So what works then?

[wlnd]

got started in trading with extreme misknowledge on options. did "no-brainer" vertical debit spreads on spx. do it both directions = iron condor. well i got ironed by the condors for sure

would only trade options, if you have some minimum trading skillsets + sharp mind in mathematics. most will have a problem developing a min. trading skillsets. maybe start trading outright in stocks/futures/fx first? & build further on options, if you have a sharp maths mind. search for "desterio/atticus vol journals.". will give you an idea of skills required to trade options

 

[ironchef]

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?

For us mom and pop, your experience just about sums it up. If we blindly buy, blindly sell, statistically most will net a lost if we play long enough. No different than going to Vegas.

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.

IMHO, best advice for us mom and pop retail option traders.

Knowledge of the underlying, trading directional betting with the trend (like this 9+ yr bull market) should enhance our chances of making a profit. Of course when the market suddenly revered, like this year, using this approach could be painful.

Finally, get off the beaten path and find a road less travelled. The more popular the strategy, the more popular the underlying, the more crowed the field, the less of a chance you will be profitable.

 

[ET180]

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.

I think the TastyTrade approach is the best place to start. I don't follow it strictly. Since volatility picked up, I've moved towards more defined risk trades instead of undefined risk so I can sleep better at night. If you follow the TastyTrade mechanics and know how to manage your trades, I think you'll make money. As it's really just a probability and numbers game.

 

[zenostiffler]

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.

A man after my own heart. But let's face it, market makers do not have to be "right". They just have to act quickly enough to benefit from their built in advantage: the bid offered spread. And of course we are given to understand the operators in the HFT space are privy to inside information: orders and order size. Which must be rather helpful when you are making a market and have to take a very short term position.

It may just be that apparent "success" in trading is a question of survivorship bias. In other words an illusion. Those who take advantage of a genuine market opportunity (the market makers) are perhaps more likely to survive than those who take a view on market direction. Even trend following (as traditionally practiced at least) has ceased to work.

As to "guessing what a stock is going to do".....hmmm!

 

[smallfil]

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?

You are all over the place is the problem! No trading system works 100%, you will have losses. Let me guess, I bet you do not have a trading journal, trading plan nor observe proper risk management? Good trading is boring and does not need to be complicated. If you do not have a trading journal, how can you correct your mistakes? Do not have trading plan, how can you get from point A to point B and then, point C and achieve your goals? Do you have proper risk management in place? If not, you will blow up your account and still be wondering what happened?
Would suggest, you figure out what kind of a trader are you? Day trader, Swing trader, Position trader. Then, study how to be a good say Swing Trader taking into account risk management (should be job number 1), maintaining a trading journal and having a trading plan in place. Lots of material in the internet and You Tube videos to learn about risk management, maintaining a trading journal and having a trading plan. Study, study and study some more! However focus on those things missing from your trading.

 

[ktm]

I've been trading options for over 20 years. I feel like I've tried everything at some point in various forms. At times, everything works...at other times, nothing works. And nothing works all the time.

You seemed to have traded enough to know how options work and the risks associated with various positions.

I came up with my own strategy years ago. That's what you need to do.

Sit down and work out what you want to accomplish in terms of points per expiry or exposure levels and start working on a strategy that is yours. Personally, I barely look at charts and I have absolutely no clue where the market is headed for the next minute, hour or month.

In a nutshell, I just do spreads. When I have around 90% of my profit for a segment of the spread, I capture that. When I have a short option in the spread that's getting cheap and adding to my exposure, I move it up. Things get adjusted based on the VIX and how the market is behaving. When we are grinding up week after week, you adjust. Generally the VIX is going to take care of you in terms of pricing to put things on, but it's up to you to adjust as things move around.

The 60/40 Section 1256 stuff is absolutely the way to go. That's 100% of what I trade.

 

[Corto]

... Let me guess, I bet you do not have a trading journal, trading plan nor observe proper risk management? ...

 

[Corto]

My trading journal is a spreadsheet. I keep it to hopefully see what works after a while. It currently shows 226 trades since April this year when I revamped the spreadsheet. Selling slightly OTM puts looks the best in terms of number of winners/losers, but assignments are killers. I manage them for additional credit, but often got assigned early. Fear of early assignments made me close early some losing ones thus certifying the loss.
Now I have more than half of my account blocked with long stock positions. Selling covered calls on those doesn't help much.
I think risk management kept me in the game.

 

[Corto]

The 60/40 Section 1256 stuff is absolutely the way to go. That's 100% of what I trade.

Good to know indexes work for you. Care to give details? For me managing (rolling, repairing) iron condors in SPX were almost killed by commissions. Doing three repairs in a row would barely put me in the plus after commissions. And I use Interactive Brokers, cost can't get much lower I guess.

 

[smallfil]

My trading journal is a spreadsheet. I keep it to hopefully see what works after a while. It currently shows 226 trades since April this year when I revamped the spreadsheet. Selling slightly OTM puts looks the best in terms of number of winners/losers, but assignments are killers. I manage them for additional credit, but often got assigned early. Fear of early assignments made me close early some losing ones thus certifying the loss.
Now I have more than half of my account blocked with long stock positions. Selling covered calls on those doesn't help much.
I think risk management kept me in the game.

You should be reviewing your trades and looking at the stockcharts and see if you are committing the same errors over and over. Chances are good you are! You should also, calculate your win percentage, loss percentage, average size of winners, average size of losers. Your winners should be multiples of your losses, say 3/1 or 2/1 at a minimum. Small losses are fine, big losers will hurt your account the most! If you sell naked calls, you need to hedge it otherwise, you might suffer the same fate as Optionsellers.com. Your risk to the upside is unlimited in the case of naked calls. At a minimum, you must hedge your position. Buy a higher strike OTM call as insurance and turn your trade into a vertical spread.