No matter how much mentoring you have, there are two factors that you will never overcome. 1) You are a retail trader and therefore must buy at the ask and sell at the bid. 2) The most important factor in option price is the price of the underlying. Many options have low liquidity that leads to large spreads. The way to get tight spreads is to only trade in a relative small number of issues that have large volume. If you trade off of a given indicator or chart pattern, most of the time these small number of liquid options will not meet your requirements, and you will not have a trade. If you're not good at short term prediction of price movement, then you should probably forget about speculating in options. Ergo, if you're good at short term prediction of price movements, you should trade only the most liquid of options (such as QQQQ). Otherwise, stick to conservative positions such as covered calls, or just stay the hell away from options all together.
And how is this different from stocks and futures? There are many options out there which are pretty liquid with $0.05 spreads or $0.10 at worst.
I don't like to consistently give up 0.10 on options, especially when that spread represents such a large percent of the overall premium.
quite different coach. liquid instruments such as hi vol stocks or emini's trade at one tick slippage, in most cases one tick is just a small fraction of the instrument daily trading range. this allows to approach these products as they are a fair gamble (zero expectancy). that's why there are some many professional traders using these products as their backbone for high frequency strategies. in options, even with hi volume ones such as spiders, cubes, goog, etc, slippage is still weighs many times more than in a liquid future. this turns the options game a less efficient game, in which the market maker has an edge and the other side of the trade has negative expectancy. options can be traded in many different ways which adds to their appeal, but saying that slippage is not an issue would not be accurate, especially when compared with the futures world.
It's true. The appeal of options is the versatility and gearing, definitely not the slippage. But it is getting better.
Mav, Are ratio spreads and collars that much better than any of the other spread strategies? I haven't seen much of them.
I'm currently a student of Dan. I have to say that the money paid for the mentorship is well worth it, based solely on the money I've been able to make while still a beginning student. Prior to starting, I traded options for one year. I feel fortunate to have been able to break even during that first year. After starting using the strategies and knowledge I gained from the mentorship, I've had returns of +8.7%, +9.2%, -3.5% (Feb 27th), +14.5% and +8.5% for the last 5 months, totalling almost 40% ROI in 5 months. Nothing astronomical, but this isn't speculation trading. It's income trading. I'm thinking that anything above 5%/mo is great. I'm averaging 8%/mo as a "beginner". I've had losing trades every month, but still garnished decent returns. This is a testament to Dan's money management and trade adjusting teachings. There are a lot of books out there, but I don't think a single one truely teaches how to adjust a trade when it starts going bad. Most only teach you what the strategies are. They don't teach what's a good vehicle to put them on. What to watch out for. When and how to start profit taking. When to exit, or how to salvage it, or prolong exiting (staying close to delta neutral). Likewise, many books/people talk about money management, but don't offer what it really means. What is good position sizing? How much risk is acceptable for a given credit? How much of a loss is too much? They all talk about how important money managment is, but no specifics on how to do it. Dan doesn't leave you hanging. He gives you solid guidelines of putting on trades, managing/adjusting them, and taking them off for profit or stop loss. He goes over your specific trades. He offers several different scenarios on how to help out your trade in order to give you the tools and to get you to think for yourself. He can handle the very beginner to the advanced trader. This isn't the Optionetics infomercial where "I made 2000% in 5 days". These trades aren't a preconceived/premeditated home run. They are all live trades. Winners and losers alike. Is it worth the money? It depends on what you are looking for. I've made double what the class cost me and I'm still a current student. (Your mileage may vary.) I like the concept of delta neutral trading. I'm like Dan when he says, "I couldn't pick the direction of a stock to save my life." Now, someone brought up that he's not a retail trader and he seems to pick up a lot of knowledge from some of his students. I believe this to be true. I did learn a lot from him at the very beginning, watching archived sessions. I've a fast learner and I was implementing his strategies before my first one-on-one class with him. Now that I'm still a current student, I feel that my sessions with him are 80% him learning about what's working for me (him learning from me), and 20% about me learning from him. But I feel I got my money's worth from the program before I even got to the one-on-one portion. I still get to pick his brain for the harder questions. And as Tom has mentioned, once a student, always a student. I can ask him any question, any time, at any point in the future. He also holds twice weekly "paper trader" classes, similar to the CBOE webcasts, on various topics. Stuff that's pertainent to the current market conditions. Or a better moustrap. Again, I think it's worth it. As far as OptionVue. As Tom mentioned, purchase is not mandatory. You are given use of Optionvue while you are a student, including while sitting on the 6 month long waiting list. So I've been using Optionvue for the last 8 months for "free". Is it expensive? Yes. But when the cost of the software and/or datafeed is a fraction of what you make in a month trading options, who cares? It's the cost of doing business. The old addage, "it takes money to make money" fully applies. Likewise, making 8% per month may not be of much interest to you if you're trading a $1000 account, but it's quite nice when you're trading a >$100,000 account. Is Optionvue still the best thing out there? Maybe. Maybe not. It is a bit antiquated, but it still does the job. Maybe OptionGear is the new thing, maybe not. OG is twice the price of OV, but lower data fees. Thinkorswim's analysis page is good, but it doesn't do overlays, previous position P&L, or portfolio stuff, nor back testing (yet). Platnium is good, but there's things in OV that's deficient in Platnium (and vice versa, such as changing IV for each leg). If anyone wants further info on the mentorship, please feel free to contact me via direct email. I don't check ET very often. Email me at----> e l i t e t r a d e r 1 (AT) w e 9 v . c o m Regards, Chad K
Nitro, I'm afraid in the real world, it's just not that easy. There is no effective way to hedge soft deltas. Certainly not a 5 or 10 delta spread. Just not possible. Let's go through some scenarios. You are short the 10 delta put spread for a .30 credit. Waaaay OTM. Market starts to tank. What do you do? OK, you suggest to sell some ES futures so that you can work your way out of the spread. So you propose selling the ES futures on the lows in a mean reverting market? OK, so you do that and you have about a 2 handle cushion here assuming you sell small enough to just cover your risk. Now the market squeezes the shit out of every short in the world (including you)! That little .30 credit went up in smoke on the first handle against you, now the ES is up 10 handles from you got short. You have now lost much more money then you would have lost by just taking the spread off. OK, so you quickly cover your short ES thinking the market has stabilized and you are safe. Uh oh, all the shorties are out, market is now reversing and heading lower! Your short put spread is under attack again!!!! So you quickly sell some more ES futures. Spreads are still too wide to get out of your put spread. But now the ES is squeezing yet again. What do you do? Of course you buy them back for another 5 handle loss. And the process keeps repeating itself until your broke. See that is the problem. You have such a small credit that there is not enough money there to compensate your losses in the underlying. That's the problem of hedging soft deltas with the underlying. Your best bet 99 times out of a 100 is usually to just swallow your pride and buy back the put spread at a loss.