Looking for a good mentor for option trading...

Discussion in 'Options' started by mizhael, Feb 4, 2009.

  1. Hi all,

    Good morning!

    I am looking for a good mentor for option trading. I need guidance and coaching in the wonder-land of the option trading world. I have been trading options on my own for a few months however I just managed to break even with a small gain. I had small gains, then came small losses. I had large gains, then came large losses. So overall I just managed to break-even. I am at a good school and have a good background in Econ/Finance/Math/Stats/Programming. I am interested in a trading career. I am familiar with theoretical option models, stochastic vols, local vols, GARCH, etc. My problem is that I don't know how to turn math theories into real-world profit. I have also read Naterberg book, Option bible, Option Edge, and Volatility Edge books, etc. I know that I am reaching a point that I need some external guidance and coaching so I should advance to the next level in my trading. Please kindly shed some lights on me. Thank you so much for your advice and I am a person who appreciates, remembers, and returns kindness. Thank you!
     
  2. OK. You understand some of the math.

    What do you know about trading? Not just options, but trading?

    What do you know about the practical uses of options? Do you have any idea of the strategies available to you, or do you just buy options?

    Do you have market timing skills? You'll need that if you buy options.

    Can you trade without letting your emotions make the decisions for you? Do you panic when things go awry, or can you make intelligent decisions when you have a losing trade?

    You are looking to reach the 'next level.' Have you mastered the very basic level? Do you know how to choose which trade to place and why you make the decision to trade a specific option or option spread? Do you understand the risk of the trade and how to manage that risk and collect your profit? I'm not just asking if you know how to buy low and sell high (or sell hig and buy low). Do you understand why the trade is made, how options differ from stocks, and what you are trying to accomplish (besides making a profit) from the trade?

    Maybe you need to concentrate on something very practical at this time - such as understanding specific strategies, which options to choose when adopting those methods, how to manage the risk of such positions.

    In short, don't assume the math background gives you a big edge when it comes to getting started in a trading career.

    I am not putting you down. [If you take it that way, I apologize.] I am just asking if you have mastered the basics before worrying about the next level. Too many beginners get lost by moving too quickly.

    Mark
    The Rookie's Guide to Options
     
  3. sugar

    sugar

    You'll need that if you trade options.

    :D
     
  4. I disagree 100%.

    I don't trade with a market bias.
    I do not make market predictions.
    I don't trade on my guess as to what's coming next.

    I make a living by trading options.
    And anyone else can do the same, with the right skill set. And market timing skills are NOT in the set.

    Mark
     
  5. Mark, I just want to ask - it seems like you have to predict something however, right? Maybe not the market, but something.

    From what I understand, you do alot of Long Iron Condors on the market overall, right? Isn't that like making a prediction of limited change and/or lower IV in the market?

    Now, if you have changed to something else because of the volatility, then you are basically predicting continuing volatility, aren't you?

    I mean for example, a long straddle that is delta neutral can be considered a trade without market bias, but the buyer would still be predicting either a large move or an increase in IV. They aren't predicting a specific event, but they are generally making a prediction, otherwise, why put on that straddle?

    So, it seems like with any strategy, to make money you have to predict something - not necessarily the direction of the market's next 1000 points, but maybe predicting a slower market, or lower IV, or higher IV or whatever. When selling credit spreads, you are basically making a prediction the stock won't gap against you (or if it does, you will lose on that trade of course).

    Or, maybe part of what you are saying is you do enough trades with a good enough likelyhood for sucess that you realize you will have losing trades and therefore, you don't predict if each trade will work or not.

    Thanks for helping me to understand,

    JJacksET4
     
  6. aren't we all!! I couldn't help it
     
  7.  
  8. Mark,

    Thanks for the good, detailed reply. I think we are basically on the same page here.

    I guess a person could either call it a prediction or just playing the hand over and over. For example, if you could go to Vegas and get 3 times your money for each correct call on a coin toss, you would certainly do it, but you are "predicting" that you will win about 50% of the time - if somehow you only won less then 30%, you would end up losing - yet the odds would show in the long run, it would be easy money assuming no one was cheating.

    So, if you do say 10 Iron Condors and using money management, you maybe profit 7 times and make X dollars overall with larger gains then the losses, you feel that you can place the next "bet", because while you don't know what the market will do, you know you are in control of the trade, and can manage it, and you know your money management skills and tools to be good.

    JJacksET4
     
  9. That sounds about right.

    Mark
     
  10. While an option coach can't hurt, I don't think that it's the key to trading success. Your math skils and a solid working knowledgeof all aspects of options (your readings) will go a long way to helping you get there. But equally important being able to be manage risk and an ability react to changing situations, particularly adverse ones. You will only gain confidence in these areas by trading. No one can teach it to you. You have to be able to think the language of options not talk it.

    If you have been trading for only a few months in this market environment and you've broken even, do not be disheartened. Many noobs pay dearly for that learning curve.
     
    #10     Feb 5, 2009