vehicle?

4. Whats one important lesson you learned from trading options that you wish someone told you BEFORE you started?
 
1. If you never traded options, do you still think you'd be where you are today (just as profitable / unprofitable)?

No way, most of my profits, 75-80% have come from options. However, the majority of my options trades, about 60% are losses.


2. What is your primary option strategy?...to speculate or to hedge?

My primary strategy is the same as with stocks, to anticipate the direction of a price-movement. Then using options to leverage and multiply the gains from that move. So if a stock gains 25%, I'd make 150-200% using options.

Hedging? Like buying an OTM put underneath a stock I own for insurance? Very rarely, it'd just stop out of a stock instead. Another way I'd hedge is to go long on straddles when I'm unsure which way a stock will move.


3. Have you lost more money learning how to trade options rather than stocks..or any other investment vehicle?

It's hard to compare just losses between stocks vs. options. You have to compare their losses to gains ratio. Stocks will have something like a -20:+25% ratio, while options will be -100:+2000% ratio.

While you can lose on stocks 5 times in a row and end up with only 50% of your portfolio left, you can lose on options 10 times in a row and still end up with 80%. That's because the gains on options are so much higher than with stocks, that even losing positions at 100% loss is more than offset by the much larger gains.


4. Whats one important lesson you learned from trading options that you wish someone told you BEFORE you started?

Most important lesson is the same as with stocks, learning when to get out and QUICKLY. The stop-loss MUST be mastered with stocks first before you get into options. No egotistical rationalizing allowed such as, "Oh yeah, it'll rebound" or "I'm a long-term investor" or "I'll just buy more at a lower price and average down"... :( NO! Such thinking may work OK with stocks and give you mediocre or average returns, but with options, you'll bankrupt yourself quickly. I've held options as long as 3-months and as short as 90-seconds.
 
Quote from DannoXYZ:

1. If you never traded options, do you still think you'd be where you are today (just as profitable / unprofitable)?

No way, most of my profits, 75-80% have come from options. However, the majority of my options trades, about 60% are losses.


2. What is your primary option strategy?...to speculate or to hedge?

My primary strategy is the same as with stocks, to anticipate the direction of a price-movement. Then using options to leverage and multiply the gains from that move. So if a stock gains 25%, I'd make 150-200% using options.

Hedging? Like buying an OTM put underneath a stock I own for insurance? Very rarely, it'd just stop out of a stock instead. Another way I'd hedge is to go long on straddles when I'm unsure which way a stock will move.


3. Have you lost more money learning how to trade options rather than stocks..or any other investment vehicle?

It's hard to compare just losses between stocks vs. options. You have to compare their losses to gains ratio. Stocks will have something like a -20:+25% ratio, while options will be -100:+2000% ratio.

While you can lose on stocks 5 times in a row and end up with only 50% of your portfolio left, you can lose on options 10 times in a row and still end up with 80%. That's because the gains on options are so much higher than with stocks, that even losing positions at 100% loss is more than offset by the much larger gains.


4. Whats one important lesson you learned from trading options that you wish someone told you BEFORE you started?

Most important lesson is the same as with stocks, learning when to get out and QUICKLY. The stop-loss MUST be mastered with stocks first before you get into options. No egotistical rationalizing allowed such as, "Oh yeah, it'll rebound" or "I'm a long-term investor" or "I'll just buy more at a lower price and average down"... :( NO! Such thinking may work OK with stocks and give you mediocre or average returns, but with options, you'll bankrupt yourself quickly. I've held options as long as 3-months and as short as 90-seconds.
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Good post, also having a good idea about market direction has been my edge since last Dec. I've started a journal to record the afternoon forecasts that I use. Most on Et would say that intraday market timing is a myth, I say it definately works.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=65265&perpage=6&pagenumber=14

Rennick
 
1. If you never traded options, do you still think you'd be where you are today (just as profitable / unprofitable)?

No, I only trade options, I rarely trade stocks. Reason being, i can make money fast with calls and puts...puts very fast.

2. What is your primary option strategy?...to speculate or to hedge?

speculate...and my strategy..well...thats ultra top secret. a bit to get you started though..most people read all the time that "the trend is your friend" and "dont trade against the trend", but they always seem to forget it. well...that advice pretty much makes up for 50% of every winning system and portfolio!

3. Have you lost more money learning how to trade options rather than stocks..or any other investment vehicle?

I lost quite a bit of money in options and stocks about equally when i was a newbie...once i got my system tweaked and risk management down pact....my losses are extremely minimal, around 12% at most.

