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Let's Trade Options

  • #4,481
  • Edited 12:46am Aug 18, 2014 12:29am | Edited 12:46am
Quoting The Fool
What do you think? What's the best way to make consistent gains? Selling premium ala Karen SuperTrader style? Trading the weeklies? Anybody with any opinions, please chime in.... {file}
Hey TF,

You know my trading style and I consistently make anywhere from about 3 -7% per month. The 3% is during the low vol months and the 7% is when there has been higher vols (predominately vol spikes thereby increasing premium followed by a short contraction after). I haven't had a loosing month since using this trading method. I've done similar modelling in excel with various performance scenarios and it helps with setting and achieving monthly targets - Always a good thing to have goals and targets.

I recall from the Karen Supertrader videos (I think the last one) that her performance was around 27% profit last year (which was a low vol 'melt-up' year). During the higher vol years I think she was somewhere around 50% profit annually. I'm sure there are other trading methods for options which can net a higher profit but I'm certain they have a lower probability of making a profit and require more risk......
  • #4,482
  • Aug 18, 2014 1:27am Aug 18, 2014 1:27am
Hey TF, thanks for answers regarding analytics... I however do not like using excel for this, as i usually manage to mess it up in short while... After checking out several vids, i really like option net explorer (ONE). See video here https://m.youtube.com/watch?v=fhDXoc3KoQc - its a long one but do ff thru it for an overall feeling. This sw costs around 500 gbp per year. From cost perspective i'd rather use excel but this looks so much better.

optionsVue is similar, but even more powerful i think, at 85usd per month or 850/year... I am not sure if it can send trades directly to IB as ONE can, but it supports futures and much more...

I've checked dough.com aand i love it, but currently it only works with ToS.

Re options analytics I also liked tradestation and esignal options analytix - but both come at much higher monthly cost...

so, fellow IBers - how do you thread?
  • #4,483
  • Aug 18, 2014 1:38am Aug 18, 2014 1:38am
I am just starting, so no track record yet. But i am looking to grow my 2k acct faster than 10% monthly,but at same time protect it from big drawdowns and losses... I WOULD love to see your strategies, and get rules for them, so I can try them myself in manual backtesting. Besides verticals and plain long puts/calls I am not yet sure which strategies would work on my small margin space... And hearing that IB is very margin strict, makes this even more important...
  • #4,484
  • Aug 18, 2014 1:51am Aug 18, 2014 1:51am
Quoting njr
{quote} Hey TF, You know my trading style and I consistently make anywhere from about 3 -7% per month........ I recall from the Karen Supertrader videos (I think the last one) that her performance was around 27% profit last year (which was a low vol 'melt-up' year). During the higher vol years I think she was somewhere around 50% profit annually.......
Well, you, sir, are a true stud in my book. I thank you most sincerely for gracing the pages of this thread and inspiring us with your lofty example. Karen getting 30-50% per year on a $100mio bankroll is amazing, too, even considering she has 6 or so other full-time traders helping her carry that load.

Do you track your performance rigorously, keeping tabs on Sharpe ratio, etc, etc? Euan Sinclair has a good chapter on trading performance assessemnt in his "Volatility Trading" that I recommend to anyone rading...

My goal for the next months is to settle down into some consistently profitable trading patterns that I can take forward with confidence at larger scale. I am probably just going to be doing spreads on the index etf's and maybe GLD and a few other very liquid names.

Gold and oil slipping overnight, US index futures all green. If there are no worldwide plagues or wars breaking out this week then I'd bet we see a positive week for the US markets. The Jackson Hole buzz usually puts the bears to sleep for a while...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,485
  • Aug 18, 2014 2:02am Aug 18, 2014 2:02am
Quoting weirdgod
Hey TF, thanks for answers regarding analytics... I however do not like using excel for this, as i usually manage to mess it up in short while... After checking out several vids, i really like option net explorer (ONE).
Most of us could afford to pay for the canned options analysis software. You may get it and use it for a while and discover that you don't really need it, or that you can't do without it - for something like $85/month it might be worth trying it out for a few months just to see.

I don't really think you need software to model the simpler trades, long calls and puts, etc, certainly not. But if you want to do spreads, especially multi-leg and diagonalized things, then it helps to model the various risks and the software would be worthwhile.

I wanted to learn to do VBA so putting together my own tools is a good excuse to dive into that.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,486
  • Aug 18, 2014 2:42am Aug 18, 2014 2:42am
JC makes a good point about momentum stock behavior right after monthly opex...

http://www.simpleroptions.com/public...ba349c4cd67837
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,487
  • Aug 18, 2014 2:55am Aug 18, 2014 2:55am
Quoting The Fool
{quote} Most of us could afford to pay for the canned options analysis software. You may get it and use it for a while and discover that you don't really need it, or that you can't do without it - for something like $85/month it might be worth trying it out for a few months just to see. I don't really think you need software to model the simpler trades, long calls and puts, etc, certainly not. But if you want to do spreads, especially multi-leg and diagonalized things, then it helps to model the various risks and the software would be worthwhile....

I intend to use it mostly for adjustments, where at 2+ legged options, it quickly becomes too complex to do it wo/ graphs... And still i think backtesting is awesome, especially when trying out new strategies... If I dont find better alternative I'll try it for a few months, and then decide if its valuable enough for me...
  • #4,488
  • Aug 18, 2014 5:22am Aug 18, 2014 5:22am
Quoting The Fool
... Now I would love to be able to get a reliable 4% per month!
There is your goal. And it is a good one.

