new trader

[RunTrade]

Quote from Option Trader:

I can't tell you much about futures, but IF you know what you're doing, equity options can be very profitable.

how long have you been trading options, OptionTrader? Could you give me some vague numbers of how "profitable". I understand that profits are technically unlimited, but what kind of per annum rate is acheivable (on average) consistantly to an experienced options trader.


As of now, i have read through 3 books/texts and am now reading some of Don Chance's texts for practice and repetition so I fully and quickly can recall theories, methods, etc...

 

[RunTrade]

Also, does anyone have information for interning on the CBOE at all? I heard they hire interns/ extra help, but know of nothing other than that. Thanks.

 

[Option Trader]

Reply to Runtrade:

When you mention consistant profits , beware of the calendar spread and covered call myths. For the most part I would not look at option trading as a method of gaining consistant income, rather to leverage positions and limiting risk. On that note, the private message I sent you before I believe was good advice, and I mean it. I am not in position to weigh pro's and con's of equity versus future options.

As for writing strategies, condors in my opinion is the only strategy worth focusing on. You can send me a private message.

 

[FullyArticulate]

Quote from RunTrade:

Could you give me some vague numbers of how "profitable". I understand that profits are technically unlimited...

I think you (like most people looking at options) have been turned off by the "earn 300% overnight!" hype. It's simply not true. Sure, I've had the options trade that more than tripled overnight (look at CME mid-October to see a recent example). But it certainly isn't the norm.

Money management is much more difficult, and more poorly defined for options traders. You definitely don't want to follow the "2%" or "6%" rules--it just doesn't make sense. My typical options trade either makes 100% or loses 60%.

The bid/ask spread is definitely the biggest "catch" in options trading. A $1 option may go for $.70 bid, $1.30 ask. That's a big difference, percent wise.

Like any trade vehicle, you have to be right about the direction of the underlying. If you're right, you'll make money. If you're wrong, you'll lose. Options offer the additional benefit of being able to choose from an incredible array of choices of what the market will do. You can literally draw a line on a chart and say, "I think it will close somewhere (I don't care where) above that line in 3 weeks", and if you're right, you'll make money. Even if the line is 20% below the current value of the underlying. You can't create a similar situation with futures or equities.

Probabilities become far more significant in options than they are in equities. For example, I can put on a trade that risks $400 to make $100, but with a 80% chance of making that $100. Is that a good bet? Alternatively, I can put on a trade that risks $100 to make $400, but with a 20% chance of making it. Is that better?

With equities, you can find patterns which have a good chance of doing what you want, but you never can quite quantify it like you can with options.

The odds are extremely good that someone who buys an option will lose money. Since all beginners buy options, it makes sense why people have such a foul taste left in their mouths for options.

 

[deglazenbol]

Why don't you apply for a job at a market maker company.. 15K to make a living on options, face it; it ain't gonna work. All odds are against you. Of course there are people hitting homeruns, and people steadily making money writing options while appying strict money management. But it will take more than the 15K to make a decent living out of it.
As a fresh graduate, go to a market maker firm so you can at least grasp how the pro's are making money. As for myself, I'm in the same position, now trading with a propfirm, learned me a lot about the market (moreover, also trading with my own money). Good luck!

 

[Option Trader]

Quote from Option Trader:

Reply to Runtrade:

As for writing strategies, condors in my opinion is the only strategy worth focusing on. You can send me a private message.

Extra note regarding condors regarding the above message to Runtrade:

If you were a money maker/ specialist, with tons of money and well diversified among many stocks, you could afford to sell calls and sell puts (and you would also get the asking price). This would form for them like a short strangle.

In doing condors there are 2 factors that decrease the upside: a) you cannot afford the risk so you need protection by buying long calls and puts and probably will pay asking price on them b) You will probably be getting only the bid for the calls and the puts you are shorting. Then you must consider after these cutbacks in profitability if it justifies the risk.

To make condors work, my thoughts are: A) Leg into the condor. Start by putting orders in to buy long at the bid for the long calls and puts; when they go through then continue by selling short B) Choose a later month for the longs to decrease theta and to enable repeating the next month(s) C) Use a platform like Choicetrade with very low commissions. In addition, you can join my group which has an even lower rate available for our combined volume. D) Use a Direct Access platform which will allow you to have 4 saved order boxes on the screen at the same time for instant reaction time (again, available with Choicetrade--you don't need IB for this; available with very few brokers). E) One more idea in mind, which is my trading secret; I would barter it in private forum for something.

 

[murray t turtle]

PARTIAL Quote from Option Trader:

Reply to Runtrade:

For the most part I would not look at option trading as a method of gaining consistant income, rather to leverage positions and limiting risk.

You can send me a private message.

========

Runtrade;
Agree with Option Trader.

Actually to trade/invest options,may want to keep track/record underlying stock;
& may want to trade underlying stock & compare results.

 

[Verdais]

Not to beat a dead horse, but I have to agree with what everyone else is saying on here. 15K is not nearly enough to start trading retail options and make any kind of decent living. If you can make a decent living doing it, then you must be some kind of guru with picking direction in which case we should all be taking advice from you and not the other way around.

If for some insane reason you still want to continue down the options road, you really should try and find a market-making firm that will take you under their wing. I think the best way to learn options is by watching some else actively trade them. Experience watching the market and watching someone trade the market is the best teacher there is. Better than books, better than seminars.

I've been trading options as my sole source of income for the last five years. So there is good money to be made from it, but it takes a ton of patience, a decent amount of capitol, and a someone to guide you.

Good luck.

P.S. Don't go retail, go market-maker or forget it.

 

[ifreebird]

using your 15K to apply for a job in options business. There are a lot of options Market making firms and prop firms looking for hiring smart people. If you are one of them, you should be able to get a chance to peek into the options world..


It takes at least a year for a very smart person to understand options and trade them with rigirous training in a professional firm.

However options are extremely flexible financial instruments, they can serve all kind of needs from investors and traders.

 

[murray t turtle]

Quote from Option Trader:

message to Runtrade:

If you were a money maker/ specialist, with tons of money and well diversified among many stocks, you could afford to sell calls and sell puts (and you would also get the asking price).

================
1] Runtrade sounds like you have the guts to be an entrapeneur;
if you cant get in with Market maker/specialist,
another elitetrader had a window washing business till he could trade full time

2] Verdais had another helpful point,'' experience watching the markets....is better than books, better than seminars.''

3] And while option buying is fun, exacting as far as capital risked;
markets stay moderately bullish or moderately bearish much of time. Sheldon Natenberg likes '' to buy/sell underlying stock in moderately bullish or moderately bearsih market.''Plus much much better bid/ask spread to trade/invest stocks

3.3]And like Option Trader says ''and you would also get the asking priice'' Money makers/specialists may split bid /ask however for option buyers/sellers for high liquid stuff like QQQQ options, especially with tons of patience.


Wisdom is profitable to direct.