Journey to a Million with Options Trading - Page 4

Second trade is 420$ / 20 = 21$ profit a day. 21$*365=7665 7665/45000*100=~17% ROI Is this a good trade or a very good trade? How many and how often do opportunities like this arise in your experience?

Poker players are familiar with variance, who is to say this is your real profitability. Maybe you are sun running? What about longterm, more data points. How many trades in that docs total?

Also please an example or two on a losing trade. How do you manage risk and when to take a loss. Buying back in underlying or closing postion via options? Is there a difference?

Hi,

Bankroll management is very important. I am currently only employing ~20% of my available capital.

Let's say the stock fell to $80. I would take the long stock - which means I paid $92.87 per share. Having said that, if I bought the share, I would have paid $100, for a stock now worth $80. I would proceed to sell call options on the stock assigned to me to lower my cost basis.

The money to cover is about 20% of the value. i.e 94 * 5 * 100 * .2 = ~$9,400K (but I have portfolio margin, which makes it about 5K).
I only trade my personal savings (grind my days as an accountant).

I would trade only credit/debit spreads on a smaller account OR trade cheaper stocks, I would not trade AAPL the way I did unless you had >100K (on portfolio margin). i.e position size <5% of account.
You should never buy a call OR put by itself just to bet direction (you will be bleed money).

Credit/Debit call/put spreads on things like YHOO, FXI, EWZ would make sense on smaller accounts OR if you want to trade naked puts things like RSX, RIG, USO might make sense depending market conditions. I was trading a small account all of last year, only scaled up early January this year.

Be realistic with earnings % on capital. Bank roll required really depends on the brokers commission. If you are a U.S citizen or can get access to TDAmeritrade OR Interactive Brokers with margin (~$1.50 per contract with no minimum), you can start trading options with a capital as low as 3K (but stick to credit/debit spreads or puts on cheap liquid stocks), but if you are unlucky and can only get etrade (~$10 flat rate + 70 cents or so per contract), you really need a 20-30K account if you are going to practice good bankroll management - yeah it sucks.

On March 13 2016 11:31 cariadon wrote: Basically on your 45k in the second trade locked up for ~20 days you make 420$. In poker terms you play 100nl with 45k and make 4.2 buyins in 20 days. Why is this attractive for poker players? What are some of the more interesting trades during this period excluding futures?

5K locked up on portfolio margin account or 10K on normal account (first trade was an overnight trade, so 1 day). Yes 4.2 buyins on 100NL or 8.4 buyins on 50NL. But that trade takes less than 5-10 minutes to put on and off. I dont know how long it takes to make that 4.2 to 8.4 buy-in in poker /

On March 13 2016 11:40 cariadon wrote: Second trade is 420$ / 20 = 21$ profit a day. 21$*365=7665 7665/45000*100=~17% ROI Is this a good trade or a very good trade? How many and how often do opportunities like this arise in your experience? Poker players are familiar with variance, who is to say this is your real profitability. Maybe you are sun running? What about longterm, more data points. How many trades in that docs total? Also please an example or two on a losing trade. How do you manage risk and when to take a loss. Buying back in underlying or closing postion via options? Is there a difference?

I would not call those good trades... only average. On average, you should be expecting to buy back what you sold out at 50% value at about 20 days. There is always opportunity... you would employ different strategies for different environments.
I was proving concept/practising on a much smaller account all of last year - full year was up 30% (and paid just as much in commission - I'm not u.s citizen and was stuck with etrade o_o... found loophole now using IB). About 200 completed trades (in & out) on that document.

The best way to manage risk is to trade small, and spread your capital over multiple products/positions. But yes there are many ways to defend a position, that will take a while to explain ... best to watch Good Trade Bad Trade on Tasty Trades as they provide a number of examples. But yes, I've taken losses (on the document). I'd guess 20-25% were losing positions, as that's the probability of success I choose when entering trades. Some I defended (by rolling down calls) Or selling calls on assigned stock, some I did not.

I don't believe I'm just on a 'heater', as I spent all over last year proving concept. But I'll update my results in another 2-3 months =).

Whats your edge? So you sell 'enter xyz here' at bad rates to others less experienced?

Is the money coming from other everyday traders just as yourself or you betting against banks and other big companies? Or we just after the 'fish' who throw darts to choose stocks?

You sell a put for AAPL @ strike 94$. This means someone buys the option to sell AAPL shares in the future for the price of 94$. You make money from the options premium if the stock doesn't fall a lot below 94$ and the other party makes money when the stock falls considerably below 94$ or he protects his longterm stock position with the option of selling his shares at a price of 94$ if/when the stock falls considerably below 94$. It can be a good trade for both.

Your edge is timing your trade and understanding the fundamentals and/or news better. Who is stopping you from following Berkshire for example. It is public info what companies they are holding. It is hard to determine "fish" in the stockmarket. It is possible, however, to determine huge differences in a companies present valuation and its "true valuation (or fair valuation)" Some great companies are undervalued and some shit companies are overvalued.

According to this guy efficient markets "simply isn't true" and I believe him (he has receipts to back it up).

I think it's possible someone that is smart, has good intuition, and puts in the work like hsfe is winning is legit imo but he probably worked really hard for it and it took alot of adrenaline, work etc.

