The "haves" and the have "N.O.T.S." (Novice Options Traders)

This is not to knock Peak Investing or any other advisory service,as I have also used them, but its just and observation and attempt for a healthy discussion.

Just take a look at peak investing's last weekly and monthly trades. You will notice huge losses that almost wipes out a years worth of small profits.

This seems to be an inevitable result of credit spread trading. Small ,hard earned profits given away in a big loss that comes eventually,as many traders can attest.

I have looked at options trading for a long time. i AM STILL not making a lot of money. However it seems like to be able to wait patiently for those moments that come a few times a year and than just trade an etf option or an index option with a simple call or a put is the way to go with it.

What do you guys think?
 
I think the expectancy peak generated is bad. The last trade was 5 point wide with 90% of winning chance. However, the credit they got was 20 cents. It was a losing trade.
 
Looks like Peak didn't have a good risk management system which is very important with credit spreads.

Wiseoptions chose to buy back the spread while it was still profitable and not wait until it goes against them. They also wanted to eliminate the SET risk (Friday opening gap). They ended up with 2.18% profit for the month.
 
I looked at crowther investments and was initialy quite excited but when I sat down and did the math it raised a few issues.

Gap fade strategy

Assuming an average of 4 trades per month

4 x 12 = 48 trades

48 x $42 (think or swim commisions) = $2016

+ cost of advisory 12 x 39.95 = $479.4

Total cost you have to cover just to breakeven = $2495

$2495/$5000 = 49%

49 % return on capital is required just to cover trading costs let alone make any money.
 
The costs are certainly high, but this assumes no reinvestment (compounding) of gains.
Consider calculating the average return per trade.
Assume your costs add $10 per trade for cost of advisory and $42 commission per round trip for a total of $52 per trade.
Keep $2,000 aside for a reserve and commissions (investing $3,000 per trade).
If average gain per trade is 4% (net of losses) we have:
$3,000 * .04 = $120 - $52 = $68 profit per trade.
Trade 2 invests $30,068 and so on.
Use a compound calculator to see how it comes out and experiment with the amount invested. Lower amounts invested (being under-capitalized) make it harder to cover the fixed costs.

Quote from GMarshall:

I looked at crowther investments and was initialy quite excited but when I sat down and did the math it raised a few issues.

Gap fade strategy

Assuming an average of 4 trades per month

4 x 12 = 48 trades

48 x $42 (think or swim commisions) = $2016

+ cost of advisory 12 x 39.95 = $479.4

Total cost you have to cover just to breakeven = $2495

$2495/$5000 = 49%

49 % return on capital is required just to cover trading costs let alone make any money.
More...
 
You folks got the spreadsheet...right? Concentrate on a good mix of diversity and let compounding take over...if you absolutly must pick a direction, allocate manually.

Good Trading to You...:)


Quote from darnelds:

The costs are certainly high, but this assumes no reinvestment (compounding) of gains.
Consider calculating the average return per trade.
Assume your costs add $10 per trade for cost of advisory and $42 commission per round trip for a total of $52 per trade.
Keep $2,000 aside for a reserve and commissions (investing $3,000 per trade).
If average gain per trade is 4% (net of losses) we have:
$3,000 * .04 = $120 - $52 = $68 profit per trade.
Trade 2 invests $30,068 and so on.
Use a compound calculator to see how it comes out and experiment with the amount invested. Lower amounts invested (being under-capitalized) make it harder to cover the fixed costs.
More...
 
Credit Put Spreads have really been hammered in the last month, so you need to make sure the advisory you select knows how to roll these forward to make up for the losses incurred.
 
Quote from darnelds:

Credit Put Spreads have really been hammered in the last month, so you need to make sure the advisory you select knows how to roll these forward to make up for the losses incurred.
More...

What the hell are you talking about? A rollover is a loss, period. Optionsmart uses this ploy to mask the fact that they have losses. It's probably illegal, but they do it anyway.

Don-
 
I looked at various advisories offering bull put and calendar spread picks, the only problem was they all tended to pick stocks in the s&p 100 because of the good option liquidity available.

What tends to happen is you end up building a position with too much correlated risk, when the market tanks they all suffer bad losses in unison.

You can offset or hedge some of the risk by using a portion of the credit received to buy some protective index puts.

In the end I decided to go for options on futures because they offer far better diversification and span margin is superior.
 
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