Sure it did. To say that risking 1/3 of one's account with one day options is equivalent to risking 1/3 of one's account with stock for example is silly. Size was only one of several factors and size by itself doesn't cause losses.
What's all this talk about leverage on a simple options play and controlling 30K shares? This is options not futures! Does anyone think if I bought 100 GOQBT (GOOG FEB 700 CALL ) @ 60cents (current quote), therefore paying $6K on a 310K account or about 2% of account, that I am having an insane leverage of 18:1 ? Will a 5.5% fall in stock price wipe out the account? Please folks present a consistent logical argument!
Neke, for the BIDU trade in question, you bought $147.3k worth of puts that day, correct? If so, that's a substantial difference from a $6k position, notional value aside.
Yes, I've already accepted I put on more size than I should be comfortable with, but you are making it look like it's the notional value that determines the risk.
You know what you are doing. Clearly. Thanks for the good journal. I am of the opinion that if you are not trading for a living. ie grinding it out then the occasional big swing makes sense. If your stars line up go for it. Just be wise about it. Sometimes we win..sometimes we lose. Just make it stairstep up and your good to go.
You're right, sorry. Do you remember what the IV was for those puts? Out of curiousity, given your strategy, what would've been the right size for that trade?
This model boils down the thoughts I've expressed here into four simple steps. Everything ultimately follows from one's trade thesis. But since there are so many different ways to trade the same thesis, taking these steps in order is a logically consistent way to develop a trade. No hindsight required. Step 1: Determine Trade Thesis: a) What do you expect to happen? b) When do you expect it to happen? c) How certain are you of a & b? Step 2: Determine Trading Instrument based on Trade Thesis Step 3: Determine Size based on Trading Instrument IN LIGHT OF Trade Thesis Step 4: Determine Position Management based on Trading Instrument AND Size IN LIGHT OF Trade Thesis
Weekly Update for week 2/50 ended 01/23/2010 Moderately positive week, up 3.6K (1%). Not a lot going on in the discretionary department, as I keep defining the objective rules for play which are going to be incorporated into my automation. A bunch of tiny-size automated trades produced the result for the week. Code: Opening Balance: 310,514 Net gain for the week 3,620 ------------------------------------------------ Net Balance: 314,134 Number of Trades 45 Number of Profitable Trades 21 Since Inception of Thread 01/10/2010 - 01/23/2010 Opening Balance: 410,000 Net loss(Less Margin Interest) -95,866 (Down 23.4%) ------------------------------------------------ Net Balance 314,134 Number of Trades 102 Number of Profitable Trades 50