I have a nephew who is a senior in undergrad. He's on a ride so his expenses are low and his family supports him. He started his freshman year with a loan from his dad for $10k and started in US vanilla equity vol. He's got something approaching $200k now. He's reinvested every dollar (no pulls). I have no doubt that he'll have $250k when he begins med next year. I'll take over the account until he's in residency. He trades nothing beyond 30-days to expiration. He does the occasional ladder in index puts, but mostly debit positions in flies, calendars and verticals. He trades unbounded on risk-reversals only on the bullish side in ES, and only because the haircut arbitrarily limits his size on price specs. So no, you're not underfunded. In my experience that is the excuse used to avoid putting money at risk.
the Op is trading pure directional longs with no mention of spreading and 10 points initial risk on each bet. there is no free ride, the family is not supporting him and med school is not an option.
<<< I realize this method is probably contrary to many in here, as most advice I've read is to stop loss almost immediately. >>> You should NEVER assume what others are doing is the intelliigent thing for you to do. Afterall, you don't really know WHO these people are, or WHY they are doing it. For example: Perhaps someone is a trend trader and is buying at a high price. It makes sense for him to have a tight stop loss. Perhaps someone is using an insane amount of margin leverage. It makes sense for him to have a tight stop loss. Perhaps someone is over concentrating in one stock or sector. It makes sense for him to have a tight stop loss. Perhaps someone is investing in a financially unstable and volatile company, with massive debt, which it's earnings do not come close to covering. It makes sense for him to have a tight stop loss. If you are investing in financially healthy, quality companies, with predictable earnings, using none or a reasonable amount of leverage, buying at very reasonable prices, and diversifying your cash in more than one stock or sector..... why the hell would you use a similar tight stop loss??? Don't worry about what others are doing.
__________________________________________________ Hi Bradson, Wow! "You sound exactly like my me 15 years ago when I first started trading options." Just like you I decided on deep in the money options with 2-3 months on companies that charted well. I also used modest profit goals like 20% to 30% and only traded one or two companies at a time (just like you). Everything was going along well and my account was growing. Then I became inpatient and addicted to trading and wanted to open up multiple positions in many companies (sound familar). So I ended up with 8-10 positions at one time and the profits were rising everyday. Until we hit a downturn in a bull market and half of my account was gone in a relatively short time. The lessons learned were: 1: Do not open more than 2 positions at a time and those positions should be no larger than 10% (each) of your account. Run a stop and limit loss to no more (or slightly no more) than your average profit that you make per average winning trade. Lets say your normal winning trade is +30%. Then use a -30% stop. Lets look at like a business: (10 trade month) 7 winning trades X +30% = +210% option gains 3 losing trades X.....-30% = - 90% option gains Net Profit............................. +120% option gains With 10% of your account into each trade, +120% in option gains is a +12.0% account gain and with commissions added in, roughly a 11.6% account gain. Also consider in your 2 open positions trading pairs: 1: Calls on an uptrending stock that has pulled back to support. 2: Puts on a downtrending stock that has rallied into resistance. Lastly if your not batting W/L: 70%, then here is a Win/Loss Table that shows you what your profitable sell limit and stop should be for various Win/Loss averages, to create a +10% monthly account gain: Win/Loss Tables for 10% Account Growth per Month (Non-Compounded) (10% of Account Invested into each Trade) Based on Approximately 8-10 Trades per Month Win/Loss = 40% (4/10) Wins 4 x 100% = 400% Loss 6 x -50% = -300% Net...............100% (10% Month) Win/Loss = 50% (5/5) Wins 5 X 70% = 350% Loss 5 X -50% = -250% Net...............100% (10% Month) Win/Loss = 60% (6/10) Wins 6 X 50% = 300% Loss 4 X -50% = -200% Net...............100% (10% Month) Win/Loss = 66% (6/9) Wins 6 X 35% = 210% Loss 3 X -35% = -105% Net...............105% (10% Month) Win/Loss = 70% (7/10) Wins 7 X 30% = 210% Loss 3 X -35% = -105% Net...............105% (10% Month) Win/Loss = 75% (6/8) Wins 6 X 30% = 180% Loss 2 X -40% = - 80% Net...............100% (10% Month) Jeff
take out of 10% of account value for each try. for example start at $100, double it into $200 then put $200 into another trade, double it into $400 then put $400 into another trade, double it into $800 .... within less than 20trades, you will be millionaire. think all trades as "who want to be millonaire". your risk is just $100. if you failed in one of those trades, take another $100, do it over. finally you may go through each trade series and reach the millionaire. in option,double each trade is just peciece of cake
everyone knows those simple math. math does not mean anything here. count before hatching is stupid 1=1 1+3=4=2*2 1+3+5=9=3*3 1+3+5+7=16=4*4 ....... I used this formula to trade
So that's how "The Donald" actually did it! I had a feeling all that real estate talk was just a front. It's Genius! I'm skipping over the puny millionaire returns and going right into billionaire territory. It means risking another few hundred on top of the initial $100, but I really feel the risk/reward is probably worth it.