yes, the answer up to now : stop trading !! I don't want to trading again after i get the solution and the right mindset man!
Thx for the comment buddy ! Regarding "the edge" that we're talking about, is it the same with "point of view". So we can make the question like this "From what point of view, you make Iron Condor position ?" If yes, so my explanation before is answering the question. My reason doing IC every month because i see good probability that they're hardly go over 10% every month, and if you said "options" only the tools. I think I treat the "options" also only as the tools to make profit to me. The instrument that allowed me to be a market neutral is only "options" as far as i know-so i use options with that. Regarding your statement that I don't need 90% winning ratio and you said that An iron condor month after month will eventually lose money. What is your reason to said that ? do you have any research and supporting data for that ? I like to know-because it's my main strategy. As far as i know, in my problem. The key-if I can use the IC in the ranging market (not to volatile) i will make good compounded profit. but the problem, how can i know next month the market will be volatile or not (anyone can teach me how to analyze this ? )
yes Sugar, I did ask mr. beatingthesp500 I think i starting to see some light here, thx to you guys !! But still little confuse of the definition, and what do you mean about "positive expectation" ? keep the good work !
Nell, If the IC is your main strategy and you depend on it for a living, you must treat it as a business & learn as much as you can about the intricacies of the greeks and and trading as a whole. This and understanding the pyschology of trading will see you through the tougher times. Good Luck
Dude, having traded options for years now I can only tell you that calling credit spreads/iron condors/and all the like low-risk is absolute bullocks. Point is when markets go bersek as they did, you are gonna get absolutely killed. Its not any much different than riding into this storm short gamma or short vega on longer expiries. Believe me, its hard to find in the professional ibank trading environment ANY seasoned options trader who survived till this day by actively writing options. THe same with your "strategy", its a flawed idea because your gamma/vega profile completely reverses when the underlying trades away from your "side strikes". I would spend a lot more time researching ideas that identify underlyers that will exhibit higher realized volatility and go long gamma those names. You can sell some longer exp. index vol against it if you want to stay "net vega neutral". Beware, this is also not a trade that may work on the first day and especially takes few days to kick in during market turmoil as index vol generally reacts faster than ss vol. Why? Because single stock vol in the OTC market completely dries up when markets go upside-down while index vol still trades, also I would expect structured flow to be anything but dead right now which will also make ss vol stickier than during calmer times. Forget those "stable income generating" credit spread ideas, they are complete non-sense. They get you couple pennies during peace times ans completely rip the throat out of you when things get windy. Just my 2 cents.
I don't agree. If risk is the trader's number one priority; if the trader is willing to lock in losses as necessary, if the trader does not feel the need to pray the market reverses direction and refuses to cover a losing trade, then buying iron condors is a long-term winning proposition. And that even more true for traders who are willing to own insurance (extra naked long straddles). Profits come easily and often. But losses can destroy the iron condor buyer. If the trader has a loss limt and practices discipline and good risk management, that is the key to long-term success. People who open positions and wait until expiration arrives to see how well they did are not going to survive . If those are the people to whom your comments are directed, I agree with you. But anyone can learn to adopt prudent risk management. it's a topic I stress in my book, <i>The Rookies Guide to Options</i>. Mark http://blog.mdwoptions.com/options_for_rookies/
THanks for the advertisment, we all love it and surely buy your book. Sounds like you pushed the iron condors especially hard. I dont know how long you have been actively trading options, if you ever even market-made options. If you ever traded for a prolonged period of time then you will know that at times such as now the vol explosion can completely rip apart your iron condor strategies. Your gamma profile will look horrid when things get really stinky as they did. You are telling us on one side that with prudent risk management those strategies can be all than a success. You know very well that nothing comes for free, why wont you walk us through the risk in this strategy because this would very well support my earlier post. I am not trying to piss on you but you call this a next to no risk strategy and I simply disagree saying this strategy has lost ANYONE during last week. What would have happend if the markets did not snap back, if things would have gone south for another 5-10%? I saw enough guys getting killed by seemingly low-risk strategies (I am not claiming that a long iron condor would ruin anyone). Problem is the profiles in a strategy such as this one gets completely whacked in market moves such as the one in the past week. Each strategy has its place but please dont tell us that an iron condor would have performed better than a long straddle last week. I dont see a lot of use for iron condors as stand-alone strategies (it can be a great net profile for a whole options book if employed in the right environment), a multiple of the little you make on those can be taken away in market moves such as last week.
I started dabbling with options 30 years ago and began serious day trading 5+ years ago, shifting more and more away from options to equities. AFAIK, it's very hard to make a living solely from this, well, at least until this year. Having been more on the short side than long for most of the year, I've had the year that I've always dreamed about. So although I'm an Pattern Day Trader (PDT) of equities, many lessons learned apply to both options and equities. 1) Manage your risk (a HUGE edge) 2) Repeat #1 hundreds of times and live it. 3) Trade from both sides (long and short) 4) Stop loss really good profits or adjust them so that a good chunk of them are locked in and thus a reversal can't take them away. 5) Book gains, possibly hold/roll paper losses when in offsetting positions. Reversals will add to your gains if you get one. Never do the opposite (book the loss, hold the paper gain). OK, never is harsh. Try: almost never. Hundreds of small losses can be offset by tens of moderate gainers. Some big winners then really make a world of difference. Get your ego out of the process. If the trade is moving against you, get out of the way. You're wrong. Period. Accept it. Forget it. Move on. Find a better trade or the peace of mind of the safety of cash. Trade within your risk tolerance. Shift your bias as the market shifts - probably a lot easier with day trading since each day the direction is known until the reversal snags you. and when it does, book profits, cut loses, reverse direction. When the market settles down and volatility dissipates, I'm going back to watching soap operas and drinking beer all day (g).