There are two strategies I am leaning and want to become better at. They are Strangles and Straddles…. I have paper traded and used them during earnings. I know they only work when there is big movement and that money is left on the table. However, my goal is about $500 a trade and it seems to work. The other strategies I may learn later but I want to learn one technique well. The other stuff confuses me.. Also I trade with in my IRA and don’t want to sell puts and calls.
i have a list of parameters for the stocks and use Optionslam.com. Can you help me learn this and then I may decide to go more into the learning such as how the Greeks work..I’m picking more up but it isn’t quite in the memory banks, and clear yet.
would like your input…I did start out with Better Trades about 4 years ago and learned from them to learn a number one strategy well and possibly a second..this made sense as I get overwhlmed otherwise.
Thanks for your time,
1) I agree that honing in on one (or two) strategies is a winning approach. I hope that you recognize that it is not quite so easy. When learning a strategy, it may turn out to be inappropriate for you. It is not always easy to recognize that in advance.
That means you have to study and learn another. I hope that is not overwhelming because it only requires working on one specific idea at a time.
2) When you say ‘straddles and strangles’ I understand (from the rest of your message) that you are referring to BUYING straddles and strangles. Be aware that many players prefer to take the other side and sell straddles and strangles.
Trading these puppies during earnings season is an excellent idea. However, you have to know that many other people like to do the same and option prices are pumped at those times. So you have two choices: pay the high prices and hope for a big stock move; or buy early, hoping that IV will rise enough to offset time decay. If you choose the latter course, there is a chance than the stock will move before earnings – by enough to provide an early profit.
3) Forget about leaving money on the table. If you seek perfection when trading I guarantee that you will lose all your money. The game is risk management. That means knowing when to accept a loss and give up on a trade. It also means knowing when to walk away with a good-sized profit, even if more profit is possible.And it means knowing when risk has become too high and that the position must be adjusted (or closed).
The bottom line is that it is not enough to adopt a strategy, it is imperative to understand how to manage risk when trading that strategy.
4) $500 per trade is 100% meaningless. How much money to you plan to invest in each trade in an effort to earn that $500? That number is 100% meaningful.
5) Do you know how to pick your stocks? Do you have any data on past performance? If we can work together, I’d want to know your parameters. I know nothing of Better Trades other than they seem to concentrate on stock, and not options, education. And I see that they are not inexpensive.
6) You must have a rudimentary idea of how the Greeks work. But it is not difficult. The Greeks simple MEASURE RISK so that you have a decent understand of what you have to gain or lose. Do not be afraid of the Greeks.
7) So, can I help you learn?
Here’s is what I can do. I would want you to go through my book or video course (no extra charge for Options for Rookies Members). You will not be interested in learning everything in the course. But the beginning lessons are important for you to understand how options work. It is much easier to trade and manage a strategy when you understand options. I do not believe in skipping over that material.
Then, ask questions as you go along. Be sure the information is clear. If you are in a rush to skip ahead, you can do so. You will be able to make your trades. But it is impossible to know what tidbits were overlooked – and one of which could be quite beneficial.
I admit to not being able to know which stocks will make the desired moves. Thus, when it comes to picking stocks, you would have to be on your own. I can discuss your parameters and perhaps suggest others to add to the list.
I confess that my heart is in selling option premium and not buying. It is my belief that option buyers face enormous odds, despite the possibility of an occasional BIG win. I can try to help you recognize the importance of discipline and managing risk. If you want to buy these strangles and hold until expiration, I will not be able to help. This is a strategy where getting ut of the trade is more important than entering into the trade.
These are VERY HIGH RISK methods. They may come with limited losses, but no one likes to lose anywhere near that limit.
8) If you want to sign up for Options for Rookies, go here. The cost is surprising low, but the quality is high. If you want private instruction, that is more costly, but probably still far less than Better Trade cost. I prefer to go through the Options for Rookies channel, but let me know if you want more information.
One more point. This is not a strategy for the rookie trader. Strangle/straddle buying requires the ability to understand risk/reward.
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