Ima go Broke Trading Long Options...Which Strategies to Focus On?

[ironchef]

Can someone explain to me why there’s seems to be obsession with butterflies on ET? Is it the @destriero effect?

@destriero uses butterflies??? LOL No I think the poster was trying to use butterflies as an example to advise OP to use limited-risk strategies.

No, not because of @destriero. But your explanation is right on. I am going beyond single legs and trying out more complex combinations.

In addition, because I am looking for a setup with positive theta and positive delta. It would be even better if I can find something with positive theta, delta, gamma and vega.

 

[ironchef]

About 90% of my trading is long options. "They" say 9 of 10 options expire worthless, but they never talk about the insane gains you can make in that other 10%. BUT, you need to be a good trader, with a real edge. Maybe you don't have an edge yet.

Can you post some of your trades?

Actually 80-90% of mine are longs too.

 

[zghorner]

About 90% of my trading is long options. "They" say 9 of 10 options expire worthless, but they never talk about the insane gains you can make in that other 10%. BUT, you need to be a good trader, with a real edge. Maybe you don't have an edge yet.

Can you post some of your trades?

so i will run a screener (one for call potentials, one for put potentials) that are heavily based on CANSLIM -> increased sales qtr over qtr, EPS growth, above MA, etc...and essentially reverse of that when looking for something to buy puts...negative growth, earnings, etc...

after that i look at the chart (usually just daily), I like to see big volume days green for call potentials, and red for put potentials, trending direction, etc...

Then i look at the options and try see which ones give the best value IMO...and i do this by price difference per strike vs strike difference....hard for me to explain but IMO paying an extra $0.75 to get me $5 closer to ITM/better delta im going to pay it. Then i look at price per strike per expiration date from 3 months out to 1 year and choose what i deem as the best value.

Then I take a small position (1-3% of my account), and will only increase my position size if it is good to me.

The adding to winners method i think needs to be eliminated or i need to alter it in some way because I lose money doing this more than gain.

Since you asked for some examples
An example of a trade gone right recently: $CLX -> met all of my requirements for a potential short...bought 5 put contracts for a total of $1,290 on 2/19 sold for a total of $1,925 (+$635) on 3/1.

An example of a trade gone bad recently: $MJ -> bought 2 contracts on 2/8...they immediately showed a good profit so I added one more contract on 2/9...it went against me and i ended up selling 2/23 for a loss of $464.

 

[Dustin]

so i will run a screener (one for call potentials, one for put potentials) that are heavily based on CANSLIM -> increased sales qtr over qtr, EPS growth, above MA, etc...and essentially reverse of that when looking for something to buy puts...negative growth, earnings, etc...

after that i look at the chart (usually just daily), I like to see big volume days green for call potentials, and red for put potentials, trending direction, etc...

Then i look at the options and try see which ones give the best value IMO...and i do this by price difference per strike vs strike difference....hard for me to explain but IMO paying an extra $0.75 to get me $5 closer to ITM/better delta im going to pay it.

Then I take a small position (1-3% of my account), and will only increase my position size if it is good to me.

The adding to winners method i think needs to be eliminated or i need to alter it in some way because I lose money doing this more than gain.

Since you asked for some examples
An example of a trade gone right recently: $CLX -> met all of my requirements for a potential short...bought 5 put contracts for a total of $1,290 on 2/19 sold for a total of $1,925 (+$635) on 3/1.

An example of a trade gone bad recently: $MJ -> bought 2 contracts on 2/8...they immediately showed a good profit so I added one more contract on 2/9...it went against me and i ended up selling 2/23 for a loss of $464.

I think you need to find setups with a bigger r:r profile. That CLX trade was kind of luck that it worked out, but if you are buying options outright you need to target like 3-5x+++ on a winner to make up for all the losers. The MJ trade (assuming calls) were well itm and you should have taken the gains on 2/10. It's an etf, you shouldn't expect more than that move.

We are looking for things that are going to move a lot in a short amount of time. For example my favorite setup today is VIAC short. It's up a ton lately and we could get a market breakdown today/tomorrow (SPY ath? that's nuts), so a real break in VIAC would be around $78-82. I'm long $83p for tomorrow. Max loss is around $0.45 (I would scale out for a loss if the market keeps strong through tomorrow) and max win is around $5. It either works or it doesn't and I can't control that...but the r:r is there.

You mentioned paying more to be closer to ITM. That's a personal preference, but make sure you are at least 3-5x target of your price or the trade isn't worth it. Many trades I take are in the 20x range (which means I'm pretty far otm), and those pay for all the little losers plus a lot more.

 

[zghorner]

I think you need to find setups with a bigger r:r profile. That CLX trade was kind of luck that it worked out, but if you are buying options outright you need to target like 3-5x+++ on a winner to make up for all the losers. The MJ trade (assuming calls) were well itm and you should have taken the gains on 2/10. It's an etf, you shouldn't expect more than that move.

