Penson Worldwide facing up to $25 million loss Friday October 31, 11:04 am ET http://www.elitetrader.com/vb/showthread.php?threadid=143377 Thinkorswim is linked or related to PENSON - anyone has more details on this, and how TOS is affected? Is TOS at risk here? and how much risk? Has TOS made a statement on PENSON's problems?
Go to thinkorswim. You are putting a big chunk of change in the account you are going to be able to negotiate lower commissions. They have the best platform great educational material, and quick support staff.
I don't think it's a problem for TOS customers. Client funds are in segregated accounts, which means the funds are safe and if Penson goes out of business you get your money back, and you also got SIPC insurance.
Options is a highly technical game. This game is played by different set of rules: If you have the traditional "Buy and Hold and Sell to take Profit" type of mentality, you are up for a rude awakening. There are tricks and traps everywhere; be prepared to devote 2 years into learning the rules.
Re: forex's comment on knowing the risk beforehand with Iron Condors. I agree that you know the risk up front, but you never want to be saddled with taking the maximum loss or even close to it. IC's typically will earn 3-10% per month on your margin depending on the risk you are prepared to take. You don't want to lose the 100% even once!! Be careful! By the way 1% per month is totally realistic..
You can't really use 3-10% on margin as "a typical IC" cause it really depends on how far OTM or close to ATM you go. My ICs average about 25-35% return on margin, and for this month it is almost 50%. So taking a max loss is not a big deal.
As a newbie, you are probably going to start off with directional trading (outright long or short). It is unlikely that you are going to dive straight into the complex 'delta neutral' options strategies (if you don't know what delta neutral means yet, then you certainly should not be trading real money using these strategies for the next year or however long it takes you to learn them and then paper trade them for a while). This is my opinion; I'm sure there are guys here who will say I'm a wimp and that you should just go for it. As a directional trader, you must have an edge of some sort. You must have a way of entering and then managing your trades which allows you the potential for profit. If you have never traded real money, you can either start by trading small lots of stock or the ES. The ES is obviously very volatile right now and a beginner entering these markets will be challenged to do well. Not to say you won't, maybe you will. I haven't traded the YM in a while but it used to be the preferred futures contract for beginners since the tick value is smaller. You can trade the QQQQ - you will be able to trade a liquid market and test your ideas. This is the most important thing for you - test your ideas while limiting your losses. Do not think about gains. They will come if your ideas and your psychology is sound. Have you paper traded options yet? If not, you should do so for a while before diving in. Once your ideas are worked out and your psychology is sound, 1% month is easily achieved.
MTE-- I take your point. Of course, the distance from the money makes a huge difference in the return and also in the probability of loss. Most advisory services (and there are lots of them, some good, some not so good) try to set up IC's like the ones I described-- more than 1 Standard Deviation out of the money so that the probability of profit is over 80%, but the potential losses are much greater relative to the premiums generated. The type you are doing are much closer to the money, and can be very profitable if you are right, but also lose far more frequently unless you are adjusting them out of the way, and usually accepting small losses doing that each time. In real life, in my own situation, I have a moderate IC on with an"inside hedge" It is an interesting play, and plenty of different adjustments can be made to it. It may make me a lot of money, but it also may lose money. We'll see. I just mentioned the usual type, because it is frequently employed, can be set up without watching it constantly, and works a high percentage of the time.