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nxt7

I currently trade mainly S&P 500 options. Started with $1000 a couple of months back, now down to $460 due to some impulsive and rather ill advised trades.

Bought a weekly ATM call @ 2080 strike price earlier this morning based on some backtesting and support/resistance magic.

(I think I'm going to pretend I didn't even make that trade now. :rolleyes: )

Still, I should have just waited a bit longer so I could have bought the 2080 call at a cheaper premium...
 
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It does not matter how cheap you buy the option if the market sells off 30 points away from your strike with 4 days to expiration. You have to be right on direction absolutely no matter how cheap or expensive the weekly option is.
 
optioncoach said:
It does not matter how cheap you buy the option if the market sells off 30 points away from your strike with 4 days to expiration. You have to be right on direction absolutely no matter how cheap or expensive the weekly option is.
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Judging by how volatile the SPX has been these past few weeks, my target of 2080 isn't really unrealistic. Though yes, theres the possibility the option could expire worthless with the underlying being just slightly under 2080 by this Friday, losing a rather big premium. I placed the trade before market open which was a big mistake as I could have bought the option at an 85% discount 30 minutes later.

I guess theres no crying over spilt milk now... :banghead:
 
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Like what were you thinking?

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Can you see Rounding top? Can you see market went up 15.25 points yesterday so not going to be a discount when you buy? Can you see moving averages are even coming together? Both the MACD and RSI are divergent, higher highs in price and lower indicator value. It is better to buy on a downclose cause it values less, and cost less if it was 2080, find a trendline and do Credit Spreads, risk much less. You are thinking in terms of reward first? I don't, I think in terms of risk. It is better to wait for a close beyond the 18 providing the 18 is sloping up and downclose, then do Put Credit Spreads and if killing you to Buy, then Debit spreads. Like April 7 close below 18ema, downclose, you give trade 5 days and if not profitable, you bail. Risk way too high for me to do outrights and overall testing never been very profitable enough for me to do outrights.
 
Handle123 said:
Like what were you thinking?

View attachment 163910

Can you see Rounding top? Can you see market went up 15.25 points yesterday so not going to be a discount when you buy? Can you see moving averages are even coming together? Both the MACD and RSI are divergent, higher highs in price and lower indicator value. It is better to buy on a downclose cause it values less, and cost less if it was 2080, find a trendline and do Credit Spreads, risk much less. You are thinking in terms of reward first? I don't, I think in terms of risk. It is better to wait for a close beyond the 18 providing the 18 is sloping up and downclose, then do Put Credit Spreads and if killing you to Buy, then Debit spreads. Like April 7 close below 18ema, downclose, you give trade 5 days and if not profitable, you bail. Risk way too high for me to do outrights and overall testing never been very profitable enough for me to do outrights.
More...

You forgot to mention IV.
Buy when IV is cheap too.
 
You are taking on a lot of risk for the size of your account. like Handle123 says, it is better to think in terms of risk than reward. you definitely need to trade "I don't care" size or you run the risk of gamblers ruin, like is possible now. Personally, I am only comfortable risking 1% of my total account size per trade. Also, the options you are buying are less than a week from expiration, and the gamma is probably through the roof. They are going to be incredibly sensitive to changes in the underlying. ATM options also contain the most time value, and therefore experience the most time decay as they near expiration. If you are interested in trading options you should definitely check out Lawrence McMillan's book Options as a Strategic Investment.
 
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