Very common mistake. People think if they don't know what play to make at a given moment, it's THEIR fault - if they were only better traders, they'd always know a good play to make. Another huge bugaboo - the biggest IMHO - is the fear of missing out. That's the one that'll kill you. If you can learn to set stringent high standards for criteria that must be met before you're willing to enter a trade, and refuse to lower those standards, and wait patiently for the market to come to you - and not shed a tear if comes oh-so-close then runs away - then you're truly a professional. And over the long haul you'll be a winner.
"Another huge bugaboo - the biggest IMHO - is the fear of missing out. That's the one that'll kill you. " You got that one right. I don't think twice about the loses I 've had, but still piss and moan about big moves I missed on stocks /etf's I was trading.
To everyone who contributed to the thread, thank you. There is much good wisdom here. For what its worth, I think of myself as a small mammal in the time of the end of the dinosaurs' age - scurrying around on the ground, not large enough to be considered prey - but still capable of being squished by an errant foot. My main concern is capital preservation first, then trading profits. I certainly don't take losses lightly nor let them run, but I do have great angst about taking profits too soon, as the opportunities I seek do not always come around too frequently. I do need more work on the area of expectancy, as I do take my profits too soon. Finally, I too shake my head and go, "If only I was able to have been present then..." when i look at those missed moves. I don't think that will ever change. I do recall my mentors feeling the same way, and I did consider them successful traders. To channel the conversation back into something topical, has anyone had success selling options in a retail account without just being lucky/stupid (holding strads to expiry) or doing covered calls in a buy/write strat? Just curious.
I started a thread about the following strategy sometime ago: short puts on a number of stocks on the S&P, determine the % of the S&P these stocks comprise and then buy a corresponding # of puts on the S&P or OEX to cover a drop in the stocks you shorted. I had read about this strategy and the numbers were very compelling as you took in more on the puts you shorted than the cost of the offsetting puts on the S&P. This strategy requires some $$$$ though. A strategy I've used successfully was selling put LEAPS on a non volatile stock like IBM with a strike price slightly below the 5 year low.
Yes. During 2000-2001 I created a screen using Telescan's OptionSearch program (no longer available) that looked for OTM high premium calls (and other criteria) expiring in one month on mainly NASDAQ stocks. My brief "testing" showed the majority (>95%) expiring worthless. I then proceeded to start selling naked calls based on that screen and was successful. However, if you look at a SP500 chart from 2000 to 2002 period you will see a downtrend, which made that strategy succeed. But, the strategy died in the uptrend in the years that followed (see Niederhoffer and selling puts). The period back then was completely different with overvalued/overhyped stocks. Lesson: There are times when certain aggressive option strategies fit the economic and market environment. And there are times when it pays to play it safe. I was also younger, a newbie and maybe a little foolish at that time.
quote from dmo "If you can learn to set stringent high standards for criteria that must be met before you're willing to enter a trade, and refuse to lower those standards, and wait patiently for the market to come to you - and not shed a tear if comes oh-so-close then runs away - then you're truly a professional. And over the long haul you'll be a winner." But then again, of course you can simply be opportunistic. By building your positions in such a way that no matter which way the market decides to go your overall position improves. For this all you need is a tool to gauge market direction and a good understanding of option dynamics. [greeks] Then most importantly of all you have to think clearly! In regards to profitable option trading. The short answer is YES. Regards Johno