I'd imagine stuff like AlphaGo, pokerbots, etc should be a reminder that advances in machine/deep learning is very big thing in current events. Funds like Renaissance I guess will get better / increase in quantity and probaby will make things tougher and markets more and more efficient so it's possible that he may have some edge now but just like poker / dfs everything else may have a limited shelf life.

On March 13 2016 20:57 JohnnyBologna wrote: Whats your edge? So you sell 'enter xyz here' at bad rates to others less experienced? Is the money coming from other everyday traders just as yourself or you betting against banks and other big companies? Or we just after the 'fish' who throw darts to choose stocks?

Johnny, you are thinking too deep. In liquid markets, it does not matter who the counter party is. It's not about "you" up against "X party". Market makers are paid by exchanges to make a market. And It's not always about "you lose" and "they gain". They have a big portfolio of products which we can't even imagine... and sometimes it not always about only entering winning trades, but more so about hedging risk or managing resources.

e.g For argument sake, lets assume that "selling puts" is a winning strategy.... then why on earth would you by a further out of the money put to create a credit put spread... but that's because you are managing your capital even though you know that buying puts in the long run is a loss.

Or Lets take an insurance company. Why on earth would you buy insurance, if you know in the long run, the insurance companies are making money?

Your edge, is your freedom... you are not tied by regulation, not limited to one direction, you have more freedom in being picky about your trades etc which large corporations don't necessarily have.

To add to what hhse said, many funds are "long only" which means they can bet on the upside of instruments and not downside (shorting).

There was a fund of mathematicians that went bust in glorious fashion aswell. Can't recall, i might look it up tomorrow.

On March 14 2016 22:15 cariadon wrote: There was a fund of mathematicians that went bust in glorious fashion aswell. Can't recall, i might look it up tomorrow.

Most likely you're looking for: LTCM https://en.wikipedia.org/wiki/Long-Term_Capital_Management

Waiting Until You Are Right...
Markets move up and down ... now imagine constantly closing losing trades or riding winners and only closing them, once they become losers? Sounds crazy right... but it is not far from reality.
Here's an idea... how about waiting until you are right and taking your winners. But wait, that would mean that we 'would lose' substantially less and win more? .... <INSERT LIGHT BULB EMOTICON>

Waiting until you are right... How?
Whether it be with poker, or whether it be with investments, there have been times in the past where I've punched above my weight. As a result, due to unavoidable variance, I've been forced off tables or out of positions earlier than I wanted. I lost the opportunity to play with "fishier" people (mind you there weren't many people fisher than I) and I lost the opportunity to wait for winning trades. The right trading size is driven as much by bankroll as it is by emotions. Until you've ridden those high volatility/variance days do not assume that a sound bankroll, means a sound soul. Staying small and finding the right trading size will help you stay in positions longer and allow you to wait for winners...

We all know about the time value of money. Not all of us can afford the luxury of 'locking away' capital and waiting until we are right. We could be using the money instead, to pay down our mortgage, collect interest from bank or to make money or pay debt elsewhere. But the thing is, you don't need to 'lock away' your money for free in the markets. There are more strategies than buying or selling 'vanilla' futures or stocks. You can accompany these strategies with short premium in put/call options or options on futures and get paid to wait.

Markets move up and down... stay small ... get paid to wait ... and close winning trades. Simple concepts, but concepts some people choose to ignore.

i have a buddy from vancouver whos made a million doing this, its his mainstay and he grinds poker @wsop in summers

I'm a first time investor and I was wondering if it is possible to determine the theta-decay of a stock based on real world events. What should I be looking for?

So I have some money I'd like to lose and never see again. This sounds like the place that could make this dream tru...The OP sounds like someone who has a past criminal record or other shady past and is now trying to start their next fail-proof venture.

On May 18 2016 21:27 shootair wrote: So I have some money I'd like to lose and never see again. This sounds like the place that could make this dream tru...The OP sounds like someone who has a past criminal record or other shady past and is now trying to start their next fail-proof venture.

lol. I don't know how I can make the above happen, when I'm not selling any products or service.

On May 19 2016 03:25 hhse wrote: Show nested quote + On May 18 2016 21:27 shootair wrote: So I have some money I'd like to lose and never see again. This sounds like the place that could make this dream tru...The OP sounds like someone who has a past criminal record or other shady past and is now trying to start their next fail-proof venture. lol. I don't know how I can make the above happen, when I'm not selling any products or service.

Oh ok. What's your education and resume?

Was just introducing resources that I thought was interesting and useful.

Degree in Accounting + CPA, worked in audit->management accounting-> commercial manager ... but irrelevant to investing.

About 3000 trades in options & futures year to date. Up just over 40% YTD on 6 figure account. On 2nd year of trading. 2 month in on sabbatical to focus on investing.

On May 19 2016 18:05 hhse wrote: Was just introducing resources that I thought was interesting and useful. Degree in Accounting + CPA, worked in audit->management accounting-> commercial manager ... but irrelevant to investing. About 3000 trades in options & futures year to date. Up just over 40% YTD on 6 figure account. On 2nd year of trading. 2 month in on sabbatical to focus on investing.

lets us know when you're a millionaire

reading this from the other side is incredibly funny. some of you present really good arguments about how to look at trading and how to look at returns.

leveraged trading is difficult and options even more so. the more complex the product the more complex the risk.

that being said, i definitely don't believe in efficient markets. the markets are made of people and while they are generally "efficient" on the whole there are usually a lot of opportunities available.