Do you make decisions based on the number of contracts or a specific dollar amount to invest ?

Discussion in 'Options' started by DallasCowboysFan, Sep 20, 2016.

  1. Doobs789

    Doobs789

    Bet-sizes are most often viewed as a percentage of acct net liq, eg my acct is $100k, so I want to put 5% into a trade ($5k).

    Most traders/gamblers use the kelly criterion to size their bets (size increases with edge). Read books by pro blackjack players, gamblers are often more disciplined than traders when it comes to managing a bankroll.
     
    #11     Sep 21, 2016
  2. Gambling is more left-brain/analytical; while ...Trading... can be much more ambiguous, :confused:o_O and complicated
     
    #12     Sep 21, 2016
  3. Doobs789

    Doobs789

    I would advise you stay away from both endeavors, they're not for you.
     
    #13     Sep 21, 2016
  4. newwurldmn

    newwurldmn

    Welcome back.

    What is 5percent on a naked put?
     
    #14     Sep 21, 2016
  5. CannonTrading_Ilan

    CannonTrading_Ilan Sponsor

    Really depends on what markets, how strong you feel about the direction, the strike price, your projected price for the underlying. How much risk? The options delta and time value....
     
    #15     Sep 21, 2016
  6. comagnum

    comagnum

    Novice traders and greedy gamblers put on position sizes significantly larger than the long term successful pros would ever dream of which is why 96% wash out. My risk is approx 1% MAX of total capital per trade: so as an example I would never take a position size of more than 1 ES contract per $100k of my capital. When I hit 10-20 losers in a row it is just a draw down from which I always been able to recover from - If I sized up any larger I will be on the road to ruin.
     
    Last edited: Sep 21, 2016
    #16     Sep 21, 2016
  7. I guess you can still limit loss on a naked put by putting a SL. If you can't (Manage your risk) then don't trade it. Simple.

    Only rookie expose themselves to unlimited / unbounded downside.
     
    Last edited: Sep 21, 2016
    #17     Sep 21, 2016
  8. newwurldmn

    newwurldmn

    A stop loss isn't an ROI tool because the whole point of options is gap risk. If gap risk didn't exist there would be no need for an options market (you can synthetically create options yourself). You can use stops to mitigate gap risk.

    So if you say sell a naked call and in the after hours the stock gets taken out for a hundred percent premium (like LNKD) then your stop is meaningless.
     
    #18     Sep 21, 2016
  9. always minimize fees. buying SPY options instead of SPX almost always screams 'noob'
     
    #19     Sep 21, 2016
  10. CyJackX

    CyJackX

    Use another option as a stoploss.
     
    #20     Sep 21, 2016