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Is it possible to make a modest living w/options?
- Thread starter wartrace
- Start date
Quote from wartrace:
Is it possible to make a modest living w/options?
Options, and derivatives in general, are far to complex for the average investor to consistently make profits. If you are not average and if you are willing to devote the time needed to learn the necessary skills, you will make your "modest" living and then some. It is not easy, but nothing worth doing is easy. Best of luck to you.
Quote from 4444CJones4444:
Options, and derivatives in general, are far to complex for the average investor to consistently make profits. If you are not average and if you are willing to devote the time needed to learn the necessary skills, you will make your "modest" living and then some. It is not easy, but nothing worth doing is easy. Best of luck to you.
Options are as simple tools and almost anyone can understand them.
A rain check at a grocery store is a call option.
But - the strategies can be complex. Risk management is difficult for most to understand. You perpetuate the misconception that options are 'complex.'
Mark
Let me get this straight in regards to the 4% return. There seems to be some conflicting posts regarding "day trading" ect........
The way I am seeing it I will need 500 dollars per spread contract to cover the possible loss (100% loss on the trade).
4% of 500 dollars is 20 dollars, right? That is a difference of .20 cents between the option sold and the option bought. Are you all telling me that it is unlikely that I will be able to get a .20 cent credit on a trade? From what I have been seeing there seems to be a bit wider spread between strike prices. I realize that some trades will not work out well and I would have to close them out when they turn bad which will result in a loss. Of course the first thing I was taught about any trading is not to place more than 3% into any one trade. I know it will cost more in commissions but it will cost less in losses.
Unless I am mistaken, everybody who trades options or ANY security started out as a rookie. It isn't genetic, is it? I will give it a shot paper trading, that way I won't have anything to lose but time.
Are there any books or training dvd's that cover credit spreads exclusively? I am trying to learn the ins & outs of it.
The way I am seeing it I will need 500 dollars per spread contract to cover the possible loss (100% loss on the trade).
4% of 500 dollars is 20 dollars, right? That is a difference of .20 cents between the option sold and the option bought. Are you all telling me that it is unlikely that I will be able to get a .20 cent credit on a trade? From what I have been seeing there seems to be a bit wider spread between strike prices. I realize that some trades will not work out well and I would have to close them out when they turn bad which will result in a loss. Of course the first thing I was taught about any trading is not to place more than 3% into any one trade. I know it will cost more in commissions but it will cost less in losses.
Unless I am mistaken, everybody who trades options or ANY security started out as a rookie. It isn't genetic, is it? I will give it a shot paper trading, that way I won't have anything to lose but time.
Are there any books or training dvd's that cover credit spreads exclusively? I am trying to learn the ins & outs of it.
Quote from wartrace:
Let me get this straight in regards to the 4% return. There seems to be some conflicting posts regarding "day trading" ect........
The way I am seeing it I will need 500 dollars per spread contract to cover the possible loss (100% loss on the trade).
Less than that. It's $500 minus the premium you collected.
4% of 500 dollars is 20 dollars, right? That is a difference of .20 cents between the option sold and the option bought. Are you all telling me that it is unlikely that I will be able to get a .20 cent credit on a trade?
I don't know to whom this question is directed, but trading 5-point spreads for $20 is a difficult way to make money. Commissions become significant and one good loss wipes out a year or two of profits.
From what I have been seeing there seems to be a bit wider spread between strike prices. I realize that some trades will not work out well and I would have to close them out when they turn bad which will result in a loss. Of course the first thing I was taught about any trading is not to place more than 3% into any one trade. I know it will cost more in commissions but it will cost less in losses.
The 3% rule does not work all the time. It's fine for stocks, and it's ok for buying options. My personal opinion is that it's not workable with option spreads.
Unless I am mistaken, everybody who trades options or ANY security started out as a rookie. It isn't genetic, is it? I will give it a shot paper trading, that way I won't have anything to lose but time.
But please: If you don't think of it as real money, you will not benefit from paper trading. Play as if it's real.
Are there any books or training dvd's that cover credit spreads exclusively? I am trying to learn the ins & outs of it.
I devote several chapters to credit spreads, iron condors, and double diagonals. Here's a sample so you can see what's in all the chapters.
http://www.mdwoptions.com/freebook.pdf
Mark
The previous poster wasn't talking about getting a 4% credit. He said "If you are just randomly putting up verticals and condors there is no way in hell to achieve 4% monthly return" and I agree with him. It's possible but really not likely. and as someone else noted, you have to get lucky to get such a return... eg. the underlying really has to cooperate.The way I am seeing it I will need 500 dollars per spread contract to cover the possible loss (100% loss on the trade).
4% of 500 dollars is 20 dollars, right? That is a difference of .20 cents between the option sold and the option bought. Are you all telling me that it is unlikely that I will be able to get a .20 cent credit on a trade?
How much of your trading capital you put into one trade has nothing to do with the return from the strategy.Of course the first thing I was taught about any trading is not to place more than 3% into any one trade. I know it will cost more in commissions but it will cost less in losses.
Quote from dagnyt:
Options are as simple tools and almost anyone can understand them...You perpetuate the misconception that options are 'complex.'
Let's agree to disagree on this one, Mark. Understanding the concept of options may be simple, but consistently profiting from options is something altogether different.
Please don't get me wrong. Until I invested the time to learn the options market, my annual returns were average at best. And, for me, there is no going back. Without options I would soon lose interest in ALL markets, not just equities. When asked, I always tell people it's hard, but once they spend the time to learn the craft, they will be extremely happy that they did and they will never look at the markets in the same way.
Quote from spindr0:
The previous poster wasn't talking about getting a 4% credit. He said "If you are just randomly putting up verticals and condors there is no way in hell to achieve 4% monthly return" and I agree with him. It's possible but really not likely. and as someone else noted, you have to get lucky to get such a return... eg. the underlying really has to cooperate.
How much of your trading capital you put into one trade has nothing to do with the return from the strategy.
I've learned enough to know you can't just throw money on the wall and hope it sticks. Of course you have to screen for the best possible trades.
The 3% I was referring to was the amount I should risk on any one trade. Obviously it has nothing to do with the possible return of that trade but it does help prevent huge losses. If I risked 50% of my capital on one trade I could suffer a 50% loss in capital. Isn't it good money management to keep your exposure to loss low? I disagree with your statement that how much you put into one trade does not effect your total return. If I put 25% on one trade and it went bad, wouldn't that effect the total return?