Options Noob... 1st 100 trades completed

Scataphagos

Scataphagos

When you show any interest at all in options, you get bombarded with solicitations. Some of which include free trade recommendations.

I took 100 of those with the strategy:
1. Take profits when +100% gain
2. Stop when -50% loss
3. Close in early July, regardless (all plays were July expiration)

Results...
1. 38% win rate... all were option buys. I understand I could get a higher percentage of small winners writing OTM, but not much appeal. I don't care to wait 3 months to earn $.70, or do a "spread for net credit of $.55"
2. ~$22K net profit... without 3 decent size winners which I let run well past "100% gain", likely would have ended negative.

Assuming average stock price of $50, I traded an options portfolio on $5MM worth of equities... for a gain of <0.5%.

Seems not worth the hassle.

If I am to continue bothering with options, need better trade choices and a higher percentage of winners. Lots of people want to sell me "their picks" for a high price. Seems likely to not be worth it.

FWIW....

Comments?
 
Last edited:
Scataphagos said:
When you show any interest at all in options, you get bombarded with solicitations. Some of which include free trade recommendations.

I took 100 of those with the strategy:
1. Take profits when +100% gain
2. Stop when -50% loss
3. Close in early July, regardless (all plays were July expiration)

Results...
1. 38% win rate... all were option buys. I understand I could get a higher percentage of small winners writing OTM, but not much appeal. I don't care to wait 3 months to earn $.70, or do a "spread for net credit of $.55"
2. ~$22K net profit... without 3 decent size winners which I let run well past "100% gain", likely would have ended negative.

Assuming average stock price of $50, I traded an options portfolio on $5MM worth of equities... for a gain of <0.5%.

Seems not worth the hassle.

If I am to continue bothering with options, need better trade choices and a higher percentage of winners. Lots of people want to sell me "their picks" for a high price. Seems likely to not be worth it.

FWIW....

Comments?
More...

Would've made 1000% if you bought crypto currencies
 
Despite trading everything else for decades now - never traded a single option due to the poor odds of winning.
 
Last edited:
You're making purely price plays, and it sounds like you want to keep playing price. To that end, you're correct, no point to options.

Just a thought, but excepting those the trades that pushed you into profit, what if you had taken the opposite side of the trade? Did your losses more than double your commissions?

And one step further since you're good with price plays, how much would the short profits have improved if you applied your directionality to trades? (I.e. Sold the put rather than buying the call)
 
beerntrading said:
You're making purely price plays, and it sounds like you want to keep playing price. To that end, you're correct, no point to options.

Just a thought, but excepting those the trades that pushed you into profit, what if you had taken the opposite side of the trade? Did your losses more than double your commissions?

And one step further since you're good with price plays, how much would the short profits have improved if you applied your directionality to trades? (I.e. Sold the put rather than buying the call)
More...

The buys were both puts and calls. I didn't discriminate, just took what was recommended. (Part of my quest is to determine whether it could be worthwhile to rely upon someone else's analysis as to which play to make.)

If I were big into "income", I understand writing OTM would be the ticket... but to small money.... unless leveraged.

I've traded the SP futures for years with a 3:1 profit/risk "reasonable expectation possibility". Writing options doesn't give me that, so why bother?

For options to work in my K.I.S.S. mind, I need to "pay $2 and expect to sell for $6 with a high enough percentage of plays".

As for now, I'm thinking the key to options success is to make better trade selection. Do I pay for someone's picks, or dig them out myself? (I have no problem paying someone to do the screening leg-work... if they do a good job. So far, I'm not impressed. There are apparently lots of option services charging $1,000-$3000/year for their picks. I even saw one for "$8,999 for a lifetime of pics". Really? They must think option traders are both naive and desperate.)
 
Last edited:
Scataphagos said:
The buys were both puts and calls. I didn't discriminate, just took what was recommended. (Part of my quest is to determine whether it could be worthwhile to rely upon someone else's analysis as to which play to make.)

If I were big into "income", I understand writing OTM would be the ticket... but to small money.... unless leveraged.

I've traded the SP futures for years with a 3:1 profit/risk "reasonable expectation possibility". Writing options doesn't give me that, so why bother?

For options to work in my K.I.S.S. mind, I need to "pay $2 and expect to sell for $6 with a high enough percentage of plays".

As for now, I'm thinking the key to options success is to make better trade selection. Do I pay for someone's picks, or dig them out myself? (I have no problem paying someone to do the screening leg-work... if they do a good job. So far, I'm not impressed.)
More...
You've got a fix looking for something broken (or something to break).

I started options with debit spreads. And had a slightly better than 50-50 when it came to spotting price direction, but the price moves were never to the magnitude to make that profitable. But I had a very consistent strategy--just a losing one. And a loser to such an extent that the all I need to do was change the "Buy Open" and "Sell Open" legs of the spread to make it profitable.

And what do you mean by 3:1 profit / risk? I would take that to mean 300% profitability. And if you're that good with price direction already, why would you ever take someone else's recommendation? I suspect you mean target gain is 3x stop loss. If that's the case, that's just chop or noise from an options standpoint.
 
beerntrading said:
You've got a fix looking for something broken (or something to break).

I started options with debit spreads. And had a slightly better than 50-50 when it came to spotting price direction, but the price moves were never to the magnitude to make that profitable. But I had a very consistent strategy--just a losing one. And a loser to such an extent that the all I need to do was change the "Buy Open" and "Sell Open" legs of the spread to make it profitable.

And what do you mean by 3:1 profit / risk? I would take that to mean 300% profitability. And if you're that good with price direction already, why would you ever take someone else's recommendation? I suspect you mean target gain is 3x stop loss. If that's the case, that's just chop or noise from an options standpoint.
More...

"...You've got a fix looking for something broken (or something to break)..." I have no idea what this means.

My basic strategy is to find the ES trades where I am risking 4 points with the reasonable expectation of making 12 or more on a successful play. For options, I have to screen lots of issues to find similar risk/reward setups. I don't want to screen "thousands" or even "hundreds" of stocks nightly looking for them. Option adviser services claim to do the screening and then tell you their picks. Any worth what they charge?

My experience so far with options is that they are "a whole lot of hassle for nickel-and-dime money"... unless you want to go the leveraged-risky route. I can do the "risk-leverage" thingy without the hassle of options... except for the rare cases of "catching the big one", which likely will never materialize in my account.
 
Last edited:
You must log in or register to reply here.
Back
Top