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My option trades for the past 6 months, feel free to ridicule, or offer guidance
- Thread starter thebubs
- Start date
Quote from thebubs:
As far as risk money management- I put 1000 in account and bought with that, have taken out 2000 from account thus far, (playing with houses money for now-mock again).
My game plan for closing position is if I can sell 1/3 of position to break even on intial purchase then do that, let the other 2/3 ride ,if not moving my direction 10-14 days out from expiration sell the rest (as they quickly go to $0-the churn if you will) after that- so far have been lucky/succesful with that approach, but looking for others, recently started toying with calender calls. Biggest single bet thus far is $350 on an option (vertical call)- not playing with alot of money
Thanks, you did very well.
imo, written rules as above can be useful. As trading is a % game, periodically increasing your gross risk capital by a certain % would be also useful for increasing profit amount in the long run, i guess.
Quote from thebubs:
very good point, but beating back that temptation is something hard to manage
Yup. But beating back temptation is THE essential ingredient to successful trading.
That's why paper trading success is so meaningless. I mean, there's nothing wrong with paper trading as a way to practice or try out a system. But never forget that 90% of the game is missing.
Quote from thebubs:
As far as risk money management- I put 1000 in account and bought with that, have taken out 2000 from account thus far, (playing with houses money for now-mock again).
My game plan for closing position is if I can sell 1/3 of position to break even on intial purchase then do that, let the other 2/3 ride ,if not moving my direction 10-14 days out from expiration sell the rest (as they quickly go to $0-the churn if you will) after that- so far have been lucky/succesful with that approach, but looking for others, recently started toying with calender calls. Biggest single bet thus far is $350 on an option (vertical call)- not playing with alot of money
Which broker(s) let you trade with 1000 to start ?
Good going on the returns. You must have something going on with that kind of performance, using otm illiquids, no less.
Whatever your critera, it would seem to me that you would want to up the ante a bit.
As far as risk money management- I put 1000 in account and bought with that, have taken out 2000 from account thus far, (playing with houses money for now-mock again).
My game plan for closing position is if I can sell 1/3 of position to break even on intial purchase then do that, let the other 2/3 ride ,if not moving my direction 10-14 days out from expiration sell the rest (as they quickly go to $0-the churn if you will) after that- so far have been lucky/succesful with that approach, but looking for others, recently started toying with calender calls. Biggest single bet thus far is $350 on an option (vertical call)- not playing with alot of money
Which broker(s) let you trade with 1000 to start ?
Good going on the returns. You must have something going on with that kind of performance, using otm illiquids, no less.
Whatever your critera, it would seem to me that you would want to up the ante a bit.
Quote from donnap:
Quote from thebubs:
Whatever your critera, it would seem to me that you would want to up the ante a bit.
How can you suggest that? Based on the success of a few trades? There are far too few data points to draw any conclusions.
What if the success were due to the fact that he bought only calls in a rising market? What would that tell you about the viability of the system?
A lot more information is needed before the bets are increased. And the fact that he admits that controlling emotions is so difficult - larger bets may induce panic.
There's plenty of time to up the ante. Perhaps after a few years of up and down markets, volatile and non-volatile markets. If he does well in all of them, then an argument to up the ante would be reasonable.
my 2 cents.
Mark
Quote from thebubs:
Everyone seems to feel I should'nt be buying options b/c I will be wiped out (based on my last to posts), I'm not investing alot of money as seen above and enjoy it, just looking for some pointers and constructive advice, thanks to all who do that
I do trade options as well (from the long side only) and made more money from them than from stocks in 2007 and 2008 (well down this year so far). As with any trading instrument, there is a right way and a wrong way to trade it. The premiums on the options are not set arbitrarily. So in reality one cannot say the sell side is the right way to go. You could blow up either way. It is much harder to make money on the long side if you seek to be fully invested in options and hold for long durations (or till expiration). The big volatility that comes with the premium (you can lose 100% of it) and fixed fractional bets would ensure most people would not survive. If say you always trade with 20% of your account. In month 1, you staked 20% of your funds in an option that losses 100%, and in month 2 you stake 20% of your funds (of the balance) and your premium gains 100%, you would still end down 4% (does not really matter whether the gain comes before the loss) on what was basically a fair premium. No none has unlimited funds to be able to trade fixed absolute size, so this handicap of fixed fractions would always be there. Add to that slippage (lots of stock options have really big spread that it is difficult to see how anyone could make profit in the long run trading the options).
So basically to make it going long only, you must make sure you are selective (set-ups that give you an edge in the underlying instruments - does not happen everyday) enough to offset the costs outlined above, and preferably have lower holding time-frame to mitigate the impact of volatility on results (of course not too small otherwise you may not cover your slippage and commission costs).
3 more questions:
Would you consider to keep long both calls and puts at the same time with a proper/ equal ratio is a good approach?
I guess your edge would be selecting the right stock for its moving to the right direction you project, either up or down, and trading at the right timing. Right?
Did you compare your performance for individual trades using options against using its underlying equity, to see how much trading options (say 100% pa) has been better and outperforming trading stocks (say 50% pa)?
Would you consider to keep long both calls and puts at the same time with a proper/ equal ratio is a good approach?
I guess your edge would be selecting the right stock for its moving to the right direction you project, either up or down, and trading at the right timing. Right?
Did you compare your performance for individual trades using options against using its underlying equity, to see how much trading options (say 100% pa) has been better and outperforming trading stocks (say 50% pa)?
Quote from neke:
I do trade options as well (from the long side only) and made more money from them than from stocks in 2007 and 2008 (well down this year so far). As with any trading instrument, there is a right way and a wrong way to trade it. The premiums on the options are not set arbitrarily. So in reality one cannot say the sell side is the right way to go. You could blow up either way. It is much harder to make money on the long side if you seek to be fully invested in options and hold for long durations (or till expiration). The big volatility that comes with the premium (you can lose 100% of it) and fixed fractional bets would ensure most people would not survive. If say you always trade with 20% of your account. In month 1, you staked 20% of your funds in an option that losses 100%, and in month 2 you stake 20% of your funds (of the balance) and your premium gains 100%, you would still end down 4% (does not really matter whether the gain comes before the loss) on what was basically a fair premium. No none has unlimited funds to be able to trade fixed absolute size, so this handicap of fixed fractions would always be there. Add to that slippage (lots of stock options have really big spread that it is difficult to see how anyone could make profit in the long run trading the options).
So basically to make it going long only, you must make sure you are selective (set-ups that give you an edge in the underlying instruments - does not happen everyday) enough to offset the costs outlined above, and preferably have lower holding time-frame to mitigate the impact of volatility on results (of course not too small otherwise you may not cover your slippage and commission costs).
Opportunistic approach/ timing required for options only when the markets are rational. At these times the RR easily overcomes expenses and can provide handsome returns. The second half of 08/early 09 was particularly unpalatable for options buyers due to the hugely reduced RR as a result of the extreme implied volatility. It was also no picnic for writers irrespective of the huge premiums on offer as many sellers were left annihilated due to the extreme market moves. All in all this period was a good time to keep your powder dry and watch from the sidelines.
One other point, it's not always what you do but often how you do it that matters the most!
Regards
Johno