QQQQ Option Traders

[cwareing]

Hey guys and gals,

I've been reading the forums for a good few years now, although I don't post much. There is a lot of good info on this site, and a lot of BS too.

Just wondering if some of the more experienced option traders could give me some clues as to where I am going wrong.

I trade the QQQQ option's exclusively. Always long, either calls or puts, always near month, or 1 month out. Between 8-20 contracts at a time. I rarely hold an option for more than 3 days, and if the possibility presents itself to close off the position with some profit in one day, I will take it.

This year I am down, but by less than commissions, so not too bad. But, as commissions are to be counted for, and are part of the game, obviously I have a lot of room for improvement.

My biggest issue is getting stopped out. I use mental stops, usually 10 cents below my buy price. On three of my last 4 trades, I have been whipsawed badly, getting stopped out, right before the option goes on a big run. I have closed my position within mere pennies of the low of the day, then it takes off. What kind of recommendations do you have given the information I have provided.

Thanks in advance,

Chris

 

[dmo]

You seem to be consistently getting out exactly where you should be getting in. To correct that, you could try scaling in two positions. That is, you buy (for example), then just where you would place your stop, you instead place another buy order. Place your stop for both positions further down.

This violates what many consider a fundamental rule. But is it better to get stopped out right at the bottom every time?

Of course, you should drastically reduce your size if you decide to try it. Since you are currently doing 8 to 20 contracts at a time, you have plenty of room to do so without increasing your risk per trade. If the market turns around after your first buy, you make less money than if you had bought your full normal amount. But you will get stopped out less often.

This may be psychologically difficult for you. If you're too nervous about it of course it will not work. I would start out doing just 1 contract at a time and see how it works for you before committing more funds than that - or even paper-trade it.

BTW - if you are trading this style, I'm curious why you're not just trading the underlying itself?