How long is your holding time of individual options-trade ?

Discussion in 'Options' started by OddTrader, Nov 3, 2010.

  1. Just curious:

    How long (expected/ actual; average/ range; minutes/ hours/ days/ weeks; buy/ sell/ spread; etc.) is your holding time of individual options-trade?

    Have you ever changed your holding time significantly? What were the major impacts?
  2. u21c3f6


    About 7 weeks. That produces the best risk/reward profile for most of my options trades.

  3. I hope I'm not reading more into your question than you meant.

    I generally enter a new options spread the Monday after expiration for the month with 59 days left. I aim for an Iron Condor but enter both spreads as separate trades. Sometimes one side does not offer the right risk/reward criteria and may take longer until it is entered. I hold the spread until expiration unless there is an opportunity to roll one side. Toward expiration I will close the side closest to the underlying if it is within market gap risk.
    Author - "These Seven Trading (Investing) Secrets Will Explode Your Account: All I Know About Trading (Investing) I Learned in Flight School"

    "The Johnson Report on Day Traders

    Ronald L. Johnson prepared a report for the North American Securities Administrators Association (NASAA, a consumer protection group trying to keep the futures industry honest) on the success of retail traders.


    The most successful trader in the group had an average holding period of 47 days, and did not day trade. (The other accounts not accounted for as winners or losers only had a couple of transactions and were not statistically valid).

    Conclusions of this study: the great majority of traders surveyed had a risk of ruin so high as to make eventual bankruptcy virtually inevitable. The traders with the shortest time frames (day traders) lost the most money and had the highest risk of ruin.

    The report also found that the average holding time for winning trades was much shorter than the holding time for losing trades, indicating that traders were cutting their winners early but letting their losses run.


    Five Fundamental Steps to Successful Stock Option Trading

    This brings us to the second part of the option selection process of trading options successfully is factoring time into your trading system. Trading a particular stock option and knowing the key factors of your option trading system or setup by knowing the average time period of a trade once it has been signaled and entered. For example, if your average holding time for an option trade is five days then you don't want to buy an option with four months of time premium left on it because you would be paying more for the extra time with the option's purchase price. Nor would you buy an option with less than 30 days till expiration as time decay would eat away the value of option so rapidly that even if the stock option's underlying stock moved favorably in your direction the time decay would be so great you would be too late to capture a gain in the option itself.

    When to Stop Trading

    Among the statistics that I make sure traders keep is the average holding time of positions. Holding time also determines the opportunities available to traders, as markets can be expected to vary more in price over a longer time period (multiple days) than over a shorter one (multiple minutes). (The reverse side of that coin is that holding time is a determinant of risk, as drawdowns are likely to be larger on positions held for multiple days vs. minutes). Your typical holding time is an essential part of your trading personality and, ideally, is also a key ingredient in your trade planning. Knowing the expectable volatility of the market for your holding period can be invaluable in telling you when to get out of the water.
  7. Interestingly, how about the conventional wisdom that "Let Your Winners Run and Cut Your Losses Quickly"

    Any comments?
  8. I find it difficult to draw any serious conclusions from a study of only 30 accounts.
    Author - "These Seven Trading (Investing) Secrets Will Explode Your Account: All I Know About Trading (Investing) I Learned in Flight School"
  9. Billy Williams' first sentence in his article sets the tone for this very confusing article. I'm afraid it prejudiced me against the rest of the article.
  10. It seems to me that holding time as a determinant of risk is highly dependent on the options trading strategy in use. Sometimes time is your friend.

    When to stop trading is a very worthy topic. Many of the traders I know are insufficiently self-aware to know if they are in any of the psychological distresses mentioned in the article. Developing metrics to give the trader some unbiased data to provide the warning of danger is a great step. As I recall, Dr. Elder, a trader and psychiatrist, has some good ideas on such metrics. Whether or not the warnings penetrate the traders fog so that appropriate action is another matter.

    Author - "These Seven Trading (Investing) Secrets Will Explode Your Account: All I Know About Trading (Investing) I Learned in Flight School"
    #10     Nov 4, 2010