We are looking for things that are going to move a lot in a short amount of time. For example my favorite setup today is VIAC short. It's up a ton lately and we could get a market breakdown today/tomorrow (SPY ath? that's nuts), so a real break in VIAC would be around $78-82. I'm long $83p for tomorrow. Max loss is around $0.45 (I would scale out for a loss if the market keeps strong through tomorrow) and max win is around $5. It either works or it doesn't and I can't control that...but the r:r is there.

You mentioned paying more to be closer to ITM. That's a personal preference, but make sure you are at least 3-5x target of your price or the trade isn't worth it. Many trades I take are in the 20x range (which means I'm pretty far otm), and those pay for all the little losers plus a lot more.

I couldn't agree more with you about MJ...I need to take profits on the big move then get out.

Hand 1 says "let profits run"
Hand 2 says "pigs get slaughtered"

For my personal experience with options (as you noticed), after a big swing the position needs to be closed. Every time I try to "let profits run" after A nice gap/leg up...theta and IV crush me to death as it trades flat/slight downtrend for the next few weeks and my profits evaporate into nothing.

VIAC is looking strong on the chart bro lol...best of luck to you.

So you tend to trade short dated OTM options? when they hit they hit big because of high lambda when they lose its not a huge loss because they are cheap?

 

[Dustin]

I couldn't agree more with you about MJ...I need to take profits on the big move then get out.

Hand 1 says "let profits run"
Hand 2 says "pigs get slaughtered"

For my personal experience with options (as you noticed), after a big swing the position needs to be closed. Every time I try to "let profits run" after A nice gap/leg up...theta and IV crush me to death as it trades flat/slight downtrend for the next few weeks and my profits evaporate into nothing.

VIAC is looking strong on the chart bro lol...best of luck to you.

So you tend to trade short dated OTM options? when they hit they hit big because of high lambda when they lose its not a huge loss because they are cheap?

Did you have a target on the MJ trade? Maybe that would help with your exits, to at least have a general idea. Re:VIAC that's my favorite kind of short. When they finally crack it's $$$, and you limit risk with cheapie otm puts.

 

[zghorner]

Did you have a target on the MJ trade? Maybe that would help with your exits, to at least have a general idea. Re:VIAC that's my favorite kind of short. When they finally crack it's $$$, and you limit risk with cheapie otm puts.

i didnt have a $ amount man...usually stick with moving averages to exit and fully expected a continued trend up...definitely need to work on my exit strategy, thanks man.

 

[Dustin]

i didnt have a $ amount man...usually stick with moving averages to exit and fully expected a continued trend up...definitely need to work on my exit strategy, thanks man.

Ah, if you are waiting for a break of an MA then IV crush has already happened...try to scale out as the trade is going your way around a pre-determined profit.

 

[murray t turtle]

up to this point...to leverage my capital without using margin.

now...what "i am trying to achieve"...is to consistently grow my account.

trading options will provide a way to put the odds of profit in my favor...I know it can at least I just have to put in the work.

im also not trying to delude anyone away from the fact that I have some fundamental issues that need to be addressed as well...learning all about straddles or butterflies wont fix the fact that I overtrade & lack Patience.

%%
Options[leverage] are among the best way to make big bucks on a super trend.
BUT have to be right on trend/right on timing+ do better than big bid \ask spread.
Thats why i no longer trade them .
EVEN leverage can goof up easy,with NO expiry.
QQQ, Jan 4 open price to todays open was positive profit;
TQQQ Jan 4 open price to todays open was worse than QLD,QQQ?? See that.
Thats why leverage even with no expiry date can goof us up big!!!!!!!!!!!!!!!
Don Bright Daytrading CO, founder,was an option market maker + noted ''options are made to be sold''
IF i traded sqqq same size as qqq,qld i would never make a profit;10+ 3 year year chart shows why..............................................................................................Wisdom is profitable to direct

 

[zghorner]

%%
Options[leverage] are among the best way to make big bucks on a super trend.
BUT have to be right on trend/right on timing+ do better than big bid \ask spread.
Thats why i no longer trade them .
EVEN leverage can goof up easy,with NO expiry.
QQQ, Jan 4 open price to todays open was positive profit;
TQQQ Jan 4 open price to todays open was worse than QLD,QQQ?? See that.
Thats why leverage even with no expiry date can goof us up big!!!!!!!!!!!!!!!
Don Bright Daytrading CO, founder,was an option market maker + noted ''options are made to be sold''
IF i traded sqqq same size as qqq,qld i would never make a profit;10+ 3 year year chart shows why..............................................................................................Wisdom is profitable to direct

i know exactly what you are saying...from time to time i trade options on leveraged ETFs or vol...timing must be perfect as they stay in a constant downtrend with a major spike once in a blue moon.

as a matter of fact I am holding SQQQ and UVXY calls currently getting my ass handed to me like a bum lol.