It's been my opinion for quite some time, due to complexity, Options trading is probably best suited as a minimum, a 2 person's game. It requires one person who is well versed in Options. It requires one person well versed in stocks and well versed in price action. Marry those two together on a technical level for best results.
If you are good option trader,you should be able to successfully trade almost any any asset . You do have to know the nuances of the underlying, I.e , fixed income vs currency vs equity.. If your game is direction, you do not have to be a great options trader..
Keeping on topic as best possible, 'What are some Basic Strategies that have Worked for You?', KISS would be one of them. I have my hands full just coping with stocks, adding Options to the list, well maybe if I were a young guy again. Imo, trading is quite a complex endevour, besides coping with hardware, software, data, then learning about trading, throw in market experience, fundamentals, technicals, coding, algos, stop loss methods etc. However KISS only applies to those with years of experience, difficult when a beginner which can be a 10 to 15 year experience or more. I notice on ET many posters discussing at length technicals or algos for example, it can be a mental trap to become absorbed in detail while not actually just simply trading.
Does the gambling feeling decrease as experience increases? SPY for example...how am i supposed to have anything more than a hunch that it will go up or down? Judging by how the market has been doing the past few years obviously the safer "bet" would be long calls but other than that i cant help but feel like i am playing roulette and I f'ing hate casinos to be honest.
Yes. To continue the casino exemple. Take black jack. 1. You play your first hands. You’re a gambler. 2. You discover card counting, an edge. 3. You sharpen your counting skills. 4. You bet optimally as per kelly. 5. Now a profitable business. You know the odds, You know your expectancy, You know how much to bet per hand. You’ll laugh at your old self #1 if you ever meet him around the table. However wagering is always stochastic, Meaning ... There will always be uncertainty.
in the options/futures field, I lean towards "using the markets money to finance trades", examples are ratio spreads, backspreads and vertical call spreads, vertical put spreads. Depending on the volatility I will look to utilize one of these 3 strategies.
The more I think about your thread topic,the more apparent it is that you are looking for the secret sauce. Dont get me wrong,it's a very good question.The problem is the very same strategies that I have made money on,are the same strategies that I lost huge sums of money on early in my career... At this stage in your trading journey,you can not have open ended risk where gamma explodes on you. You aren't ready for delta hedging.... Imho,your positions should be either in the underlying with sound MM,or simple option positions that have limited risk. Go long options/ verticals.If you cant stomach long theta, perhaps ratios 2 x 3. Or Calenders. At some point you need to choose a style of trding that suits your temperament.. And start small,keep a log of all your trades.
options are extremely popular with hedgefunds to take directional bets. they are the worst possible way to do this. the more exotic the combination of options used the worse they become particularly cheap exotics like knockouts. it is usually very easy to make a lot of money in very volatile times with most strategies so options should be used to make you indifferent to market vol. vix can't do this because the 1m forward variance swap doesnt lose vega (decay) as the days pass becuase it has a constant length, it decays because the number of expected shocks before settlemt decrease . the only way on a day like today to not make less than on a coronavirus day is to use options. options should be sold to manage the return profile during prologned low vol periods because they print money as time passes. they need to be algorithmically executed with delta risks removed then optimised to maximise theta bleed. id first write the code, including how to get the delta from the price and strike, the vol you use as the black sholes vol and for pnl should be you own function of the prices, realised vols, average implied vols and probably dampened versus market. It is important it is a useful accouting metric though so should be better than the market prices at predicting realised vol so you can mark of it and use it to choose overvalued options to sell as hedges. decide how you will hedge the delta to keep it zero (use options) and set up the initial short option positions. Try weighted strikes which will minimise how often you will need to hedge delta (consider all the calls and all the puts with weightings to give you constant theta. If you aim to keep theta constant everywhere you minimise gamma and so how often you need to rehedge. Hedge using options to the same expiry. Try 1month on expensive index vols or basket of single stocks is even better. If you use it as your primary strategy you will earn enough theta over the year to make 100% easily with a draw down of less than 5% (this will only be mark to market vega so will quickly be gone before expiry) It will compliment you other strategies which cant do a lot when nothing moves and vix is at 11 for 4 months. you can be indifferent to the vol at inception becuase it has most notional in the 1m wings which are always 21-25 vols independent of the atm vol level (10 -15 vols expensive) and if it goes up you will be hedging more so will sell the more elevated closer the money vol and closer to expiry so will get the benefit. even if you put this on at all time low vol levels and there is a blowup you will make money, just a bit less than the other way around. advise using your own vol marks which you are optimizing for not the black sholes vol to calculate delta and the delta of options. black sholes delta is easily calculated from the price of the call and put of the same strike by using the inverse tangent equations for their time values and intrinsic value (which you get from the price) but is less good at predicting the change in pnl and makes you trade short vol gamma. fine to use though at the start if easier