Depends on the trade. Long Options = If you're right, you make good money. If you're wrong, you lose a small amount of money. The R:R is very good. Short Options = If you're right, you make a small amount of money. If you're wrong, you lose a good deal. The R:R is very poor.
Lost 2/3rds on my Aapl shenanigans yesterday.... but it was only 1K. I sure wish you'd do that ATM strangle for me OG.... I don't have backtesting capabilities. If it were Weds of last week, where would that ATM strangle have predicted AAPL to close Friday? Was it $96.50? If it was, believe you me, I'm gonna get what I need to do it.
On Sunday evening I'm going to start a thread dedicated to how and why long and short ATM straddles are Dead Money. With a couple live examples on SPY and some other underlying, maybe GOOGL. Stay tuned.
Cool. Throw in a sub-chapter about using them as a tool for predicting. And mind you, I know this is is just one tool. Nothing is 100%, but I would be very interested to hear what you have to say about this. I think without major geo-political or geo-economic influences, ie, a dull market, this could be very useful, at least for me and the way I trade.
If you are buying a shit load of cheap options, hoping for a big move, then last Friday would have paid off. Looking forward to OG's new thread - maybe ET is not that bad after all J_S
Been posting some Friday expire charts in the wrong thread - so back we come! I am short, so if market keeps going up I lose, back down and I win! J_S
Here is the SP500 total volume - let's see if the rising prices with lower volume means anything! J_S
Without knowing the probability of the small and large losses you can't know the R:R. For example, let me give you two choices. 1. You have a .00000001% chance of winning $1,000 and a 99.9999999% chance of loosing $10. 2. You have a 99.9999999% chance of winning $10 and a .00000001% of losing $1,000 I'll take option 2 as many times as you'll let me, even though it's a "short options" play per above.