So what works then?

[Corto]

Got into options few years ago only because I wanted to learn how to protect long stock positions using puts. Got this advice: forget about it, read Alan Ellman books about covered calls. Those looked promising, so I tried for few months, but it didn’t work great. You need to be able to guess right what the stock is going to do. Then I discovered tastytrade and optionalpha. They both made me think that trades having probabilities on your side are possible. So I started with iron condors in indexes (SPX, NDX, RUT). I chose indexes because of the special tax treatment (the 60/40 rule). It just happened that I had 2-3 incredible months doing weeklies to only see my account slowly evaporating after that. Started again buying deep ITM calls (delta close to 1) with 1-2 months till expiration. The setup only needed less than 1% stock increase to break even (Chuck Hughes strategy). My account quickly recovered and went well in the + until February 2018 when nothing seemed to work anymore. At that time I was already reading about selling puts (slightly OTM) and the idea that they allow a bit of adverse stock move and still be able to win looked attractive. So I sold time value for roughly 8-9 months now and I’m back where I started.

I thought maybe I was too greedy and should have played at lower delta. That’s the kind of trades promoted by Don Fishback and started a thread about it, but got the feedback it’s a losing strategy.

So I think I tried enough to justify asking: can this really work? Maybe it’s a skill I simply can’t get. Does this sound familiar?

 

[REDP1800]

Got into options few years ago only because I wanted to learn how to protect long stock positions using puts. Got this advice: forget about it, read Alan Ellman books about covered calls. Those looked promising, so I tried for few months, but it didn’t work great. You need to be able to guess right what the stock is going to do. Then I discovered tastytrade and optionalpha. They both made me think that trades having probabilities on your side are possible. So I started with iron condors in indexes (SPX, NDX, RUT). I chose indexes because of the special tax treatment (the 60/40 rule). It just happened that I had 2-3 incredible months doing weeklies to only see my account slowly evaporating after that. Started again buying deep ITM calls (delta close to 1) with 1-2 months till expiration. The setup only needed less than 1% stock increase to break even (Chuck Hughes strategy). My account quickly recovered and went well in the + until February 2018 when nothing seemed to work anymore. At that time I was already reading about selling puts (slightly OTM) and the idea that they allow a bit of adverse stock move and still be able to win looked attractive. So I sold time value for roughly 8-9 months now and I’m back where I started.

I thought maybe I was too greedy and should have played at lower delta. That’s the kind of trades promoted by Don Fishback and started a thread about it, but got the feedback it’s a losing strategy.

So I think I tried enough to justify asking: can this really work? Maybe it’s a skill I simply can’t get. Does this sound familiar?

buy cheap options with a probability of jsut havign the market move large. do not worry about direction.. strangle or straddles and use spreads to strangle or straddle if really strapped for cash.

 

[Robert Morse]

You need to be able to guess right what the stock is going to do.

IMO, this should be this focus for most successful retail option traders.

1. Have a process to predict where a stock will or won't trade over a time period.
2. Then, based on current option pricing, with a process to predict option prices over the same time period, use the option strategy that best fits your expectations.

Any trader that likes to do strategies of any kind, all the time, is just betting market makers and other participates are wrong. That can happen, but not every week, week after week.

 

[Handle123]

Got into options few years ago only because I wanted to learn how to protect long stock positions using puts. Got this advice: forget about it, read Alan Ellman books about covered calls. Those looked promising, so I tried for few months, but it didn’t work great. You need to be able to guess right what the stock is going to do. Then I discovered tastytrade and optionalpha. They both made me think that trades having probabilities on your side are possible. So I started with iron condors in indexes (SPX, NDX, RUT). I chose indexes because of the special tax treatment (the 60/40 rule). It just happened that I had 2-3 incredible months doing weeklies to only see my account slowly evaporating after that. Started again buying deep ITM calls (delta close to 1) with 1-2 months till expiration. The setup only needed less than 1% stock increase to break even (Chuck Hughes strategy). My account quickly recovered and went well in the + until February 2018 when nothing seemed to work anymore. At that time I was already reading about selling puts (slightly OTM) and the idea that they allow a bit of adverse stock move and still be able to win looked attractive. So I sold time value for roughly 8-9 months now and I’m back where I started.

I thought maybe I was too greedy and should have played at lower delta. That’s the kind of trades promoted by Don Fishback and started a thread about it, but got the feedback it’s a losing strategy.

So I think I tried enough to justify asking: can this really work? Maybe it’s a skill I simply can’t get. Does this sound familiar?

How are your skills at reading charts? Perhaps study what charts do near end of a trend or mini-trends, learn what is a retracement and what is a right shoulder. If you going to trade directional, need to be aware of patterns.

 

[REDP1800]

you can trade non directional even more successfully by knowing patterns because typically all patterns lead to a break out a break down or a continuation so strangling is always your best bet

 

[Corto]

I think I'm good enough at reading charts and I choose my candidates based on retracements, oversold stochastic, MACD histogram divergences, etc. Problem is when market goes down, almost everything goes down.

 

[REDP1800]

what does that statement even mean?
then buy calls and puts in a spread and see what happens.. solongs mkt doesn't go sideways..not a chance in hell right now then you will make more money on one side than the other. you can also buy back your loser at less of a loss.

 

[Corto]

I was chasing stocks I had a slight bullish bias for. Now we got into this sideways action where everything is all over the place, so obviously predicting trend is as good as a guess.

Tastytrade doesn't care about trend, all that matters to them is volatility and they seem to like the recent market behavior a lot. Tom Sosnoff often said he prefers straddles and strangles and he advocates aggressive deltas, but some on this forum advised me to avoid what tastytrade sells.

 

[REDP1800]

i dont know what tasty trade is but sideways this mkt is not. you cannot say it is sideways when making 3 to 5 % moves a week up or down. sideways means no movement or very tight range...this mkt has a huge range right now and buying calls on dips and puts on rallies by legginto a spread can do very well or place both at same time. YOU need to understand that there i s NO HOLY GRAIL. nothin you can buy or sell that will fix this problem of yours. It is called taking a risk. you must take a risk to make money. put your trades on and see what happens. place trades you like. apparently you are good at everything but need help with actually taking a risk...so just put on the trade and see what happens

 

[Magic]

What works? Getting paid risk premium. No harm in spending time looking for a pronounced edge meanwhile, but really everything obvious has already been priced pretty fairly for the nature of it. To find a deal you’re going to need additional information the rest of the world doesn’t already have, or some sort of model that does better than the general assumptions that things are priced with.

Diversify your risks, optimize your risk adjusted returns, and hold as much risk as you can safely absorb. Do that consistently for long enough and your capital will start compounding into a non-trivial sum.