Registered: Aug 2010
12-17-11 11:37 PM
Quote from SteveH:
The few traders I know of who can make single-trade killings every so often are doing so with options (simple buy side, no hedging) on something like the QQQ (60/40 tax split, just like regulated futures contracts, btw). When they expect a big move is coming up, they'll load up with like 300-700 contracts with an avg cost no greater than $1 per option ($100, of course). So that's roughly a 30K-70K position where the expectation is a 3x-5x gain.
One of the guys I follow in a forum made 700K on QQQ options positions in the flash crash incident in Spring 2010. He regularly makes 50K to 100K on the bigger QQQ option swing trades where he has around 20K-30K at risk.
Ironically, they are scared to death of the futures markets because it's a different mindset to them (unlimited losses due to marging reqs. vs. the option bet itself being the ultimate stop-loss upfront).
But, the mindset they're really good at is with compounding their wins. When the big win comes along, they'll feed a greater initial sum into the opposing bet from the first. It's "house money" at that point so they can take the emotional hits when they fail.
Extraordinary thing to watch unfold. If you're at that level of the game, a QQQ or SPY option swing trader, it probably trumps day trading in the futures market. You get the 60/40 tax benefit, more leverage possible with less cash involved and you have a limited loss. [The time decay factor in options is not as much of an issue as you would think. They're good enough to peg a move within 1-3 days.]
I mean, can you imagine being emotionally unfazed by 10K-30K 1 trade option losses because you're good enough to produce far many more 20K to 100K wins and you also get about 2-3 huge wins per year (200K-500K)?
What guy at what forum ?