check this out http://elitetrader.com/vb/showthread.php?s=&threadid=10237&perpage=6&pagenumber=1 a happy ending http://elitetrader.com/vb/showthread.php?s=&postid=383174#post383174
Dont cash your 401k now, as you are being layed off your tax net wil be high with all the layoff package. Roll the 401K to Roll over IRA with a broker wehere you can trade also if yuo want. Cash you 401K next year as you will be definitely broke and no salry so less tax bracket. Good luck and welcome to the World of independence.
Please refer to item no. 2 in my original post. If he does this correctly he will determine what is an appropriate amount for him to implement his strategy with prudent risk managemnt. I used the 25k figure SOLELY for the sake of this discussion as he said he already had 20K and was trying to get it up to 25K. To be explicit, I do not imply that 25K will be sufficient for him to implement his strategy and succeed. Again, only he will know the minimum required trading capital once he completes task no.2 in my prior list. Furthermore, whatever the amount is, 5K, 25K or 250K, there are two issues here: 1. Building and implementing a valid and comprehensive trading plan 2. Making enough income from trading to live. At this stage he should be concerned with no. 1, hence my advice to him to live prudently and get a part-time job. Once he achieves No.1 he should be able to take care of No.2. But he CAN NOT achieve the two simultaneously!
NO NO NO NO NO NO NO NO NO NO. you need expenses for AT LEAST 2 years right now (if you are really really good) and more like 50k (again, if you are really really good). with your egg and only 6mos expenses you will become a poster boy for the PDT if you try to trade on that. just my .02
Agree. And with kids that sum of money is not risk capital by any stretch of the imagination. You haven't yet earned a full-time ticket to the table, regardless of how much you want it. Take a seat with that toolbox and you'll get fleeced and shown the door. You owe it to your family (& kids) to put this dream off untill you are Much better capitalized. And taking $$ out of a 401K to trade with is dumber than dumb. And you know what they say - idiots and $$ are lucky enough to get togethor in the first place.
Hey, Just a suggestion from lessons learned hard.. start very, very slow...and hedge, hedge, hedge. what I mean by this is if you have just 20k to start I would buy a long option straddle or strangle and let the market work for you. Make sure your expiration is atleast 90 days out. The benefit of this strategy,among others, is absolute definition of risk, it eliminates the variable of stock direction (as long as the equity is moving in a direction..avoid equities that are caught in a channel). This is a great start for a beginning player, you can pull 1k a week (a very conservative estimate) figuring in your cost of trades, per contract fees..etc. Once you've built 5 or 6k in your account you may never trade stocks...believe me. trading success is all about risk management combined with profit leverage, long option positions inherently give you both. There are ofcourse more complex option trades but this is a start. Rossmedia
You're saying that a strangle or straddle eliminates the variable of stock direction? In fact, they are both heavily dependent on stock direction, or lack thereof, and on the timing of both. If you have actually ever traded a straddle, then you know that a stock must make a major move to generate a profit in the position. And this, you say, is eliminating the variable of stock direction? And are you seriously suggesting that this new trader who wants to generate a living income to support his family dive into options strategies? Did you leave your brain in bed this morning? Please tell me, you MUST be an options broker.
If you are trading for a living then that is your employment and you should not take unemployment benefits. Unemployment is not so you can get in touch with your inner self, learn how to paint by numbers, or learn how to trade. It is a program to help you while you find a new job. If you can't afford to trade full time, then get a job instead of living on welfare for half a year. Best of luck