Options trading for a living

Discussion in 'Options' started by TSLexi, Oct 4, 2013.

  1. Curious ... (unless I'm reading it too literally) .. strategies that are capacity-constrained for reasons of specific markets microstructures I understand, but could you give a few examples of options strategies that are restricted?
    #41     Oct 5, 2013
  2. tommcginnis


    1) loss from long stock is unlimited (to $0)
    2) write credit spreads to guarantee small wins and limit absolute losses.
    3) write spreads above and below (but well away from) the same underlying, to double the use of your available margin capital (since, if you are hit on puts below the market, your calls above the market are sitting pretty -- and your broker will recognize this). Twice as many spreads= twice as much premium.)
    4) Paying OptionsXPress commissions WILL KILL your dream, by forcing you to write too close to the flame in order to net sufficient premium. That closeness will get you hit, hit, and hit again. Bang: you're broke.
    5) Watch a Dan Sheridan webinar on income-production from $35,000 account: he will introduce a statistical normal distribution, and show you why/how to work the tails (the areas further from the market) for base hit base hit base hit. (If you're already writing DITM puts, you'll eat this up.)
    6) Hit http://www.tastytrade.com for their Best Practices and Market Measures sessions...
    7) If you're lucky (REALLY lucky), and you avoid long stocks, OptionsXPress, and single-sided weeks, you might shoot for 100%, $20k/year, $400/wk, $80/day. Shooting for more will put you too close to the flame, and you WILL get burned, 1-in-10 weeks? Thus,
    8) DO NOT ENTER A TRADE WITHOUT AN EXIT PLANNED (and perhaps laid in). And "stops" are not time-sensitive: if you're writing options, you're trading on time: your best exits will change with each tick of the clock. LOSE the "stops." Time or distance? Time or distance?
    #42     Oct 5, 2013
  3. To offer some trading insight on convexity. No, writing puts is for hobbyists at any level, or for institutional overlay. Don't trade anything if you can't reliably predict direction or the vol-line. Do not trade some passive garbage vertical strategy. Find someone that is qualified to do so.

    None of the previous advice is going to get this person anywhere, except broke. Get 30mg of Vyvanse and read everything you can. If you had the brain-pan you'll eventually find an edge, but it's a costly education.
    #43     Oct 5, 2013
  4. Lexitran, do not do this ^
    #44     Oct 5, 2013
  5. TSLexi


    Why not? It sounds sound.
    #45     Oct 5, 2013
  6. Credit spreads = death.
    #46     Oct 5, 2013
  7. TSLexi


    How is a bull put spread death-equivalent? Limited risk, limited profit.

    What about gamma scalping a long straddle around earnings?
    #47     Oct 5, 2013
  8. I think you're an old nick trolling, but no. All cs are limited risk, but a poor R/R. You're simply substituting R/R for prob of profit. The expectancy doesn't change. You will get killed trading vol into earnings, as the average issue loses 10bp on the vol-line and you'll not be able to hedge in spot AH with only $20k. believe me when I say it's not where you want to be.

    The exception is skewed indices and ETFs. There is some edge in the leveraged vol-indices and first-order stuff (SPX, NDX, RUT). Stick to deep OTM put spreads on those perhaps strangled against some upside call spreads (bear-delta) on UVXY.

    I'd suggest going naked on a futures option overwrite before attempting any credit spreads. Go out 60-days in a skewed strike and get neutral on underlying.

    Or perhaps some one-lots pitchforks in SPY (100-multiplier). I have a thread on pitchforks under the nick "atticus".

    Your best bet with $20k would be delimited exotics (not path-independent binaries or analog up/down and outs), such as DNTs and NTs at places like betonmarkets.com. Don't trade OTC binaries with a dealer as it's simply a discrete vertical on time and strike at a massive loss of edge. You would have to find someone in the EU to hold the account and use a local IP. I have machines setup with partners/relative so that the IP is local. May not be worth the effort otherwise.

    You could replicate long gamma on FX and index markets at BOM. Buy a local touch-exotic, say under the mkt by 40 pips and go long spot at 50x. Go out 20-30 days and wait for the strike-touch. Cover spot and repeat. The payouts are skinny at say 15-20% on the touch, less the loss on spot. There is no edge, but my experience has been that you'll get a run of 15-20 wins before taking a loss.
    #48     Oct 5, 2013
  9. TSLexi


    Why would anyone do a buy-write on a non-dividend-paying stock when you can write puts? Isn't that an equivalent strategy?
    #49     Oct 5, 2013
  10. Thanks, saved for when I'm sober enough to analyse the nuance.
    #50     Oct 5, 2013