Question to options traders

[Ayn Rand]

You are a freak.

"I have $10,000 in my account but only want to trade $200."

Actually it does not seem you have ever traded options before.

If you want to do 1 contract at a time - whatever.

Paper trade until you can at least do 5 or maybe (wow!! no!! super wow!!) even do 10 contracts.

Here is the skinny

Not sure what asset you are trading. However if you think down then you want to buy puts. I would buy puts for next week expiration just out of the money. A little less risky but more than $200 would be in the money puts.

Truth - Try a few 1 contract trades and lose some money. You will learn more by doing that then anything.

If you want to blow your mind, if you ever show a profit take it immediately.

 

[Ates]

You are a freak.

"I have $10,000 in my account but only want to trade $200."

Actually it does not seem you have ever traded options before.

If you want to do 1 contract at a time - whatever.

Paper trade until you can at least do 5 or maybe (wow!! no!! super wow!!) even do 10 contracts.

Here is the skinny

Not sure what asset you are trading. However if you think down then you want to buy puts. I would buy puts for next week expiration just out of the money. A little less risky but more than $200 would be in the money puts.

Truth - Try a few 1 contract trades and lose some money. You will learn more by doing that then anything.

If you want to blow your mind, if you ever show a profit take it immediately.

Dude it's just an example and risk management. I never risk more than 2% of my entire account in a single trade. I didn't say I have $10K btw. It begins with "Let's say..."

I have never traded options but everything else. Just asking this simple idea to understand the logic

 

[ironchef]

How would you trade this setup?

I think market is going bearish for the next few weeks. Shall i buy puts or sell calls itm, otm, atm? And what expiry date would you trade? Can you close the position if the target hits before the expiry?

I think, selling is risky as your loss can be unlimited. I don't have experience in options trading but i want to limit my risk. Let's say I have $10K in my account and would like to risk only $200 which is 2% of my balance. Also I would like to go long at the magenta support and add more at the bottom ascending support lines.

We don't know if it is going to hit or when it's going to hit. I'm a bit confused here

How would you trade this?

I won't trade this, I wait

 

[Times]

Sell calls buy puts for no cost. It is called a risk reversal. Google it.

"no cost" Isn't the cost if the markets go up, the calls you sold have unlimited risk

As far as OP, It depends on your targets and time frame you think it will happen. Puts are fine as long as it fits in

 

[Ates]

Thank you for all your comments. Maybe I couldn't explained enough. I'm not really asking for a trading advice. I'm already a trader. I have never traded options. This is the case... All I am trying to find out if there's a fit to my analysis by trading options:

"Assuming" I have $10K in my account balance. I risk 1% to 2% per trade...! In this particular case, my maximum expected risk is $200.

At the time of this thread, SPY was trading around $286. So I'm short biased at this moment and I see high probability that market is going down to $267 (6% - 7% decline).

What I'm planning to do is; by risking only $200, I would like to short until $267 and long from $267 with open ended target, by another $200 expected risk. So I risk $200 for both trades and it's total $400 risk in two trades.

My risks are always pre-defined. This is the setup I'm trying to find out.

Again; I have never traded options before. All I know is you buy calls with pre-defined risk or sell shorts with unlimited risk if you are bullish - OR - buy puts with pre-defined risk or sell calls with unlimited risk if you are bearish.

Again; I'm not asking for any trading advices. I'm already short SPY. All I'm trying to figure out if there are practical ways to execute my trade setup. That's why I have asked this to option traders.

Thank you

 

[ironchef]

Thank you for all your comments. Maybe I couldn't explained enough. I'm not really asking for a trading advice. I'm already a trader. I have never traded options. This is the case... All I am trying to find out if there's a fit to my analysis by trading options:

"Assuming" I have $10K in my account balance. I risk 1% to 2% per trade...! In this particular case, my maximum expected risk is $200.

At the time of this thread, SPY was trading around $286. So I'm short biased at this moment and I see high probability that market is going down to $267 (6% - 7% decline).

What I'm planning to do is; by risking only $200, I would like to short until $267 and long from $267 with open ended target, by another $200 expected risk. So I risk $200 for both trades and it's total $400 risk in two trades.

My risks are always pre-defined. This is the setup I'm trying to find out.

Again; I have never traded options before. All I know is you buy calls with pre-defined risk or sell shorts with unlimited risk if you are bullish - OR - buy puts with pre-defined risk or sell calls with unlimited risk if you are bearish.

Again; I'm not asking for any trading advices. I'm already short SPY. All I'm trying to figure out if there are practical ways to execute my trade setup. That's why I have asked this to option traders.

Thank you

If you are so sure of your model, buying options (call or put) is like printing money (think insider trade, invariably they bought options). If you asked my opinion I said I wait.

 

[Ates]

If you are so sure of your model, buying options (call or put) is like printing money (think insider trade, invariably they bought options). If you asked my opinion I said I wait.

I'm always sure of my model but never sure about the results

 

[Baozi]

The problem with options is that you need to have also an opinion about the volatility and the timing of the move, not simply about the direction.

if you expect a sharp move down just buy at the money puts

if you expect some sort of drift first down and then up again you could try with a call calendar or diagonal. (in both cases short the front month, long the back month), you can search this forum for in-depth guides about calendars and diagonals.

If you have no clear expectations about volatility better to just short the underlying.

Final disclaimer: my option knowledge on a scale from 1 to 10 is around 5.5, so do your own research on these topics..

 

[Pkay]

The problem with options is that you need to have also an opinion about the volatility and the timing of the move, not simply about the direction.

if you expect a sharp move down just buy at the money puts

if you expect some sort of drift first down and then up again you could try with a call calendar or diagonal. (in both cases short the front month, long the back month), you can search this forum for in-depth guides about calendars and diagonals.

If you have no clear expectations about volatility better to just short the underlying.

Final disclaimer: my option knowledge on a scale from 1 to 10 is around 5.5, so do your own research on these topics..

Thanks, you said that "if you expect a sharp move down just buy at the money puts". Would this be ATM with a week to expire or a much longer time frame than that? Thanks mate.

 

[Baozi]

Thanks, you said that "if you expect a sharp move down just buy at the money puts". Would this be ATM with a week to expire or a much longer time frame than that? Thanks mate.

The general consensus seems to be that you should give yourself some safety margin, so if you expect the move within one week its advisable to go further out in time.

Once again, be wary to take advice from an option noob like myself.