Any book? Course? What are your risk management rules?
Short strangles via Tastytrade....
- Thread starter tradingpoker
- Start date
Everyone's risk tolerance is different ... usually depends on personal psychology / experience ... and how big a draw down you think you can tolerate
I trade index options ... the simple rule is not to blow out your trading account ... personally, I take more upside risk ... for a number of reasons ... to avoid risk of market shut downs as they did post 9/11 ... to be a seller of put options on / into a market crash ... and you can usually recover from any drawdowns on a market rally with patience as Vol is not exploding and forcing you out of positions
I agree, but, do you really think is bad advice to trade small? It's is true it's a better deal for the broker but I think is better for the trader too. The trader needs many occurrences for the probabilities to play out. Don't you think?
Not a bad idea to trade small ... at least in the early days ... and then trade whatever is the right size for you
What is bizarre ... is for Sosnoff to say 'trade small' ... and then have up to 100 separate positions on ... which are all broadly correlated and have exposure to systematic risk ... what on earth can justify that ... other than generating comms for the broker
Yes that's insane. But 5% per trade I think is a good allocation per trade.
How many positions are you going to have on simultaneously with 5% allocation ?
5% of what ? ... when the market moves 5% - 10% - 50% - 100% against you ?
5% of the portfolio maximum per trade, around 10 positions and leaving 50% in cash.
My gut: You should reduce your bet size.
IMHO, maybe you should go back to your trading history (e.g., ~ for the past year), calculate your expectancy. From that you can better calculate your bet size using fractional (1/4 to start and perhaps up to 1/2) Kelly.
Good luck.
No that I'm his lawyer, but in some episodes, he recommends to widen the width of the strikes instead of increasing the number of contracts, this reduces commissions and increases the probability of success.
You said you trade index options, do you trade then naked or verticals spreads?