4. Whats one important lesson you learned from trading options that you wish someone told you BEFORE you started?

Trading is 99% psychology, 1 % methodology. if you can understand the unerlying concepts behind this, you can rarely lose. always remember...there is no 100% perfect trading system, so stop looking for it...just try to get as close as you can to 100%. personally, im at about 90%. everybody loses, even the best traders who ever lived...they were just able to minimize thier losses which is key. everyones perception of a holy grail is different, your personal holy grail should consist of a system that works for you on a personal level and has small losses...and one that doesnt revolve around someone elses advice which includes the media and advisement services.
 
I've been trying to apply for an options contract, but keep getting turned down. Here is what they said:


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Securities regulations require brokerage firms to review essential facts about a customer before approving the customer’s account for options trading. This review includes a customer’s current financial situation, investment experience, and investment objectives, using information provided on the options application.



After reviewing your options application, we have determined that the information provided is not consistent with that of a customer for whom options trading is appropriate. We have reached this conclusion based on the following reason(s):



___ Incomplete account information



_x__ Insufficient income, net worth, or liquid assets



_x__ Inadequate investment experience



_x__ Inappropriate based on employment



___ Inappropriate based on investment objectives



___ Other ____________________________________________________________



Please review National Association of Securities Dealers (NASD) Rule 2860 (B)(16)(B) for more information concerning these regulations. We look forward to serving your general securities needs. Any appeals or objections should be directed in writing to the branch office or to the undersigned.

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1. I dont have an income because I TRADE FOR AN INCOME..why cant they understand this?

2. How am I going to get investment experience until I try?

3. "Inappropriate based on employment"... AGAIN, I trade for a living...


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I'll just keep sending the application till they break down and just accept the fact that i'm going to keep sending these forms until they decide to except me. :)

Anyone else have this frustrating experience?
 
Quote from cashmoney69:


1. I dont have an income because I TRADE FOR AN INCOME..why cant they understand this?

2. How am I going to get investment experience until I try?

3. "Inappropriate based on employment"... AGAIN, I trade for a living...


--

I'll just keep sending the application till they break down and just accept the fact that i'm going to keep sending these forms until they decide to except me. :)

Anyone else have this frustrating experience?
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In #1 you say you trade for income, in #2 you want to get experience by trying. I'm confused :confused:.
 
Cashmoney69

If you have $3500 go to thinkorswim they have NO restrictions on what you can trade. However to have any success with options you will need more than that. Work on your overall market proficiency and build up a trading nest egg while you are learning.
 
Quote from ryank:

In #1 you say you trade for income, in #2 you want to get experience by trying. I'm confused :confused:.
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are you still hanging on to your 1295/1300 spread?:p mkts going downnnn
 
Quote from cashmoney69:

1. If you never traded options, do you still think you'd be where you are today (just as profitable / unprofitable)?

2. What is your primary option strategy?...to speculate or to hedge?

3. Have you lost more money learning how to trade options rather than stocks..or any other investment vehicle?

4. Whats one important lesson you learned from trading options that you wish someone told you BEFORE you started?
More...

Hi cash,

I have just started this year in options..

1. I am really enjoying them so far. my profitability has not yet taken off...but havent really lost anything.

2. I am just directional for now with a small % of my overall portfilio (less than 10%). I think this is a directional market for now...

3. havent really lost much. one of the great things is ithat you can take really small bets. i have a few index puts for instance..they only cost a few bucks each, so the risk is low. I prefer index puts to shorting the indices, becuse it uses much less of my capital.

4. TIME VALUE... you can be right on direction and still get your ass handed to you. these are NOT stocks. keep the risk low and dont get crazy on things like buying large amounts of out of the money contracts.
 
dac8555

i agree with some of your answers...however, the only way to make serious money with options is to buy options out of the money. leverage is the name of the game. if you divide the price of your out of the money option by the price of the stock, you get your leverage...never take anything that doesnt give you atleast a 10 to 1 leverage. every 10% move above the strike price is a 100% gain on your money. if you find and screen for some good smallcaps with the right conditions...which you can do for free at msnmoney.com....you can make gains above your strike price with out of the money options in a 3 week average time period or less. just make sure you buy an option with no less than a 4 - 6 month expiration date. just my 2 cents. this method works for me extremely well....but to each thier own...bottom line...as long as your accumilating points (cash)...thats all that matters.
 
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