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- Thread starter z32000
- Start date
Quote from z32000:
can you please explain what do you mean by...."I only took in $50"?
Are you saying that the 1 option cost you $50 and it lost $800 overnight? couldn't you just put a limit on the option to close out at a certain price?
He(she) sold the option for $50 and lost $800 on an adverse move. Since it was an overnight trade the stock most likely gapped on open hence it was impossible to close an option at anything but that price.
" when people talk about hedging....doesn't this lesson the amount of leverage you are putting forth?"
Yes it does and the quickest / easiest way to make big $ in the market is to wait until you see a big move coming and buy lots of out of the money calls or puts that eventually become deep in the money. Those have been my most lucrative trades.
But professional option traders don't usually sit there hoping to guess which stock/ETF is going to do that then wager a huge amount of their stake on one move. They try to hit singles and doubles on a regular basis instead of waiting for a grand slam and they do it having a hedged winning position that reduces their risk but still makes them $ on a REGULAR basis.
So you can do what most option traders do, decide how much you can afford to lose on a position and buy that amount of options. If you are wrong and they expire worthless, so be it.
Or you can set up spreads that limit both your reward and risk. Or you can do what I do, buy in the money calls and if the stock starts to move against me, short the stock or another out of the money call for the short term movement.
Yes it does and the quickest / easiest way to make big $ in the market is to wait until you see a big move coming and buy lots of out of the money calls or puts that eventually become deep in the money. Those have been my most lucrative trades.
But professional option traders don't usually sit there hoping to guess which stock/ETF is going to do that then wager a huge amount of their stake on one move. They try to hit singles and doubles on a regular basis instead of waiting for a grand slam and they do it having a hedged winning position that reduces their risk but still makes them $ on a REGULAR basis.
So you can do what most option traders do, decide how much you can afford to lose on a position and buy that amount of options. If you are wrong and they expire worthless, so be it.
Or you can set up spreads that limit both your reward and risk. Or you can do what I do, buy in the money calls and if the stock starts to move against me, short the stock or another out of the money call for the short term movement.
Quote from chrismontez:
" when people talk about hedging....doesn't this lesson the amount of leverage you are putting forth?"
Yes it does and the quickest / easiest way to make big $ in the market is to wait until you see a big move coming and buy lots of out of the money calls or puts that eventually become deep in the money. Those have been my most lucrative trades.
But professional option traders don't usually sit there hoping to guess which stock/ETF is going to do that then wager a huge amount of their stake on one move. They try to hit singles and doubles on a regular basis instead of waiting for a grand slam and they do it having a hedged winning position that reduces their risk but still makes them $ on a REGULAR basis.
So you can do what most option traders do, decide how much you can afford to lose on a position and buy that amount of options. If you are wrong and they expire worthless, so be it.
Or you can set up spreads that limit both your reward and risk. Or you can do what I do, buy in the money calls and if the stock starts to move against me, short the stock or another out of the money call for the short term movement.
so it sounds like professional don't daytrade...or do they?
from the way it sounds, they try to predict a large amount of points within a week to month timeframe.
wouldn't the probability of just investing your entire $$$ into something like index futures and going for just a point out of the full average daily point range mimic the same probability or even better due not having to double up on multiple position fees due to hedging and usually having a smaller spread?
i know that futures is more leverage, but couldn't this also be an advantage since your goal is not to predict the entire day...
Quote from MTE:
He(she) sold the option for $50 and lost $800 on an adverse move. Since it was an overnight trade the stock most likely gapped on open hence it was impossible to close an option at anything but that price.
so that person tried to sell that option during afterhours...cause you never really know what's going to happen the next day
"so it sounds like professional don't daytrade...or do they?"
When you see big positions of options go through, They are holding them for longer than a day. No one buys 500 calls on the SPY for a 4 hour trade. You would never get out of the trade at a profit unless there was a huge move in your favor. Don't forget the spread is usually $50-$100 per contract. You will see individual offers in between the spread for a few contracts, but that's not the MM spread. McMillan recommends buying options 3 mos out. Also most options are being bought to hedge stock positions.
That said, lots of traders like myself buy options for short term moves and I do buy options and sell them at the close or in 1-2 days for a quick profit. But I'm not a pro and most pros are looking at longer time periods and figuring their positions based on the greeks and IV, not just a short swing.
When you see big positions of options go through, They are holding them for longer than a day. No one buys 500 calls on the SPY for a 4 hour trade. You would never get out of the trade at a profit unless there was a huge move in your favor. Don't forget the spread is usually $50-$100 per contract. You will see individual offers in between the spread for a few contracts, but that's not the MM spread. McMillan recommends buying options 3 mos out. Also most options are being bought to hedge stock positions.
That said, lots of traders like myself buy options for short term moves and I do buy options and sell them at the close or in 1-2 days for a quick profit. But I'm not a pro and most pros are looking at longer time periods and figuring their positions based on the greeks and IV, not just a short swing.
"so are you saying she had a stop on the amount of $50...but the market ended up stopping her at $800 off instead?"
1. Options only trade during market hours, not in the after hours like SOME stocks do.
2. Maybe you don't understand how the market works with stops. If you short a stock at $20 with a protective stop at $23 and your stock announces great news after hours, and your stock opens up with a spread of $50x$50.02 the next morning, your stop executes at $50.02, not $23. It is the same for your short options.
1. Options only trade during market hours, not in the after hours like SOME stocks do.
2. Maybe you don't understand how the market works with stops. If you short a stock at $20 with a protective stop at $23 and your stock announces great news after hours, and your stock opens up with a spread of $50x$50.02 the next morning, your stop executes at $50.02, not $23. It is the same for your short options.