A New Options Trader's Worry

ironchef · Apr 1, 2016

rick cremer said:
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
More...

Thank you for sharing your experience.

Another question if you don't mind: How important was the stop loss in managing your trades?

Regards,

Log in or Sign up

A New Options Trader's Worry

ironchef