For those that make their living as a trader, I'm curious as to which vehicle you use most to do so and also, the type of trader you are. For instance, Trading stocks and futures? Only stocks? Only options? Only futures? Method: Fundamental Technical analysis Short term or long term trader Thanks in advance.
i trade 98% options on stocks. 2% index options. i trade 90% front month options. if there is any running theme to my trading it is "buy the wings and sell the meat." by that i mean that i mostly trade positions that look like butterflies with curvature at the wings (extra wing units which means i never have "black swan" types of risk). i day trade and scalp a lot against this core type of position. i risk about 1%-3% on any single position and can risk up to 25% on my net positions.
This is exactly what I'm looking for. I'm a rank amatuer just trying to make a bit of money on the side but it is encouraging to me to know that some people are actually talented enough to make a living working from the privacy of their own home. After reading pit bull by Marty Schwartz, it seems that you are both walking down a similiar path because he made his living trading options for some time before moving into futures. Let me ask about the "extra wing units". Are you trading butterflies with a short time until expiration? When you say extra curvature and front month, I take this to mean that you concentrate on positions with high gamma? I'm not familiar with the "black swan" type of risk you mention. Even with extra curvature, how can you reduce your risk so much that you wouldn't be hurt too badly if you had a position that had high implied volatility which suddenly collapsed? How do you determine the stock that you are trading options on? Do you have software that will scan for attractive positions or do you trade a few stocks that you know well? I know optionsxpress will list positions by topic such as a large movement in implied volatility. Do you refer to something such as that to find new trading opportunities? I haven't traded index options yet but last week I had been considering the Russell 2000. Had I put the order on Thursday as I initially thought about doing, I would have been able to have a nice return on Friday. Coulda, woulda, shoulda. Is there any advice you would be willing to share in regard to trading index options? Is it best to place my order on the index just before market close or would you suggest another time frame during the day? Thank you for responding.
since i trade front month options mostly, yes these have little time to expiration. as butterflies i benefit from time decay. by having extra units on the wings i have gamma only if there is a big move outside the wings. i don't look at these trades as +gamma so much as simply fixed risk trades with lottery coupons attached. black swan is just another way of saying a very unlikely gap move. since i have more units long than short this kind of rare event benefits me. the bulk of the position is short vega (the fly) so i like high vol situations where the gas gets deflated. i actively manage and trade into these positions so that on balance i am seeking to buy the fly for near zero debit or even a credit. all the while i am making sure to add some of those cheap OTM wing options so that the net position might wind up costing me $1 on a $5 or $10 wide fly. (e.g. the most i can lose is that $1 and i can make a nice payoff inside the wings with the occasional bonus of a gap way beyond the wings. trading basically the same handful of stocks i've known for years. i sometimes look for unusual activity on things like biotechs or earnings plays but these are generally easily found just by paying attention to news. i don't use any special scanning tool. sorry i can't give much advice that would be of much use to you. i watch the markets pretty much full time. i only rarely make a an index trade and that is usually based on a specific directional or volatility bet or sometimes to play as hedge if too many of my stock positions seem to be leaning in one direction or the other.
As has been stated by dummy, as well as many times by your's truly; optimal portfolio-dissection will result in long upside/short downside gamma-slope vertically, and long time spread horizontally. It allows one to sell the distro with limited gamma and limited to neutral-volatility. Keeping your gamma/theta < / = 2.0 when selling naked premium is best-practice; as well as portfolio VaR at < -1% at +/-5% on global book.
Hi Riskarb & others! I read some of your quite thoughtful posts.I have been trading options since 1999.But some how with a day trader mentality I trade mostly naked call/puts in the near month betting in the direction in the next 5-7 days. As you guessed some big winners & most small losses.Some times I do buy deep in the money calls & sell ATM/OTM calls like covered call play. I have a question -How you will compare index options & the underlying ETF options for liquidity,pricing & cost of execution? ($SPX/ES-SPY,$DJX-DIA,$rut-IWM,$ndx-QQQQ)--- Thanks
100% AAPL options, Technical trader, with some discretionary elements, Mid-to-Long Term, though I won't leave a quick, short profit on the table if the opportunity seems available. If I am bored, I sometimes trade a little in stocks. Just a little.
Interesting. Never heard of someone just trading one stock's options. The stock itself, or a particular index maybe, but not just one stock's options. I guess if you watch the stock and its options all day, everyday, you can get pretty good at predicting moves... Can you tell us a little about your strategies and what you are looking at for trades? Thanks! C
All are quite liquid; Q^4 certainly moreso than the rest. The only ones to be avoided are NDX and RUT/IWM. I would favor ES due to the recent increase in liquidity and SPAN/risk-based margin reqs.
Option play i made today. Bought 1000 MO at 72.88. Sold the dec 70 calls @ 3.40. Plan is to let it be called away in 10 days and collect 52 cents premium and also the 80 cents dividend. Comments from option pros?