Not being evasive. This is strictly non directional trading, looking for theta. Which you would do if you believe there is expectancy in selling options. Calculate expectancy by taking the win rate times average win and subtract the losing rate times average loss. for example (.8*2)-(.2*8)= has negative expectancy as it is allowing a trade to experience max pain. You have to reduce the average exit so there is positive expectancy. One way to do this is to use a multiplier of the entry. For example if you sell a 10 point credit spread for 2 and exit if it triples the formula is (.8*2)-(.2*4). This nets a positive number. I'm simplifying but you get the concept.
Elite Trader Hmmmnnn! I´m not sure I do get the idea? Lets say I had 32 wins and 2 losses over 8 months. What then?
I´m trying to figure our how to trade stock options. I did 30 contracts of 20 cent OTM INTC yesterday and it moved my 5 cents and I closed it this morning for $150. But since commissions are based on the number of contracts, I ended up with $110 round turn commissions. Only made $45 on the two day trade. So now I´m looking at higher priced stock options. Probably between $4 and $10, preferably OTM, but okay if ITM This to get the number of contracts down to a lower commission rating. The question is: am I on the right track here? a $4 option would be 4 contracts, which in turn would be $1600 bet size and a commission of $10 plus $1.50 a contract I believe on TOS? round turn would be $22 if I figure it right? Just looking for some back up here, to say I´m figuring this right.
make sure your losses are small enough to maintain positive expectancy. You will have to deal with a lower win rate. Beware of 85%+ win rates.
With the weekly options, you're really swimming against a strong current as far as time decay is concerned, especially with OTM, which is why I like to buy the longer term (although weeklies are nice for selling). As far as commissions goes, you can get $0.70/contract ($1 min) with IB and I believe I get $1.25/contract with TOS.
Goonier This is not weekly, I´m trying the DECEMBER options. Since this is my first foray into this after giving up credit spreads, have got some learning to do. Not sure if there is another thread for this, but since the ones I´ve been kibbitzing on here with are here. Just thought I would say here.
1.4280 was the exact top. Now EUR/USD at 1.3660. Models sent me a message: cover the short EUR/USD between 1.3660 and 1.3640. The model are however NOT saying to go long. Just take profit, and of course not to short it (it=eur/usd) at this level without a bounce first. Falconview: what do you think about the future direction? FV and Stanford: did you notice how fast the reversal was? In 5 trading days only, the whole picture was reversed, from a weak short direction in the dollar against EUR to a 180 degree reversal with a strong dollar against the EUR, and with a big move. This is an example where sellers of premium can get killed, selling puts on EUR/USD. 1.4260 to 1.3660 in five days is a huge move in EUR/USD for the premium it pays.
Now EUR/USD at 1.3648. Within less than 8 pips from the 1.3640. update: EUR/USD now at 1.3642. Within 2 pips from 1.3640. Will a rally develop out of no where?
TR Actually I was waiting for entry into TOS to go LONG CALLS when the data finally caught up and it gapped DÃWN. So I changed my order to LONG PUTS Down. Plan a short trade of $2 if I can get it. As I don´t think there is much downside room before a bounce. In the OEX to 540 on the index maybe?