I've found that hedging options with options does not work, maybe spreads but I've not gotten into those yet.
Currently I'm hedging options with 3x ETFs or visa versa. It requires more money than I have to do it right
like I want, and the 3 day settlement gets in the way big time, but it is working better, hedging options
with options, you lose time on both.
I understand setting a $500 stop on a $5000 futures contract, but unless one is trading deep in the money(the leverage
is lost doing that) holding overnight with a little time decay and $1000 option position can realize a 50% drawdown.
Extremely difficult to recover from that.
Open a margin account, but don't trade on margin. It is not possible to trade on a cash account with such wild fluctuations. I hope you have that control when you are looking at margin, atleast you are experienced enough. You might be saying evil thoughts towards margin,
but resist it. If urge can't be controlled, IMO, it is not good to be in the market.
I am very skeptical about trading futures with any account less than 150K. You could get a drawdown of as much as 500$ or 1000$, which only sounds apt for an account the size of ~ 150k$. And considering how they toss the futures up and down, the drawdowns can come within no time. I confess that I cannot control emotion of being depressed, when I see a loss of more than 1000$ on a single day or so. I have paper traded futures, but very well decided that trading futures is not for me. My paper account is at 100% gain, in 1 1/2 year - I have only done 15 - 20 round trips, all are short 2 - 3 day trades. But, my brain tells me that futures trading is not apt for my real money account. Sleep is another factor. I wish to sleep well and I know that is not possible with futures trading.
Edited by DrSP, 02 October 2011 - 10:16 AM.
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