How do you know you have an edge trading options?

Discussion in 'Options' started by OddTrader, Nov 12, 2010.

  1. How do you know you have an edge trading options?

    Perhaps you have been trading options quite profitable every week for several months/years now.

    How do you know if you really have an edge trading options in the long run or just get lucky in the short run like some options gurus such as VN

    What are the characteristics you think can define (or how many trades can determine) one's true edge in options trading? by that I mean winning odds for the long run.

    Or you believe there is no distinguish difference about edge in trading with options against trading without using options (i.e. underlying only):
  2. pak


    over 30 trades and u will have a very good idea- But ONLY when buying options.

    No matter how many trades u do u cant determine the edge when selling options...
  3. imo, I believe utlising options for trading (with hedged and leveraged postions in order to capture reasonable profits while limiting losses) by itself is an edge.

    "A smart strategy seeks to avoid catastrophic risk at all times, to profit by real or implied volatility explosions, and to limit time decay loss." --- Baird

    I think trading (constructing, managing, etc.) options would require a lot of reading and research with examples and data. Here are some books with lots of data and examples that I found quite practical and useful:

    - Options as a Strategic Investment (MaMillan)
    - McMillan on Options (McMilllan)
    - Option Market Making (Baird)
    - The Options Edge (Gallacher)
    - Trading Options to Win (Johnson)
    - Enhanced Indexing Strategies - Utilizing Futures and Options (Yates)
    - The Option Trader's Workbook (Augen)
    - The Bible of Options Strategies (Cohen)

    Here is the most important and informative web page I found on the net for learning options trading: