Bad week for me

I've been trading stock options mostly with days to expo. When I think I'm sure w/divergence, and don't hedge, I lose, divergence fails. When I try to trade safe and hedge, the stock goes sideways. When I study too many issues and indicators, I miss huge gap moves that could have made thousands. I know, hind sight. I guess better to hedge and lose than to be wrong and watch hundreds and thousands slip the other way. Then again you could go broke if nothing moves all the time either.

Edited by CLK, 22 July 2011 - 03:04 PM.

I know that feeling. I count the profits at the end of the week as well. My wife wants an update sometimes in the middle of the week, there is no way I reveal any P/L in the middle of the week. I have been up 3% this week till yesterday. But, since I fingered with options, I lost 1% today and as a result, I am only up 2% this week. I was doing silly silly amatuer and basic mistakes today and I realized I need a break for my mind to relax and become clean. I closed all positions which means I will look for set ups on Monday for the next week. Sometimes rest will do a world of good to me. Have a good next week, CLK!

I don’t remember which great NBA player coach Don Nelson was talking about, but that player's performance was the key to a critical victory after an emotional overtime loss the night before. Don Nelson told a TV reporter that player had the "worst memory" of any players that he had ever coached. He was very impressed with how quickly that player could let go of a tough loss like that and move on to the next game as though that had never happened.

Edited by TechMan, 22 July 2011 - 04:18 PM.

I've been trading stock options mostly with days to expo. When I think I'm sure w/divergence,
and don't hedge, I lose, divergence fails. When I try to trade safe and hedge, the stock goes sideways.
When I study too many issues and indicators, I miss huge gap moves that could have made thousands.
I know, hind sight. I guess better to hedge and lose than to be wrong and watch hundreds and thousands
slip the other way. Then again you could go broke if nothing moves all the time either.

Do you ever make money trading options?

I used to trade options and never made money but then I found a perfect solution.

It may sound unlikely but of all the traders I have met, as a class, option traders are the most consistent at making money. Most of these traders are staying away from outright long call or put positions. They employ a combination of techniques, mainly option spreads and are mostly net short options, earning premium. Trading options if done correctly is an intricate business but they are built in characteristics of options that, if properly exploited, can make trading a high probability winning practice. The following is a description of what I think of my bread and butter option trades. I am basically a directional swing trader but to keep myself from taking unnecessary outright positions I keep myself busy by selling naked short calls or puts on active ETF's ETN's when it looks like a swing is turning back with the trend. At times doing same with short call or put spreads. This fits my personality profile, I am always trading but not carrying large outright positions. I am staying away from shorting options on individual stocks because of the possible single catastrophic event (for the trader short options)risk. The short option positions or short option spreads I am placing are in the opposite direction of the expected move at least a few months out where there is still plenty of premium. For these to be successful all one needs is to figure out where the market will not go in the prescribed time and get involved only if the premiums are relatively bloated. If the trend does not resume but retraces for a couple of more days I may suffer a bit. Occasionally the vehicle settles in to a perfect configuration to take an outright position. Because I assess more or less correctly when a counter trend move exhausts itself (that does not mean it snaps back necessarily, it may linger for a while) I almost always make money on these trades. As the market is going through it's gyrations there are opportunities to work the position by adding or subtracting from it and while the options are for 2-8 month duration I am out of the positions within the first favorable swing and look elsewhere where the conditions are optimal. My favorite used to be KOL when it was basing and in the last year UNG. I actually like higher priced active ETF's where the commission to premium ratio is better like IWM, EEM, EWZ,TBT, SLV, GLD, OIL etc. These days I have positions in two or more vehicles at a time. Aren't there any loosing trades? Of course they are, but at any hint of trouble I liquidate or alter the position. More then not gains from positions on unrelated other ETF's make up for some or all of the loss. It may sound strange, or it's just a personality quirk, because I have money rolling in fairly consistently I am not as eager as I used to be to swing from the fences with outsized long or short positions. There is tons of info on options trading, most of it is free. The CBOE and the Options Industry Council sites and some others like Bernie Schaeffer's are amazing. There is a very talented young fellow called Steven Pace who has a one hour video on each Sunday on his Blog discussing the market and how he would tackle it with options. Regards, F&D

Edited by flyers&divers, 23 July 2011 - 10:07 PM.