I am not sure if I am headed in the right direction. I have been studying, paper trading, and real trading mixed options strategies with mixed results for a few months now but would like good advice. I mainly sold bear calls & bull puts and did ok until I got hammered on one trade or experienced the gamma burn. I've tried weekly & monthly expiration. Originally I was attracted to these trades because of the high probability of profit potential. I have a full-time job but I am at a computer all day so I am able to monitor my positions while I work. Ideally I would like to only trade SPY, QQQ, and IWM because I like the 1 point strike differences and tighter spreads. I also like that I only have to focus & monitor 3 charts. If trading the real index is best in your opinion, please explain why. I have a $5k account with tos with $1.50 flat rate commissions. At the moment, I am being lured into iron condors. I am also familiar with butterflies/condors and straddles/strangles but have never traded them. I am 26 & not dependent on my tos account but I want to grow it. Ideally, I would use strategies that require low monitoring and/or maintenance but I am open to suggestions. In your opinions, what strategies should I try to incorporate and why given the above information? I know I ask for a lot but sincerely thank you all in advance for your help.
I would start out with simple directional credit spreads, calendar spreads and cover calls or cash secured puts. Going into more advanced things like condors, strangle swaps, back-ratios and various butterflies takes alot of position management and capital to do it. Options are not a panacea. You really have to respect leverage. You have to be right on direction, timing, and speed of what your trading. One of the most important things you can learn is about volatility as an options trader and IMHO the most important greek. You need a broker with advanced orders if you are not at your terminal. I think TOS has the best orders of any broker. If you are starting out go over the CBOE site and watch every video they have and take their little option course. Its cheap too. You will garner alot out of it. Good Luck
I like credit spreads except for the fact that my timing needs to be pretty good during volatile environments, such as the last few weeks, or else I get burned. I'll take a look at calendars. I've never really researched them because their risk profile doesn't look good to me, can you explain why it's good? I have a fairly decent understanding of the major greeks and implied volatility but I am still researching as much as I can. What are important vol concepts that I should research? Thanks!
No trade should hammer you unless there's a gap (hammer = big loss). In addition to learning about the behavior of options and their strategies, also focus on money management. You need to know what you might do and where you will do it when the opening trade is executed.
The OTM put calendar can be a low risk directional and vol play. Generally, better R/R in low IV situations.
Hi juice, I started using iron condor 4 months ago. Successful so far in every month. I think it's a good strategy if played carefully and adjusted every once an a while. Please share some details about your losing trade, I would like to know why it went so wrong. I use thinkorswim too and I always try to make sure the delta is more or less natural. It's easy to keep track on Greeks with this broker.
I didn't get hammered is was just my choice of wording at the time. How would you apply risk management rules to this account? a max percentage loss of 1% in this account is $50 and it doesn't seem like enough to let plays work out. I do not have an exact plan set out. I mainly look at support/resistance levels and play from there. I'll have to take your advice and have pre-composed decisions set-out before I place the trade. Thank you.
I trade index option credit spreads as a unit. The formation of an Iron Condor is an artifact to take advantage that the opposite spread can be placed without additional capital and places the position more nearly delta neutral. I got hit in March because I did not maintain sufficient cash in the account to buy back the spreads that passed my stop loss. This made my loses more than they should have been. This was a trader (me) error not a strategy error.
I've read a few pages on your thread but haven't gotten through all of it. Do you have a link to a specific post that explains your approach to credit spreads and IC rolls?