Hi all, I'm new to options and have spent the time to learn the foundation of options behavior and mechanics of the different strategies. But what I'm missing is a way to turn all of this knowledge into a trading plan, what to actually do day in and day out. Which strategies to apply when, on which instruments, what's suitable to what market conditions. Does anyone have any advice on how I should go about this or where I can find some guidance? The objective is to spend an hour or two per day, to open positions (selling), manage, close, adjust portfolio risk etc. Thank you.
To be successful with options, you need to correctly predict the move (direction, magnitude) of the underlying. Depending on that prediction, you can choose a suitable options trade. This book presents many options strategies based on the expected move of the underlying. https://www.amazon.com/Bible-Options-Strategies-Definitive-Practical-ebook/dp/B0119THOU4
It's a deep topic. Outside of Rates vol, structured products and exotics there aren't more difficult products than equity vol. If you're not going to commit years to it I'll tell you to buy verts (long call vert = short put vert). Pick a direction, moneyness and maturity and start trading. You can stress your vert in real-time w/o a model (ignoring sticky strike/delta) by simply stressing the same spread n-points ITM (gain) or OTM (loss). With index you have dailies so it makes it easier to stress over time. The more you trade the better your sense of cheap(ness) and rich(ness) in vol as the ATM verts will get cheap (low vol) or expensive (high vol) in prem.
1) establish a watchlist 2) Look at each ticker and decide your directional and volatility bias (up/down,sideways,high/low vol,future expectations of each). Open an options structure (maybe include underlying also) that fits your biases, existing portfolio holdings, and sizing constraints.3) Manage (adjust or close) according to your pre-determined PnL plan and then-current outlook or market situation. Repeat as necessary or till quiting. Do all this at very small size for 4-6 years, then maybe you can confidently continue while spending only 1-2 hrs per-day. Throw in 10-20 hrs per week learning (not "trading") for those first 4-6 years.
If you are really serious and have the passion, here is where I would start: First, read McMillan, then Hull and Bennett. If you still want more and are not math challenged, read Tomas Bjork that gives you the foundation for arbitrage. Second, on ET, go to archive threads, read up posts by Dest, sle, maverick74... and then follow @poopy, @taowave.... Third, you mention selling options, contrary to popular believes, writing options to "generate income" is not a sure fire way to print money. If you write naked, you will understand what @Maverick74 told me years ago: You are picking up pennies in front of a steamroller, be careful. Finally ignore my post, I am just an amateur retail gambler, gambling in options instead of at the blackjack table. Good luck.