I am starting a new acct JST TO LEARN options. I have been using my demo options account for couple of yrs. I have basic understanding of options (not great with technical terms). I am thinking of putting 3k in my acct jst to play around with it. I want to know what are good strat to start with other than jst buying puts and calls. I made a post regarding selling cash secured puts, but it was quicky shot down by most (rightly so i suppose). which are good strat? this is what I recently did in my demo acct. 1) aapl may 13 450 call bought @15.75 & sold may 13 400 put @ 11.3 with net of abt 450 bucks cost with 10 bucks comm. I bought this 2 weeks back when stock was at 430ish. I am actually showing PL of 1040 in call and 665 for put so doing very good in this one. 2) nok apr 13 3 put sold @ .08 when it was at 3.5. from what i understand, PL shows lost of 10 bucks but as long stock stays above 3 i ll be fine. 3) few days back, appl bought BOTH jun 13 400 put @ 8.8 and jun 13 500 call @ 9.85. PL put= down 172 call= up 92 4) sold ITM put options of VOD while it was at 28 for SP of 29 apr 13 for 1.15 - thinking behind this is, if the stock goes up even 28.5 or so, I can jst get out of posi with some potential gain. I would really appreciate it, if all gurus can help me out understanding the pit falls and also the benefits of these diff starts. I am also looking for you help in finding out better strat to play around with. keep in mind I am only starting with 3k no more no less. thnx.
Personally, I think you are thinking too optimistically. You're too positive. And you are thinking too much about "potential", and not enough about the "probability" of that optimistic potential occuring. Perhaps because you feel you are only risking $3,000. That is your problem. Risking just $3,000, while "potentially" earning a lot of money, is NOT a very realistic way to think. It's almost like paper trading. When you paper trade, you are willing to make much more risky trades, than when real money is involved. Thus, it's NOT realistic, and NOT good training for the real world. You need to be more afraid of the consequences of your decisions. And your stocks are all over the place. From $3 NOK to $450 AAPL, to "itm" for VOD. Put down the dart, and focus more on stock selection. Then strike selection. Then the "probability" of the stock and strike selection being successful, for the credit you desire. Know why you selected that stock, strike, and credit. Are you merely selecting stocks in the news, or stocks that are popular, or stocks that seem to have hot credits? Is your credit too greedy, or are you better off trading more otm, with a higher probability of success? Most investor lose money in the market. Thus following what most are doing, is not a good long term strategy. You need to fear the market. Focus more on the "probability" of what you are doing being successful, vs the "potential" reward "IF" it is successful. Potential doesn't pay the bills. Only probabilty does that. IF IF IF IF IF IF IF IF..... IF the stock does this. IF the stock does that. IF is merely potential. Potential without probability will eventually get you killed. You won't learn by simply risking just a little money. Because your thinking changes when real money is involved. You will learn by setting realistic goals and expectations. Start with a goal of earning 5 - 10% annualized return on each of your trades. That should give you a decent otm safety cushion and thus a higher probability of success. As you become more experienced with "real money, real consequences, real concerns, and thus real thoughts",... you can gradually raise your % return goals. My main concern for you is, you don't seem to fear the market. Not based on the stocks and trades you've discussed above. ($3 NOK.... $450 AAPL...."itm" for VOD.) Too much focus on potential. Not enough on probability and consequences. BTW, it wasn't your idea of selling cash secured puts that got shot down. It was your stock and strike selection.
ok then.. #1 don't paper trade strategies you can't actually trade..... with a 3k account .. i would sell credit spreads, and buy butterflies cautiously.. your going to have a hard time selling naked puts in an account of that size... putmaster smushmaster..
Other than the issue of using a certain degree of leverage, there is little difference between the objective of generating income, via selling naked puts, selling cash secured puts, or initiaiting a buy/write strategy. He can select strikes up to $30 with his $3,000. That gives him plenty of stocks to select from. However I am NOT suggesting he limit his strategy choices to those 3 strategies. However, if you are going to suggest a strategy of credit spreads to him, you should be sure he is aware of the potential risk and consequence, of selecting a strike higher than $30 for that spread. The strategies I listed, automatically limit his strike to no higher than $30. Your suggestion has no strike limit. Hence, no Plan "B" to fall back on, if a bad market or sector takes his stock down. Potentially losing most or all of his money, if the stock experiences a mere one dollar drop below his strike, is not my idea of a good Plan "B"..... if he selects strikes above $30 for a spread. (Remember, he is considering AAPL.)
cdcaveman is right- you could get luck with selling spreads- but don't dick around with stock options,only use index and european style- ie no early exercise, and that can happen when you are least expecting it. Don't try and be the market, go where the liquidity is. Enjoy the journey-and nothing, repeat nothing prepares you for trading real money compared to paper trading-even after many years of real trading. Happy trading
buy OTM: the best strategy. aapl is the best vehicle for options. next is spy. aapl is trending up, I loaded 460/465 calls for this week. already doubled, I just hold it toward this friday. it will be above 480+ end of this week. you should not consider day trade since you are not allowed. you need think and consider trades in long-term charts, that is not intra-day, in daily chart. 3k is big money in option
If you're going to use real cash, you may want to check out the mini-options to give yourself a bit of a better chance by starting as small as possible. They are currently offered on 5 different symbols, including AAPL, GOOG, and SPY.