If you starting out trading options again - what would you do differently

b-man

Junior member
17 0
the title says it all really!

If you starting out trading options again - what would you do differently?
 

Traderjodie

Newbie
1 0
Hi, I'm new here so take this for what its worth. I would rarely trade spreads on stocks unless I would be happy own them outright as a secondary exit from a trade gone bad. I would do more diagonals. I would trade more from my watch list and rely less on "scanning" for opportunities. I would pay more attention to fundamentals and earnings dates! I would never ignore a chart because I was in love with a company.
 

Thriyve

Newbie
8 0
For my first option trade I purchased a deep out of the money put near expiry. So I would recommend anyone starting out in options to first do a demo account and understand how options are priced (in theory). Also know that what works in theory may not work in reality.
 

Windlesham1

Well-known member
443 35
I'd have put in place the strategies I have no w for not losing money-that is key. The profits will come,but the losses unless controlled will get ya.
I still break my own rules- like paying for a trade,when I should always be in a free or credit trade.
Currently the not so proud owner of ftse 5850/5800 put spread -paid 3.5 and tried to get clever legging in,while the market went utterly mental upwards as it always does against me- I never seem to get out of my bearish mentality. The market is a crock that tries to fleece the majority,we need to be neutral in our stance
 

wino59

Active member
126 12
the title says it all really!

If you starting out trading options again - what would you do differently?

I would forget about all complex spread strategies! No double calendars, no iron condors, no vertical credit and debit spreads etc.

The only thing I do now is pick a direction, and buy deep in the money calls and puts based on which way I think the market would go. I only trade highly liquid etfs, such as DIA, SPY, QQQ, and sometimes GLD if I like the trade.

Once I get an entry point I try and pick an option that has a delta of 85 or so. and here is the reason... If the trade goes in my favor the delta will quickly increase to 100, so as the trade continues I am getting a $1 for every point it moves in my favor, if the trade moves against me the delta is reduced, so it is not a $1 per point loss, however the theta risk increases. This is also why I pick a high delta option if the trade goes no where and stays in a trading range, then my theta risk is minimal compared to out of the money options, as I have a good bit of intrinsic value in the option I purchased.

The reason I trade options is purely leverage. I can buy 1 contract (100 shares) for $500 to $700, vs $13,900 that I would have tied up if I bought a 100 shares of the DIA right now. So as you can see your money goes a lot further with the same upside potential, with out all the downside risk.

If you are going to trade options, make sure you have a firm understanding of the greeks, and pay close attention to theta, delta, and vega. Understanding how volatility effects option pricing is must for someone that wants to trade options.

Just my 2 cents...
 
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Hannu Anttila

Newbie
3 0
I would forget about all complex spread strategies! No double calendars, no iron condors, no vertical credit and debit spreads etc.

The only thing I do now is pick a direction, and buy deep in the money calls and puts based on which way I think the market would go. I only trade highly liquid etfs, such as DIA, SPY, QQQ, and sometimes GLD if I like the trade.

Once I get an entry point I try and pick an option that has a delta of 85 or so. and here is the reason... If the trade goes in my favor the delta will quickly increase to 100, so as the trade continues I am getting a $1 for every point it moves in my favor, if the trade moves against me the delta is reduced, so it is not a $1 per point loss, however the theta risk increases. This is also why I pick a high delta option if the trade goes no where and stays in a trading range, then my theta risk is minimal compared to out of the money options, as I have a good bit of intrinsic value in the option I purchased.

The reason I trade options is purely leverage. I can buy 1 contract (100 shares) for $500 to $700, vs $13,900 that I would have tied up if I bought a 100 shares of the DIA right now. So as you can see your money goes a lot further with the same upside potential, with out all the downside risk.

If you are going to trade options, make sure you have a firm understanding of the greeks, and pay close attention to theta, delta, and vega. Understanding how volatility effects option pricing is must for someone that wants to trade options.

Just my 2 cents...

Hello Sir, This is my first contact in T2W.. Could you pls inform me where I could get information of DIA, SPY, QQQ and the greeks, and pay close attention to theta, delta, and vega.

Hannu Anttila
 
 
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