nah....I lost my gains since I got sloppy with my stops, not my initial investment.
Going long on short positions without getting burned
- Thread starter Cuddles
- Start date
nah....I lost my gains since I got sloppy with my stops, not my initial investment.
I do not like options. They seem overall to be (1) more bother than they are worth for speculators, (2) a hyped vehicle to make commission money for the brokers.
Everybody wants to "risk a little and hopefully, make a LOT". Options seem to offer that, but in reality do so only with outsized risk for most of us retail screen jockeys.
I know of one ETer who's a long time options player with a significant size operation. I suggested to him that "trading for options profits is mosly for chicken feed". He replied, "Well.. if making $100-$300 per play is chicken feed, I'll take it". You gotta make a LOT of those to make the endeavor worthwhile. My view now and has always been.... to make any REAL money in the markets, you have to make a LARGE, UNHEDGED BET AND BE CORRECT ABOUT IT. And to play "that way", you'd best have stop discipline. (The market generally is NOT going to give you the opportunity to "risk a farthing to make a bundle".)
(I'm sure I'll get some "you're full of crap" and "whaddaya mean?" responses, so let 'er fly!
)
Everybody wants to "risk a little and hopefully, make a LOT". Options seem to offer that, but in reality do so only with outsized risk for most of us retail screen jockeys.
I know of one ETer who's a long time options player with a significant size operation. I suggested to him that "trading for options profits is mosly for chicken feed". He replied, "Well.. if making $100-$300 per play is chicken feed, I'll take it". You gotta make a LOT of those to make the endeavor worthwhile. My view now and has always been.... to make any REAL money in the markets, you have to make a LARGE, UNHEDGED BET AND BE CORRECT ABOUT IT. And to play "that way", you'd best have stop discipline. (The market generally is NOT going to give you the opportunity to "risk a farthing to make a bundle".)
(I'm sure I'll get some "you're full of crap" and "whaddaya mean?" responses, so let 'er fly!
)
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Robert Morse
Sponsor
I do not recommend automating options trading for retail users. There are 15 option exchange and prices change even when the underlying does not. I suggest you view current market and enter manually. You can enter spread orders where you send an option order or spread with stock tied. They then get executed as one order.
I was approaching from the angle of automatically updating the hedge, not so much as trading it.
TBH I am not sure how to even do automated options trading if you're not making markets. It seems excessively complicated.
Same can be said about most leveraged instruments. Options are indeed hyped because they offer fairly cheap exposure and getting a margin account is really easy on most brokers. There are ways to limit your risk and increase your probability of reward. Certainly, the normal mentality people have going into options that "I can have limited risk and unlimited reward?" is what crushes people. To your point - it is certainly not as easy as it seems.
Covered calls are traditionally a loser's game. You're forced to hold stock to cover your short call with in the event you're exercised. Naked puts are a far better option. Your tail risk is unlimited, which makes people uncomfortable, but selling puts on instruments like SPY (except for in the market at the moment...) would be less risky considering if SPY goes to 0 the market basically ends. By selling puts your capital outlay will most likely be less for exactly the same risk/reward ratio.
I'd personally suggest trading verticals as a newbie. The commissions are a little high depending on your broker however you are more-or-less trading options as a replacement for stock. Before trading, take a few courses on options online. OptionAlpha isn't bad. The most important thing to think about is the greeks. "Options as a replacement for stock" have some complications - namely in the greeks. There's a lot of little things that you can snag yourself on that can turn a winner into a loser really fast.
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Yes ;
but momentum is more fun.And some find a better benchmark, SDOW can be better sometimes than DOW 30 . Dont know if its liquid enough for daytrading??Good thing about blowing up an account; it sends a word to the wise message.
Hedging is expensive, imperfect, and adds complexity. Stops are free. As @Scataphagos says - KISS!
What do you guys think about this approach? Hedge initial entry with options. Once the trade moves in desired direction(enough to be protected from overnight gap perhaps), close hedge for small(how small?) loss and replace it with a stop. The idea is to have some wiggle room off the initial entry. How far would the expiration need to be so that the adverse move does not cause the option lose too much premium yet provide enough protection? Should it be some ratio spread instead? Anyone played around with this?
I will copyright this strategy as "catching falling knife wearing iron gloves" just in case I write a book someday and need a cool sounding name. Will curve fit it to work wanders!
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Have done part of that , but once i get plenty of liability on my i auto, insure rest of it without insure Co. Stock/ETFs Gaps happen, sometimes profit +sometimes loss; so ''money management as you noted''
They raised rates [gap up,LOL]on me, once with out my permission-so i knocked off the car rental insure. Had a claim[ her fault]+ wouldnt you know it= got by with OUT car rental insurance.
If you only lost your gains, then you didn't blow out your account, yeah? You broke even. I did the same thing in Q1 of this year. Made a bunch, gave it all back. I think that is important to think about psychologically.
I guess my definition of a blow out is taking a 20% loss. Didn't realize this was a specific term to losing it all.