been trading long options for about 1.5 years and its clear to me that im fucked...and that I will blow up my account if I continue down this road...and I need some help. I have always hated the thought of putting a cap on profit potential (have a touch of the pie in the sky, home run mentality), and I like simplicity so have avoided multi legged strategies up to this point. Other than a few naked shorts (that raped me in horrific fashion) and long calls or puts the only other strategy I have employed has been strangles on volatile companies...which have been hit or miss. I've been reading books and watching instructionals and all of that...I don't really mind the self education part and enjoy learning more, but I am at a point now where I realize that I need to desire capping risk more than worrying about capping reward. I understand that different strategies are needed for different scenarios...there is no one size fits all...but I would like some advice on a few points of focus to get me started. Plan on becoming proficient in a few strategies and looking for setups to use them vs learning them all before moving forward. Vertical spreads and calendar spreads both seem to be pretty straight forward and adjustable concerning risk:reward so I was thinking about starting there...opinions? I humble myself before you Gods of Greeks and ask for some guidance...I know these threads are annoying to many of you OGs but I really do appreciate the help. ps: feel free to comment the usual "you should quit trading, park your money in spy and join a circus instead"...although that is wonderful advice I wont listen.
Options are just the vehicle to use to trade with. Unless you can predict with some certainty volatility or price movement then you are wasting your time trading options. I'm not sure where you are from but presume you are trading US stocks. Volatility and price are closely related so if you can do one you can do the other. I only trade index options in Australia with the futures as well. I have studied the xjo index chart and come up with probabilities of where price will/won't be. I have come up with stats to trade on price such as 50% of the time the high/low is set in the first two trading days of the month or 80% of the time Monday is the high/low of the week and so on. I believe imo you need to be a master of one instrument and know all its in and outs and indexes are good for this rather than individual stocks.
up to this point...to leverage my capital without using margin. now...what "i am trying to achieve"...is to consistently grow my account. trading options will provide a way to put the odds of profit in my favor...I know it can at least I just have to put in the work. im also not trying to delude anyone away from the fact that I have some fundamental issues that need to be addressed as well...learning all about straddles or butterflies wont fix the fact that I overtrade & lack Patience.
Im not sure i understand why you made that statement, care to elaborate? I am familiar with Lambda and love the fact that options are leveraged but we all know that is a double edged sword. gain fast lose fast.
As a fellow traveler on the path to profitability I think you're on to something with the line about capping risk. I think risk management is one of the largest keys to successful trading. You find your edge. Many of them out there. The style of trading needs to mesh with your personality. I spent a few years doing the tasty trade method of selling premium iron condors and the like but I found it like watching paint dry and only to see a large 2SD move wipe out months of profit. It works for some and hats off to Sosnoff and the crew - not my style. I've gravitated towards playing long expiration day straddles in /ES. Three expiration days a week. Go long when they trade for under 20 usually around 11 CST and play a move. Trick is when to take profits. I'm doing this with 1% of my account value so I know worst case I lose 1% presuming it actually pins at the strike at expiration which is unlikely. The other method is one day expiration plays with butterflies. Put them on Thursday out Friday. I risk 2.5% of my account. My edge is tied to pinning with the OI when one strike has a significant difference in OI than the others. Once again a butterfly can only go to zero but you only need a couple of them to be successful as they often double triple in value in one day offsetting the losers. Ones that appear to be losing i take off the short options and leave the longs on to let it have a chance to move my way. My account is flat every Friday I wire a third of the profits into checking, a third to savings for taxes, and leave a third to grow my trading account. I hold no positions overnight other than the flies thurs to friday. I like going out for dinner and drinks with friends and not looking at my phone to see what's happening as I have nothing on. If they are mostly call flies I add a hedge with something long the vxx sometime a fly sometime a bull spread. I've gravitated to these as I like to sleep at night. I know the worst case scenario. I blew out an account (large one) years ago with a naked wheat option. I don't do that anymore regardless of how juicy the premium is. Find your edge, define your risk - plan the trades and trade the plan. For me capital preservation is number one, risk management two, strategy with edge three.