How do you trade?

Just curious as to how most options traders on et trade. What products do you trade (stocks/futures)? How far out do you trade (front month options,further out options, etc)? Most common stratagies you use (arb,straddles,flies,verticals,etc)? Do you usually trade directionally or just trade vol?

I myself usually just trade futures options and usually just in the front month selling premium (mostly credit spreads or straddles/strangles). I know this is a riskier way to trade but it seems like I'm in a rut and can't find a good stratagy to branch away from. So thought I would start this thread to try to get some ideas on different stratagies so I can be a little more diverse in my options trading.

Looking forward to the replies.

Good Trading Guys!

 

good question

 

Hi Young,
Try reading the thread - writing options for a living - the answer for your style resides within, but not without hard work.

Best Regards

Johno

 

I do calendar spreads -- selling the front month and hedging the same strike price with a backmonth option.

Limited risk. You are still getting the premium from the front month, and losing abit from the back month.

 

Thanks everyone for the help so far. cdowis I like the idea of the calender spreads but have always thought they were to complex for a simple guy like me. Tell me though when you sell the front month option and buy the far out are you holding till expiration? How often when a market moves will the farther out months vol rise higher than the front months vol?

Thanks

 

buying put or call verticals and if your right you can lift the short leg and put it back on when it stops moving,also leg in with the buy side and sell the short when it stalls

 

1. Decide on your bias for a given underlying (direction, volatility).
2. Put on the vertical/calendar/wingspread that gives you that bias.
3. Exit when your objectives are met.
Done

 

I would spend time looking at cboe.com, dan sheridan's webinars. He goes into great detail.

Basically you get out at certain yield or loss points, or one week before expiration. The whole issue of adjustments is a major part of this strategy. He prefers a second (double) calendar, but I have been experimenting with the use of verticals to hedge the position. It reduces vega risk, while a second calendar increases it.

Anyway, I strong recommend watching these webinars.

 

The best to the point answer.

 

Two main strategies:

1) Find bubbles which have burst, then buy LEAP puts 1 or 2 years out on the names most exposed to the bubble. Hold until the stocks have fallen 80-90%+

2) Anticipate a huge market move in the next 5-10 days, then buy front-month OTM puts or calls. This works especially well in the week or two before expiration. You haven't lived as a trader until you have seen some options go up 50 fold in a day or two when a major market move occurs. Main downside is the failure rate is high so you can't really bet much of your account.

In both cases, never exit unless you would take the opposite position. Instead, just wait till some strikes get to at the money, then exit them and roll down to deeper OTM strikes. This way you book profits as the move goes your way, whilst also keeping on some "Black Swan" exposure in case the move really goes bananas.