understand delta and theta, most new people buy puts and calls due to leverage and lose on theta, understand theta is like rent per day, so your premium decays slowly then starts to accelerate as expiration approaches. Understanding theta will save you alot of money. So what is the theta of AAPL DEC 530 call?
a great tip i learned from brian shannon from alphatrends (well not personally but you know) was to only use 30 min chart instead of hourly for equities (not futures since they trade around the clock) b/c there are 13 30 min intervals in a trading day versus 6 hour intervals and one half hour interval so if you're using hourly charts it's not a true picture b/c one of the bars will be only half hour of trading even though it is the same size as the others.
that's a good one you would think something as simple as that would be widely known but that's the first time I ever heard somebody make that case thanks for the tip
yikes, the FB 24.00 weekly calls are down 75%...well, the idea is to swing trade cheap weeklys, but not losers
you need an extremely tight stop when playing weekly/front month options or these losses will keep happening. fb had a lot of resistance at 24 so it's not surprising it pulled back from there. if fb can break 24 you could get long.
I suggest you look at trading the iron condor. This is a high probability trade. This means you can trade it every month. over and over... (focus on trading one stock, ETF or index) The key is how you manage this trade. The "trade off" for the high probabilities is a poor risk reward ratio. So you must "work" the trade to keep from losing too much money in any given month. (no big winners = no big losers) This page has a nice comprehensive tutorial on how to trade the iron condor. http://www.strategic-options-trading.com/iron-condor.html
FB is probably one of the few stocks you currently have a high probability of actually losing on both ends of the trade, via an iron condor. Not at the same time, but during the life of the contract. I assume most will disagree with me.
Cit13, Your getting a lot of good advice, here is my 2 cents: Your setup on the SE trade was good. There is only one thing I would have done differently. Forget the trailing stop and just use reasonable pre-determined sell limit and stop orders, like +30% to +40% sell limit and -20% to -25% stop. You were up +45% on 11/02, a 30% to 40% sell limit would have executed and you would have and should have been happy with that. Trailing stops for big profits look good on paper buy rarely work. Settle for quick reasonable profits over and over again instead of prolonging those theoretical home run trades that rarely ever happen. Never have your average stop larger than your average profit. For instance: Profit 40% / Stop -20% 10 trade month: 5 wins at 40%: +200% option gains 5 losers at -20%: -100% option losses Net........................+100% monthly option gains 10% of account invested per trade = 10% monthly account gain 5% of account invested per trade = 5% monthly account gain As you get better with your win/loss record and approach W/L 66% or greater, you can actually reduce the profit level a little and increase the stop a little (this gives you quicker turnover and higher accuracy). Example: W/L: 66% 9 trade month: 6 winners at 30%: +180% option gains 3 losers at -25%: -75% option losses Net........................ +105% monthly option gains 10% of account invested per trade = 10.5% monthly account gain 5% of account invested per trade = 5.25% monthly account gain Also your commissions are a little high at $5.00 per option each way. Think about Interactive brokers at $1.00 per option (.70 if 2 or >). Jeff
Thank You everyone for your help! I am going to start a new thread soon with my options strategy. I will check out interactive brokers that sounds like a good deal. Thank you!