Paper trading options

alen · Aug 23, 2005

Besides the psychological effects, what are the major differences between paper trading options and trading them for real?

FetteredChinos · Aug 23, 2005

erm the lack of cash involved?

Rhody Trader · Aug 23, 2005

A major difference could be in your entry/exit points. What are you using for prices when you make your paper trades? If it's the traded prices you see, then you could be way off on your own execution because options are often thinly traded so that the actual current market bid/ask might have very little in common with the last traded price.

alen · Aug 23, 2005

Rhody Trader said:
A major difference could be in your entry/exit points. What are you using for prices when you make your paper trades? If it's the traded prices you see, then you could be way off on your own execution because options are often thinly traded so that the actual current market bid/ask might have very little in common with the last traded price.

actually, i use scottrader to see the prices, so its not delayed or anything.

Rhody Trader · Aug 23, 2005

alen said:
actually, i use scottrader to see the prices, so its not delayed or anything.

I wasn't referring to delays. Are you seeing the actual bid/offer quotes? (I do through Schwab)

alen · Aug 23, 2005

i see the bid and the ask, but the i have scotttrader, not scottrader elite, so its not level 2.

Rhody Trader · Aug 23, 2005

As you have taken the psychological elements and put them aside for this discussion, then aside from maybe a little bit of slippage here or there, live trading won't be all that different than paper if you've been consciencious in your paper trades (accurate price point, accounting for commissions,etc.).

Don't discount psychology, though. Traders really do change when they go live.

alen · Aug 23, 2005

good, cause i have been paper trading for 2 months now. i started to keep records of my trades 2 weeks ago. at the end of the first week, i was down $70 (started out with $930). but im on day 11, and in the past three days, i made $400 profit. PS: i took off $10 for every transaction, as commission.

bulldozer · Aug 23, 2005

alen said:
good, cause i have been paper trading for 2 months now. i started to keep records of my trades 2 weeks ago. at the end of the first week, i was down $70 (started out with $930). but im on day 11, and in the past three days, i made $400 profit. PS: i took off $10 for every transaction, as commission.

===============================================================

Do you know what the margin requirments were for those trades? I fink you would have been liquidated in less than 5 hours from the opening trade?

alen · Aug 23, 2005

well, all i did were purchase calls and puts, and closed my position by selling them. i never exercised any options.

Rhody Trader · Aug 23, 2005

If you're only buying options you don't have to worry about margin. That's only for selling naked options.

bulldozer · Aug 23, 2005

Rhody Trader said:
If you're only buying options you don't have to worry about margin. That's only for selling naked options.

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http://www.elitetrader.com/vb/showthread.php?threadid=51251&perpage=6&pagenumber=1

Rhody Trader · Aug 23, 2005

bulldozer said:
==========================================================
http://www.elitetrader.com/vb/showthread.php?threadid=51251&perpage=6&pagenumber=1

That's messed up for sure. IB actually exercised the options without the customer indicating the intent to do so. I wonder if that's in their account documentation?

Regardless, nowhere does it say anything about margin. Why? Because one does not need margin to buy a put or call. You simply need sufficient cash in the account to cover the cost (plus fees, of course).

bulldozer · Aug 23, 2005

Rhody Trader said:
That's messed up for sure. IB actually exercised the options without the customer indicating the intent to do so. I wonder if that's in their account documentation?

Regardless, nowhere does it say anything about margin. Why? Because one does not need margin to buy a put or call. You simply need sufficient cash in the account to cover the cost (plus fees, of course).

==================================================================
The same thing could have happened to our friend [elan]

Also what if after he's made a few $$$$ he goes and do a spread position ie calanders, put bull, diagonals etc he would need to put up margin would he not?

From what i can see about our friend elan is that he's got iching fingers and is a fast mover!

and he probably read half a book and saw all those $$$$$$ waiting 4 him

:cheesy:

Bull

alen · Aug 23, 2005

bulldozer said:
==================================================================
The same thing could have happened to our friend [elan]

Also what if after he's made a few $$$$ he goes and do a spread position ie calanders, put bull, diagonals etc he would need to put up margin would he not?

From what i can see about our friend elan is that he's got iching fingers and is a fast mover! and he probably read half a book and saw all those $$$$$$ waiting 4 him :cheesy:

Bull

I have actually read about bull call spreads, bear put spreads, and just about all other spreads out there; they are too complicated for me, so i wont be trying them anytime soon. the only one that looked like something i would try is the straddle.

bulldozer · Aug 23, 2005

alen said:
I have actually read about bull call spreads, bear put spreads, and just about all other spreads out there; they are too complicated for me, so i wont be trying them anytime soon. the only one that looked like something i would try is the straddle.

===================================================================

Are you 100% sure you know how to pick the right strike on a "Straddle"? and the right time to go in? If you do! then you have a good chance of success.

Bull

Rhody Trader · Aug 23, 2005

bulldozer said:
The same thing could have happened to our friend [elan]

The same thing could happen with anyone, regardless of experience. All it takes is failure to pay attention to detail. I know I've made a mess of a trade or two thanks to falling asleep at the switch, and I've been at it longer than most.

alen · Aug 24, 2005

bulldozer said:
===================================================================

Are you 100% sure you know how to pick the right strike on a "Straddle"? and the right time to go in? If you do! then you have a good chance of success.

Bull

i would not use the straddle often, since in theory, if the call premium rised, then the put premium falls, and vice versa; i would use it as a means to control risk when entering an especially speculative position.

Paper trading options

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