Going Live Option Trading Questions

suppose you will make a trip to somewhere you have never been there.

you have your roadmap printed, each turn and cross, but if the route you planned are blocked because of an unexpected events such as sudden car accident,

or you have a company, and his responsibility is read the roadmap to you when you are driving, but somehow, either you drive too fast and miss a turn or your company read out too late carelessly or whatever reason, you end into a totally new route, you do not have any roadmap, and you have no GPS on board or any printed map, what you should?

or many other things, you drive on a road there is no gas station and you are not aware of this fact while your fuel is going red ... or you mobile phone does not work there is no signal coverage

most time, a querrel will happen, you blame me and me blame you,... or you may give up and want to go back, but there is no backway, you do not know how to get out of this stange new route...

you are stuck.... complain? regret? condemn yourself for not well prepared? or ....

trading is this kind of business.

often in the opening, I have a clear picture about how I proceed, but somehow, those unexpected occurs, handle well, you grow, handle bad, you may go low....
 
I have read each person's response here, and I do appreciate all the thoughts you have shared.

How about the following for a "road map"/plan? I have no idea if this is sound, or sounds stupid, which is why I'm asking:

Take my total account size (say 25K) and divide it up into 8 equal trades, which is roughly 3,000 per trade. Make two trades per week, on Monday and Thursday, utilizing options that are at least 60 days out. This provides some time-diversity as the trades will be entered as the market is moving, and some options will be expiring/being close out while others are being entered.

Use strangles as trading method (which I'm so far most comfortable with) and use a 1-2 risk/reward to signal time to roll. Meaning if my total profit if both shorts expire worthless is $500.00, if the trade approaches a loss of $250.00 I will adjust by rolling the threatened short strike.

I have been only using ETFs such as QQQ, IWM, EEM, SLV, GDX, etc.

So far, this is the only plan I have. Please tell me if/where I am way off or if this has some merit.

Thank you very much.
 
I have no idea where you want to go?

if no goal, how can you have a plan. what is your goal?

one week two trades, sounds a good goal or a plan?

there are two types of goals:

results goal, for example I want to make $1k one week

process based goal, for example I want to become a trend follower in three months, I am able to assess market conditions 80% time correctly, learn how to spot trend and how to join a trend,monitor trend reversal ....

normally result goals will drive you into dead end and you will find you are still dizzing around since you are not a trader yet.

after you become a trader, then you can talk about your trading plan. you know what you should do, what you should not do. your goal is not monetary, like $400/one day, that is stupid.

your goal is: today I want to find the strongest intra-day trend or long-term trend , join it and ride it til it is over. i do not want to fool around for range-band market etc.....

they say money is by-product of trading. so it be. you know what I am talking about.

goal--->plan to the goal. forget about money, it comes naturally






Quote from dreamliner:

I have read each person's response here, and I do appreciate all the thoughts you have shared.

How about the following for a "road map"/plan? I have no idea if this is sound, or sounds stupid, which is why I'm asking:

Take my total account size (say 25K) and divide it up into 8 equal trades, which is roughly 3,000 per trade. Make two trades per week, on Monday and Thursday, utilizing options that are at least 60 days out. This provides some time-diversity as the trades will be entered as the market is moving, and some options will be expiring/being close out while others are being entered.

Use strangles as trading method (which I'm so far most comfortable with) and use a 1-2 risk/reward to signal time to roll. Meaning if my total profit if both shorts expire worthless is $500.00, if the trade approaches a loss of $250.00 I will adjust by rolling the threatened short strike.

I have been only using ETFs such as QQQ, IWM, EEM, SLV, GDX, etc.

So far, this is the only plan I have. Please tell me if/where I am way off or if this has some merit.

Thank you very much.
More...
 
Thank you, but I have a little difficulty understanding your words; possibly English is not your first language. I appreciate your help, but was hoping others would contribute. Thank you again.

Quote from trader198:

I have no idea where you want to go?

if no goal, how can you have a plan. what is your goal?

one week two trades, sounds a good goal or a plan?

there are two types of goals:

results goal, for example I want to make $1k one week

process based goal, for example I want to become a trend follower in three months, I am able to assess market conditions 80% time correctly, learn how to spot trend and how to join a trend,monitor trend reversal ....

normally result goals will drive you into dead end and you will find you are still dizzing around since you are not a trader yet.

after you become a trader, then you can talk about your trading plan. you know what you should do, what you should not do. your goal is not monetary, like $400/one day, that is stupid.

your goal is: today I want to find the strongest intra-day trend or long-term trend , join it and ride it til it is over. i do not want to fool around for range-band market etc.....

they say money is by-product of trading. so it be. you know what I am talking about.

goal--->plan to the goal. forget about money, it comes naturally
More...
 
Quote from rmorse:

Why deep ITM call spreads? Why not pick the same strike prices but look at the put spread. The OTM puts will be more liquid, have tighter spreads and not have the risk of early assignment. If you sell the put spread for $0.20 or buy the call spread for $4.80, the profit potential is identical.
More...

I would love to get assigned before expiration because I would realize my profit right away, with OTM puts there is no chance this will happen.
 
Quote from magicz:

I would love to get assigned before expiration because I would realize my profit right away, with OTM puts there is no chance this will happen.
More...

Are you concerned about the margin increase? Are you in a reg-T account? That can go from a small margin amount to a very large one very quickly. Also, if the stock is hard to borrow, you can get hit with some interest charges.

http://www.cboe.com/tradtool/mCalc/default.aspx
 
Quote from rmorse:

Are you concerned about the margin increase? Are you in a reg-T account? That can go from a small margin amount to a very large one very quickly. Also, if the stock is hard to borrow, you can get hit with some interest charges.

http://www.cboe.com/tradtool/mCalc/default.aspx
More...

not entirely sure what you're trying to ask but yes I trade for myself so its a retail account hence PMA and there are no margin involve in this debit spread. If I get assigned my long call will auto exercise to cover if I dont have enough cash in the account for the short.
 
Quote from magicz:

not entirely sure what you're trying to ask but yes I trade for myself so its a retail account hence PMA and there are no margin involve in this debit spread. If I get assigned my long call will auto exercise to cover if I dont have enough cash in the account for the short.
More...

Your long call will not auto exercise for early exercise. If someone early assigns you stock on your in the money call spread, you will be short stock and long calls for at least one day. In a regular margin account, that's a lot of margin. In a PM account, it is much smaller. It's a small risk on a stock like AAPl, but dividend stocks and hard to borrow stocks, this can happen.
 
Quote from rmorse:

Your long call will not auto exercise for early exercise. If someone early assigns you stock on your in the money call spread, you will be short stock and long calls for at least one day. In a regular margin account, that's a lot of margin. In a PM account, it is much smaller. It's a small risk on a stock like AAPl, but dividend stocks and hard to borrow stocks, this can happen.
More...

I am not disagreeing with you at all but my instruction to my broker is exercise when you see my short leg get assigned, in any case its a covered position. Believe me I know what you're saying that is why I gave him an example of what I do, its not theoretical.
 
Quote from magicz:

I am not disagreeing with you at all but my instruction to my broker is exercise when you see my short leg get assigned, in any case its a covered position. Believe me I know what you're saying that is why I gave him an example of what I do, its not theoretical.
More...

Except he won't know until the next day. It's not a big deal, until it is. It may never happen to you.
 
You must log in or register to reply here.
Back
Top