What's your average trade size?

Discussion in 'Options' started by a529612, Jan 4, 2007.

  1. How much equity % do you risk for long options per trade?
  2. 2% of bank.
    daddy's boy
  3. Size doesn't matter.

  4. Helen2


    Who said so?
  5. Helen, you rascal! :D
  6. tower



    I am not sure this answers your question directly but I can tell you that a rule of thumb we use is to never risk more than 1 months profit per day.

    So, if you make $10,000 per year, we would never have a position on that exposes us to more than an $833 loss in one day.

    That said, I have personally increased that amount by as much as 20%. In the case above that would increase my exposure to $1,000. (For me to do this I have to have a significant lead on a trade).
  7. That's interesting.
    So how much would you risk if you have no profits or a loss for the year?
    daddy's boy
  8. tower



    We do it on a rolling 12 months and not on a calendar year basis.

    The closest we have to someone in the position you describe is someone I have started training. I just looked at his position and he has about 5% of his account at risk.
  9. Thanks for the reply Tower.
    That's an impressive statistic. Please correct me if I'm wrong but you seem to be saying that the traders you know/train generally become profitable within the first month or two of starting their trading, the exception being this chap with a current 5% acct risk?
    daddy's boy
  10. tower



    I agree it would be quite impressive if the guys we worked with were profitable within the first sixty days. Sadly, that is not the case - or even close to it.

    Where I work about 1 in 15 options traders survive the first year. As I recall, I started making money after six months. I would be thrilled if the guy I am working with was at scratch after a year.

    The posts I read in this forum seem to indicate far more aggressive schedules to profitability. I believe there may be two reasons for this: first, they are probably more selective on the trades they make early in their careers than we tend to be and second, they may be calling a profitable trade one in which they simply sell their option for a higher price than they bought it. This, of course, excludes transaction costs as well as the money lost on the hedge.

    Alternatively, they just may be smarter than the guys I work with.
    #10     Jan 16, 2007