now i understand

Discussion in 'Options' started by mikeenday, Aug 10, 2011.

  1. mikeenday

    mikeenday Guest

    couple years back , i was consistantly losing money. and one successful trader I met told me this: "you need to trade plain stocks to build your equities, options are not"

    I think I got what he meant now. Options have fundamental problems that prevent us building substantial postiions:
    1) unlike stocks, you can put 7-10% stop loss, options are more like binary event. The stoploss is not meaningful.
    2) for the reason of 1), you can't go all-in with options. this requires perfect entry and consecutive moves in the same direction.

    my year performance (280k) so far, stocks contributed more than 70% of the gains. while most option trades are a wash. The most value from option trading is that they keep you consumed and keep you from in-and-out of stocks.

    so the strategy might be something like this: big position in stocks (for me SPY/QQQ), and satisfy your desire to over-trade with options.

    BTW, suggest a spread trade: buy WYNN, short MGM