How do successful option traders do it?

J

Johnmaine

Way back on July 6, 2002, praetorian2 wrote, "On my 60k account, it isn't very difficult to make 20k a month. That's only a meager 30%. I don't see any reason that with even a 40k account, you can't make 100k+ per year pretty easilly".

So how do successful option traders do it?
 
The market of 2002 is not the market of 2018, but I'm incredibly skeptical of someone claiming to make $20k/mo on a $60k account. If they were doing that, then why is their account only $60k? Either they're full of shit, or they just got started and were incredibly lucky their first month and probably lost it all the day after they posted that.
 
Lee- said:
The market of 2002 is not the market of 2018
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Well, it's been done this year on this forum...it was less than PDT minimum and was spun up to like $120k by the end of June. That was a straight long option strategy.

It would be nearly impossible to keep up the kinds of annual returns you can with a tiny account as you start to grow. Both from a risk management standpoint (playing 100% of your wealth when you're worth two paychecks is much different than playing 100%--or even 50%--of your wealth when you have substantial assets); and from a liquidity standpoint (in that your edge erodes dramatically when you must use marketable orders to get complete fills).

You need to be solid at risk management with long options strategies--and the nature of the game is that you must have substantially larger winners (on the order of 2x+ consistently) than your losers because the losers will be more frequent.

The other thing is just understanding how orders work and keeping costs down--when you can trade a contract for 0.14 or even a credit in some cases you typically flip the odds in your favor (because your order gets hit on the favorable side of the spread). And know what price you're likely (and when you're likely) to get hit on certain orders. And know how to roll to keep your profits without giving away too much future potential....


....and that's just the long side. Then there's shorts and spreads.... And knowing when to use one strategy over another and the time frame to apply to it (the 6 months ending January would have done pretty well with longer holding periods and fewer rolls, but the same strategy in the 6 months starting February would have mean death by a thousand paper-cuts).
 
beerntrading said:
....and that's just the long side. Then there's shorts and spreads.... And knowing when to use one strategy over another and the time frame to apply to it (the 6 months ending January would have done pretty well with longer holding periods and fewer rolls, but the same strategy in the 6 months starting February would have mean death by a thousand paper-cuts).
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If you can decide on regime switch in Feb, you don't need options. Just trading ES futures will do the trick too. How do you decide when market is switching from BULL 2 BEAR
 
traider said:
If you can decide on regime switch in Feb, you don't need options. Just trading ES futures will do the trick too. How do you decide when market is switching from BULL 2 BEAR
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No, of course you don't need options...but I could not have made anywhere near what I did in the last 6 months trading ES outright. Nor would I have had the margin (nor risk tolerance) to build into my largest positions after rolling up and out and profit taking.

And knowing that the volatility regime has changed does not confer knowledge to me regarding overall direction of the market.

And single names offer better opportunities than the diluted indexes and ETFs.
 
Lee- said:
I'm incredibly skeptical of someone claiming to make $20k/mo on a $60k account. If they were doing that, then why is their account only $60k?
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I think praetorian2 had written somewhere that he trades only 60k and rarely 70k but then he tries to prune it down to 60k the first chance he gets because that sum is more than enough for him to make a six figure income.
 
I know him. I've met some seriously great traders over the years, and this guy is one of the best.

He is wildly successful and doing quite well - about as far from the US as anyone can be.

He's not an option trader. He's more of a Jim Rogers type of guy and options may have been something that interested him briefly and he dabbled in them, but his bread and butter is with much larger issues.
 
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