Is There A "Do and Don't" List For Option Trading?

OMG...vanzandt.. thanks for the article push but now you just gave me a ton of work next week(s) ...

this sentence from that article is very significant...

"Near as we can tell, this is a persistent source of edge in the market and yet the complexity of the process seems to deter investors from using this kind of data to make alpha-generating decisions. Speaking of alpha-generating decisions, we might sell a December call in LITE (or in any number of other currently high-GEX names)."

gotta plumb that edge and see if I can create my own GEX and use it to scalp contracts last 3 days to exp or easier is to buy flies centered around that sticky strike. A quick and dirty would probably be to look at price x% higher (since covered calls are mostly 2-3 sigmas higher, look for elevated open interest there and buy the fly there..The last part of open interest is the harddest part since I gotta figure out a way to load the bloated OI in my scans.
 
EdgeQuest said:
OMG...vanzandt.. thanks for the article push but now you just gave me a ton of work next week(s) ...

this sentence from that article is very significant...

"Near as we can tell, this is a persistent source of edge in the market and yet the complexity of the process seems to deter investors from using this kind of data to make alpha-generating decisions. Speaking of alpha-generating decisions, we might sell a December call in LITE (or in any number of other currently high-GEX names)."

gotta plumb that edge and see if I can create my own GEX and use it to scalp contracts last 3 days to exp or easier is to buy flies centered around that sticky strike. A quick and dirty would probably be to look at price x% higher (since covered calls are mostly 2-3 sigmas higher, look for elevated open interest there and buy the fly there..The last part of open interest is the harddest part since I gotta figure out a way to load the bloated OI in my scans.
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Yeah I spent some time with it too. Pretty smart stuff.
 
Robert Morse said:
How do you determine low and high?
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Mr. Morse you are an expert on the subject. And I would love to learn from you all the tricks that you used to trade options!

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My point is simple. You are looking for edge when the current implied vol is higher or lower than the past or current actual volatility. If that happens, sometimes there is real value there and sometimes option traders are factoring in uncertainty for pending events. LVX is a great tool for evaluating the past. I can't help you with the future. :D
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selling options means that you are in the insurance business. you are competing with the guys on the Exchange floor. they know how to hedge their trades and their costs are much less than yours. furthermore they are likely to have more capital than you.
the odds are not in your favor.
 
MrScalper said:
Of course options can make you money, but the odds of a retail pleb making money trading options is extremely low, so low that it is nearly impossible to find the %.
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Don't give us small mom and pop option traders a hard time. Some of us do make money sometimes.:D

But anyone that tells the OP there are simple "golden rules" that one can use to make money, or by subscribing to an options service one can make money is not telling the truth. There are no simple rules like "selling options is the only way to make money".... Think about this: To the OP, why would someone keep buying your options when they are guaranteed to lose money?

Anyway, thanks for the coaching.
 
Stymie said:
As per Tom of Tastytrade, if you don't agree with the strategy, you can do the opposite. Of course he still gets his commission on every trade.

I am doing the exact opposite of your strategy. My batting average is only .33 for the year. 33% of my trades are profitable. But my portfolio profits are incredible. Obviously, the bull market helps but if we plunge, my long vega just gets better. My focus is making money on the portfolio and in a low vol environment, long vol is overall profitable cause I have unlimited upside and pay very little in commissions and market spreads. Don't try to pick up pennies in front of the steam roller! End game is making money for the year - not just winning more times than you lose.
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Best advice I have seen on this thread. You are a real pro.

Thank you for your coaching sir.

Best regards,
 
Stymie said:
If you're not a professional, narrow the products that you trade so the bid/ask spread is fair. I wrote an algorithm that instantly changes my order price based on the underlying and the order book so I am less concerned about the liquidity and trust my server.
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May I ask you a question: Many of the options I traded were thinly traded with wide bid/ask. Normally I just aimed for mid point between bid/ask. Was I wrong to aim for mid point?
 
Try this formula. iv -iv low x bars back divided by iv hi xbb - iv low xbb.... long veta < 20 / short vega > 75, verticals in between... The secret is in the finding the x
 
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