Big Time Lurker, First Time Poster Looking to Develop My Game

Discussion in 'Options' started by ChicagoPizzainCali, Jan 11, 2018.

  1. I went live a couple of months ago, and I'm hoping to continue developing my game. I'm at the point where I need to talk with my peers to grow and learn new ideas, which is why I'm here. I'll tell everybody where I'm at, and hopefully the novices will benefit, and the OGs will pitch-in an idea.

    I've read "Options as a Strategic Investment" and Euan Sinclair's "Volatility Trading." I write OTM bull put spreads on companies with high implied volatility and pray they expire worthless. If the delta of the short strike spikes up, I write an OTM bear call spread to turn my bull put spread into an iron condor. I like iron condors for the credits with minimal margin impact... More to minimize losses on a deal that may bust.

    I contrast 3 methods to determine where to split the bid-ask spread. 1st method is based on the bids and asks, halfway points, bid-halfway average, and ask-halfway average. 2nd method is the Black-Scholes. 3rd method I use the Kelley Criterion with goal-seek in Excel. Bid-ask is just a sanity check for the other two methods. I almost always get filled when using Black-Scholes as a pricer. Kelley criteria rejects a lot of deals.

    I learned my Kelley Criterion formula from a sportsbook and rigged it for options. I use the delta of the short strike as probability estimate. I translate the spread credit into "odds." For example if the credit is $1 and the vertical distance is $5, the odds would be to lay $400 to collect your lay plus the $100 profit, (or the vertical distance of $500). Sometimes the proportion to bet is way too high for my comfort and I usually use a fraction of the Kelley Criterion.

    I've done about 15 deals of various sizes and attempted about 30 deals, however sometimes nobody is willing to enter the other side of my deals. It is a lesson in greed... Too greedy=No Deal. Not greedy enough and the insufficient risk compensation will lose in the long-run. I've had 2 spreads lose money and it sucked, but overall I've been blessed with profitability, which only encourages me.

    That's my entire body of knowledge. If you have any critiques, ideas, or know of a helpful resource, please post. As I learn more, I'll add to this thread.
  2. DeltaRisk


    When you read Sec 15c3-1 and fully understand it, then you’ll be ready to trade.

    Don’t gamble. Trading isn’t gambling.

    And, you’re welcome because I actually like to help.
    ChicagoPizzainCali and CALLumbus like this.
  3. So in conclusion, you're not profitable and struggling -- and hoping someone will point you to an overnight Holy Grail.
    Attack, or approach, a pizza...think about all the ingredients, and their temperatures and composition and volatility.
    Think about that pizza traveling from one time zone, from say Chicago to California in varying altitudes and roads.
    As Laurence Fishburne would say....Free Your Mind.

    Don't be a BTL, big time lurker -- be a BTT, big time trader.

    1999 was gambling. 2009 was gambling, and 2019 will be gambling. Anything that has to do with money, is essentially gambling -- the players considered the risks vs the rewards. And took the appropriate bets as they saw fit for the given situation in time.

    No matter how safe or wild your trade situation may's still a bottom line gamble. There's no way to sugar coat it.
    Even if you're trading with a sure thing like inside information like Steve's still gambling.
    Or if you have Nobel prize-winning economic scientists form a hedge fund like's still purely gambling.
    I'm not gambling, I'm trading...High-Five` :cool:
    Last edited: Jan 11, 2018
  4. spindr0


    Don't confuse brains with a bull market. For the most part, bull put spreads work quite nicely these days. In a correction or down market, you're going to eat a lot of short puts.

    I'd suggest that you focus more on selling bull put spreads on stocks that you are bullish on as well as willing to own rather than those with high implied volatility. Skip the 'willing to own' part if you're just trading period.

    And if you're nice, I'll share a copy of "The Ultimate Guide To Making Homemade Pizza". :D
    ChicagoPizzainCali likes this.
  5. rvince99


    I've been around gamblers my entire life.

    Gamblers cannot leave the table when they are up. They live their lives chasing being up so that they can then quit, a winner. The few who actually do, again, get up, still can't leave.

    So look at the expression "Let your profits run..." under exactly that lens.

    Understand that investing is assessing the future expected value of something relative to it's current intrinsic value.

    People come from various backgrounds and market experiences, and this is not a zero sum game.Most people want to help, and are often a fountain of great ideas -- even the beginners. Yes, here will people who will look to castigate and demean you here and everywhere else (I've been around too long to go getting into pissing contests with anyone). I'm contractually not permitted on "social media," but here I am, looking for fresh, new perspectives.
    ChicagoPizzainCali and ironchef like this.
  6. rvince99


    Because market conditions are such that fresh faces should start shuffling in.
  7. R123


    First, let me congratulate you for some things your doing right. You actually studied something before trading, You got a strategy, You actually got in the game.

    I agree with comments trading is gambling, no 100 % certain holy grail strategies, no loss proof systems.

    The only thing that is constant is change. Translated: Your system if somewhat sound, is going to be amazingly hot sometimes and a disaster others, and everything in between.

    Therefore spend as much or more time studying risk control and money management as you do systems, it will keep you trading. If you don't, you will get lots of time to study them latter when your sidelined from the game.

    Good luck and have a great trading year .
  8. Peter8519


    I gave up on the idea of generating consistent profit e.g. like monthly salary. Focus on the risk of each trade but not risk averse. Game over when the trading account blows up. So, must protect the capital at all cost. Be hard working and look at the charts everyday. Long enough, all the chart patterns will sink into the subconscious and each trade will become very intuitive. It's just like hopping onto a magic carpet and rise with the trend.:D Often times, need to bail out when it's not the right carpet. :(
    EliteThink likes this.
  9. sle


    Actually, if prospect theory is a guide, most people tend to cut their losses too late and take profits too early. So the above is probably a fair guidance.
  10. themickey


    If you shout "abraca dabraca" you will be saved.
    #10     Jan 11, 2018
    EliteThink likes this.