What technical Options strategy to trade?
- Thread starter GordonHui
- Start date
No such thing.
Do the work yourself..check out Orats and they can backtest many option strategies with technical indicators.You can add many filters and stops...
You really think someone with a profitable system will divulge the secret sauce?
Seek and thou shall find
s
You really think someone with a profitable system will divulge the secret sauce?
Seek and thou shall find
s
Welcome.
The truth of the matter is you can make money using any strategy: buy or write single names, indices; combinations... The devil is in the details and the details depend on which underlying, the micro structure, the macro market, on your personality, on timing, on the Fed.....
If you are just starting out, keep things simple, most of us mom & pop amateur retails started with covered calls or cash secured puts to "generate income" and gradually develop our own favorite plays.
That was how I started, wrote hundreds of covered and cash secured over a six month period to see how things worked. I am still a mom & pop, but now write and buy both calls and puts on names.
By the way, there is no shortcut.
Trade with the trend. Your trade must be aligned with the trend. If the stock is going up, buy only call options, if it is going down, buy put options. Preferably, buy in the money options and 3 months out, to give your trade time to work. For you to win, you must get: direction correct and your stock must move a huge amount, say $10 or more in a few weeks. Risk no more than 2% of your capital in any options trade. Expect only 40% or less in winning trades, so, you should be prepared to lose 60% of the time. Keep losses small, allow your winners to run.
Relying on someone else to hold your hand and tell you what to do will get you nowhere. You won't learn anything and will have a short career. Come up with your own ideas and trading style. Take plenty of notes, and only use technical analysis to confirm your own opinion.
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I will be happy to share all my technical analysis indicators with you that i use to trade options.
Hi, found a couple of your responses here in elitetrader, i think our approach is quite similar, just that you probably had started this much earlier and certainly have more wisdom about this.
Hope you don't mind of my questions which i am constantly trying to find solutions/better ways:
1) How do you determine whether if an option is cheap/expensive before you go in or you just don't care as long as the technical setup meets your criteria?
For myself, I am using the implied vol method to get entry confirmation besides my technical setup requirement..
2) Since the advice is to risk >2% of total capital for each trade, how many open trades does your system allow at the same time?
My risk is 0.5% per trade, but the thing is that I could have >100 open trades at the same time which I sometimes think its a little too laborious since I maintain them manually which leads me to another question.. What is your stocks scanning criteria?
Thanks.
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Hi, found a couple of your responses here in elitetrader, i think our approach is quite similar, just that you probably had started this much earlier and certainly have more wisdom about this.
Hope you don't mind of my questions which i am constantly trying to find solutions/better ways:
1) How do you determine whether if an option is cheap/expensive before you go in or you just don't care as long as the technical setup meets your criteria?
For myself, I am using the implied vol method to get entry confirmation besides my technical setup requirement..
2) Since the advice is to risk >2% of total capital for each trade, how many open trades does your system allow at the same time?
My risk is 0.5% per trade, but the thing is that I could have >100 open trades at the same time which I sometimes think its a little too laborious since I maintain them manually which leads me to another question.. What is your stocks scanning criteria?
Thanks.
The way I handle expensive and cheap options is by the cost of the option. Most times, I am hesistant to pay $800.00 for 1 contract of any option. NVDA is the most expensive option I have traded and paid $800.00 on more than one occasion. Most times, it is worth it. Sometimes, you end up losing monies. $100-$700 is my range where I buy, per contract.
As for the risk component, I try to limit my positions to 5 trades which would risk, 5 x 2% = 10% of my capital on a worst case scenario. When I sell an option, I put another trade to replace it. Most times, you would not lose the 2% or 100% of the premiums. Still, you could have 5 losing trades at once, if the market corrects for instance.