New to Options

Discussion in 'Options' started by SAA, Dec 23, 2007.

  1. SAA


    Hi There,

    G'day to everyone here! First post.

    I'm looking for some help in trading Options and selecting the market to trade (individual Stocks or Index options or something else) via virtual trading to begin with!

    I'm new to all of this, have been reading quiet a fair bit now on Options ( & other material and just finished reading a book by David Caplan (the new option secret, volatility), which is mainly to do with Selling options but looks like his very much into selling options on commodities. After reading this book my whole thinking has been turned upside down, hopefully for the better!

    I need to understand much more about volatility of options to see if I can take advantange of it by selling options in combination with other factors (following trends etc)

    Some of the strategies at face value seem risky (the Short Strangle, he calls it the neutral trade), to me BUT I'm sure he would not enter it if the probability of high success was not in his favour/side!

    Can this be done easily on individial stocks rather then commodities and easily in order to take advantage of selling high priced options when volatility is high to collect a good premimum and trade on non-directional trades?

    I'm learning alot all the time, simply through the hard work I'm putting it with some good books. Excuse my mistakes, I'm sure I will send a few, as I'm on the learning curve at this moment in time.

    In addtion are there any links which can try and help me put a trading plan together. I think this is extremelly important if I want to survice in this game.


  2. lindq


    Are you consistently profitable in trading equities? If not, then options are not for you. They will simply accelerate your losses, as will any leveraged derivative of equities.
  3. SAA


    I'm new to all of these. You made your judment so quickly.

    What made you say that BTW, the words "short strangle"? I am new, and I understand that the risk is unlimited on either side of the fence.

    I'm more interested if a professional trader considers it placing it with a wide band, what are his his changes for success?

    It's the volatility that I'm very much interested, after reading David's Caplan book.

  4. lindq


    Profiting with directional bets on volatility is extremely difficult as there are so many things working against you. More study on your part will reveal them to you.

    While theoretically the strategies are interesting (especially to those who are new to options), in reality you will find that the small number of trades that make any profit will be erased by the much greater number that result in 100% loss of your investment.

    This is true with trading options in general, but especially so with straddles and strangles.
  5. SAA


    Hi lindq,

    Let me clarify, I'm not talking about directional trades here. I'm not interested in trying to select the correct direction. BTW I agree with what you are saying.

    After reading the book David Caplan I'm not interested in either the (Long strangle or Long Stranddle strategies for Stocks) but more on the short strangle/short Iron Condor on Indices. I don't want any nasty suprises with the good old underlying stock.

    The way I read it is that its lottery type system, place your bets and good luck with the volatile stocks! Even on high volatile stocks out there, they are the ones that will give you the BEST HOPE. I have no idea but I doubt if someone is making 100% living out of long Strangles/straddles on volatile stocks, if they are they know something more then the average.

    I'm very keen on predicting the wide range instead on indices, which allows me to calculate and put in an Short strangle or Short Iron Condor in place OTM for both calls and puts.

    More important knowing when to enter into the game itself. When is the temperature just right? Indices will be the go for myself, to begin with. This is what I need help with as a begineer. David Caplan book is for advanced traders, and since I'm begining I need lots of help with, but I understood most things in it which I liked!

  6. SAA


    OOPS I meant a Long Iron Condor (bull put spread + Bear call spread) on indices.
  7. interesting thread , David
  8. ryank


    The SPX Credit Spread Trader thread by optioncoach will answer most all of your questions. It is extremely long but full of great information. I would recommend that you read it all before selling any options with real money. In the mean time, go crazy with a demo account to learn as much as you can. credit spreads&pagenumber=1
  9. SAA


    Thanks Ryan.

    That should keep me busy for a while :)

    All part of the hard work that is needed for success!

  10. MTE


    It's a short iron condor, not long, cause you have 2 short verticals!
    #10     Dec 26, 2007