This is such a great thread post, I wish more would join. I'm always wondering this too. This quarter I took on a huge drawdown (50%) but I went back to trading shorter term too-I'm already closer to my previous high then my low. I make almost all of my money the same way I suspect everyone on this thread does. Here is the $50 question: once a trader goes from a small trader who blows up accounts to a very profitable trader, it feels generally easy to make money doing very little work. Why is it this easy?
I like to ask a different question first: Can you make a living using straight directional trades on the underlying (or at least be profitable long term if not making a living)? With a fair few caveats, the answer is yes. The question then becomes: Do options give the trader any overall advantages in trading direction, over and above the underlying? Basically you are exposing yourself to delta to trade direction, so delta for delta, what effect does selection of strike/expiry, the extra contest risk, theta, gamma and vega have as the trade develops? Each trade will throw out a different set of non-linear variables so impossible to backtest accurately (IMO). One should use the same type of money management rules as trading the underlying as well. Just some thoughts.
i liked the girl that played cat women.. blondes can be overrated.. that seems to be everyones first lesson in options.. THETA at expiration.. gamma risk increases right at expiration.. for example aapl could be right between two strikes at expiration with an hour or two to go.. and trade up three dollars and turn a .05 cent option into a dollar in the money option.. if not 5 dollars in the money.. i've seen in happen.. but yea the first trade in options i made i think i lost like 6 grand in thetas..
yes .. big direction or no direction.. volatility.. haha.. trading direction is like a different animal.. its funny after reading this thread.. this guys head must be spinning.. "talks of calling the cboe floor?" really haha