For the average retailer, you can't make (or lose) money without taking on risk. Perhaps you got this from some of the replies, but you've got to have some kind of analysis AND trade plan to go by.
Yes, I am trying to make sure it is not random risks like gambling rather it is calculated risk with positive odds. If I just trade options mechanically without any thoughts, the end result will be just like gambling, net outcome = (zero - transaction costs). Regards,
Ditto. I have no idea where the market will go tomorrow. Noe does anyone else. Not the Wall Street Journal, Reuters, JP Morgan, the Financial Times, CNBC, Jim Cramer. NO ONE can look you in the eye and say that tomorrow at 9:30AM EST the U.S. markets will open up or down and will close up or down. NO ONE. Of course we can look at the Asian and European markets to see what they've done through the night. We can look at the futures (ES, NQ, YM) to see where they're at in the pre-market hours, we can consider pre-market economic data (job data, PMI, housing data, etc.) and from that we can make an educated guess as to what the market will do but my experience has been that what seems to be a certain down day starts that way but then reverses and ends up. And vice versa. That's why I, like you, trade options. With Iron Condors I can trade both sides of the market. A Put credit spread and a Call credit spread and monitor the position, take profits on the winning side, adjust the other side accordingly. Best
How long have you been profitably trading Iron Condors and feel confident that your strategy works in the long term?
I started trading options in 2002 (single symbols (e.g. AAPL, MSFT, etc.) and ES credit spreads (including iron condors) in 2005. Just before I retired from my airline job. My strategy has, thus far, proven to be successful. But what works for me may not work for others. It's a simple strategy. I don't attempt to hit a bunch of home runs, I prefer to hit a bunch of singles. Sell Put and Call spreads that are deep OTM (i.e. Deltas of 10 or less (90% prob. of expiring OTM)), 3-20 days out, Weeklys, stop loss when/if the underlying touches the short leg, e-Mini S&P 500 options (ES), 10-20 contracts at a time, short and long leg one strike apart, risk no more than $250 per contract, net credit >0.25 per contract. To get ready for the task of being an options trader I took the New York Institute of Finance's Advanced Derivatives Professional Certificate course. 5 days (in Manhattan) and $5,000.00 later I felt pretty prepared to start options trading. The course included hours studying binomial theory, various options pricing theories, volatility, Skew and convexity trading, the Greeks, Monte Carlo techniques, and on and on. It wasn't a cheap course but then I believe it was money well spent My strategy has enabled me to keep my humidor full of Ashton Cabinet #7s, my liquor cabinet stocked with MacCallan 18, and to support my wife's lifestyle to which she has become accustomed. Best
Do you have a feel for what kind of losses you take relative to the max gain when the underlying hits one of the short legs and you adjust? I gather it's a function of time to expiry? Do you let the profitable wing run and move/roll the losing wing?