New guy and the new math ....
- Thread starter wburt1948
- Start date
As Larry the Cable Guy has said ..."That's some scary s*** right there."
Here's what I learned this week going forward ....
Look for:
Higher Implied Volatility
Volume greater than 200
A narrow spread of Bid/Ask price
High Open Interest
Underlying asset price above $5 (actually got conflicting opinions about this)
At least 1/3 difference in call spread of buy and short option
Dump eTrade, get Tastytrade
Taking a break today to see the grandkids. When I get home after close, I'm hoping it will be a better day.
Thanks so much for your reply.
Here's what I learned this week going forward ....
Look for:
Higher Implied Volatility
Volume greater than 200
A narrow spread of Bid/Ask price
High Open Interest
Underlying asset price above $5 (actually got conflicting opinions about this)
At least 1/3 difference in call spread of buy and short option
Dump eTrade, get Tastytrade
Taking a break today to see the grandkids. When I get home after close, I'm hoping it will be a better day.
Thanks so much for your reply.
Take what I'm saying with a grain of salt - I've only been trading a bit more than a year - but there are certain things I've learned on my own hide. (I've managed to not only survive but do better than buy-and-hold returns in my first year - which I'm quite proud of, given that this period included the Corona Crash.)
1) That's not scary; that's the reality of trading. When you're in a trade that's gone seriously bad/outside your plan, you need to be decisive: take the loss and get the hell out. Anything else will destroy your account. In fact, if you're going to trade, you need to know that RISK MANAGEMENT is king. Get that piece wrong, and nothing else will matter.
2) Think of IV as being directly correlated to premium. Buy low, sell high.
3) There are lots of reasons to avoid penny stocks. Some people specialize in them, but it's a seriously bad idea for a new trader.
4) There's a way to structure debit spreads, whether put or call, that produce positive theta (best of both worlds.) Do some Google searching.
General comments: Hull, McMillan, etc. are probably too complicated and intimidating for someone without at least some finance background. I'd suggest checking out OptionAlpha - they've got a nicely-structured free intro course - and TastyTrade later on, for an easier ramp-up to the basic principles. Check out McMillan's "Options as a Strategic Investment" a bit later - possibly after you've got a hundred or so trades under your belt (most of those should be in sim, just so you get all the silly mistakes you're going to make out of the way. Nothing like getting a spread upside down, or hitting 'Buy' instead of 'Sell'... don't ask me how I know.)
And do continue to hang out here. Set your bullshit filter on "stun" - there's A LOT of noise and nonsense, just like in anything finance-related - but there's also a small number of people who can walk the talk. Learning to figure out which is which is a useful skill, and I won't deny you the learning opportunity...
Better than paying $99 to attend a 3 hour seminar on how to make $2.8M trading options in your spare time.
Borrow and read it to see if you like it. I refer to it constantly so borrowing from the library won't work for me. I even bought the study guide and worked on it.
OK to switch to Tastytrade but don't follow Karen's footsteps.
NEVER pay the asking price for an option. You can almost always get the midpoint or very close to the midpoint.