Quoting The Fool
I know, I know, what you may be able to do in a $50k account is likely a lot different than what you may do in a $500k or $5 mio account.
Yep, because traders tend to lower their risks when accounts gets bigger. We should allways pay attention to levels, points, pips, whatever, not on the money... but easier said than done, because everyone is allways calculating P/L even when the platform is minimized

Quoting The Fool
Do you keep a trading plan? I am revamping mine. Setting a long-term goal something like the above is what I need to do now.
Same thing with me. My trading plan is basically list of trades that I am likely to do, such as speads and ICs, and from recently naked sells, then ER's plays which are going to be IC's like 90% of all tries, and ocasionally long puts or calls on weeklies. It is just a v1.0 The BIG plan is to make profits 6 months in a row and then to pour more money in it and trade bigger size lots.

Quoting The Fool
Heretofore my options trading results have been erratic. Double digit gains one month & double digit losses the next.
I am familliar with that. Money magament is very important, allways to have simillar size positions. I had a good July, +7%, but I dont now how my August will be, I am only about +1.5% so far (on closed trades... I have 6 open now, and I dont like some of them... especially one that is not an option trade at all, but I placed it on that acc... silly me, got pulled in bear trap on NQ CFDs... what a jackass)

Quoting The Fool
Selling premium ala Karen SuperTrader style? Trading the weeklies? Anybody with any opinions, please chime in...
Selling premium is much more easier with portfolio acc size. As Liz and Jenny from tastytrade says - "trade small, trade often"... it starts to make sence to me. At first my thoughts were - "well of course that the former market makers would say that... after all they want you to open a acc on ToS and to trade all the time to make commissions"... and that true or not is the only way to make money when you sell premium. You have to trade often.

Trading long weekly options is the only option trade that can make you a lot of money BUT and this is a big BUT...
1) you have to realy now how yours few selected underlyings bread... really to know them
2) be a really good tech analyst
3) have a big cojones...

I know that trading spreads and ICs which is a good strategy is BORING for most of people. Then you MUST think about commisions, because they will eat a big chunk of your profits, then wait, then blah blah blah.... But there is absolutely NOTHING glamurous in being a trader, the truth is just the oposite. It is difficult, boring, and lonely. Bassicaly same thing over and over again. Trade mechanically like they say on tastytrade. But that is the only way to make money consistently. If you can do that, than you WILL be rewarded. I am not on that level after 10 years... still cathing myself looking at my reflection in the mirror, asking "the other guy" - WTF did you enter that stupid trade?
Hope is dangerous in this game.
  • #4,489
  • Aug 18, 2014 5:36am Aug 18, 2014 5:36am
Quoting The Fool
JC makes a good point about momentum stock behavior right after monthly opex... http://www.simpleroptions.com/public...ba349c4cd67837
I tend to agree with him. If we "sence" a big green day today... it can begin with a little dip at the open and then strong upmove. I will consider a long weekly calls on QQQ, puts on VXX, or calls on TSLA... I like Wednesday and Thursday the most for weeklies. And if you are right about Jackson Hole, then bullish put spreads may be the way to go on indexes and most stocks. I still cant understand some of them, like LNKD for example.... incredible run.
Hope is dangerous in this game.
  • #4,490
  • Aug 18, 2014 6:04am Aug 18, 2014 6:04am
S.D. / T.F.

Trading long weekly options is the only option trade that can make you a lot of money BUT and this is a big BUT...
1) you have to realy now how yours few selected underlyings bread... really to know them
2) be a really good tech analyst
3) have a big cojones...


The above 2 is reason I have adopted OTM butterflies, we have the ability to go out about 3 weeks and make good consistent returns giving you ample room to best break even, I used to do lots of weekly to daily expiration trades looking for those large moves. although not always successful it taught and helped me in my tech analysis. Even when I lost a couple days later it went the direction I was anticipating. with this new strategy of OTM butts I now have time where as before I had to be right on time. Find what suits you best and keep working on it
  • #4,491
  • Aug 18, 2014 6:41am Aug 18, 2014 6:41am
Quoting Cecil Gee
S.D. / T.F. {quote} Trading long weekly options is the only option trade that can make you a lot of money BUT and this is a big BUT... 1) you have to realy now how yours few selected underlyings bread... really to know them 2) be a really good tech analyst 3) have a big cojones... The above 2 is reason I have adopted OTM butterflies, we have the ability to go out about 3 weeks and make good consistent returns giving you ample room to best break even, I used to do lots of weekly to daily expiration trades looking for those large moves. although not...
Hi Cecil.
Yes, you must be right on time with longs on weeklies, both on entry and exit. A long time ago, one UK trader said to me shortly after the two of us entered a trade: "I dont have to live every point... Going to walk... (meaning - we have our SL and TP and let the trade go)". But you cant go to the park with your longs on weeklies, because the clock is ticking.

Re OTM butterflies, I like the concept. Could be excellent directional play.
One of the questions is how far OTM is best to go? That again depends of the U/L, I asume...
What expiration to choose? 2, 3, 4 weeks? It will come in time.
Hope is dangerous in this game.
  • #4,492
  • Aug 18, 2014 6:59am Aug 18, 2014 6:59am
Quoting StrayDog
{quote} Hi Cecil. Yes, you must be right on time with longs on weeklies, both on entry and exit. A long time ago, one UK trader said to me shortly after the two of us entered a trade: "I dont have to live every point... Going to walk... (meaning - we have our SL and TP and let the trade go)". But you cant go to the park with your longs on weeklies, because the clock is ticking. Re OTM butterflies, I like the concept. Could be excellent directional play. One of the questions is how far OTM is best to go? That again depends of the U/L, I asume......
2 weeks is generally good from entry/ 3 weeks is a little safer and as you know profit varies as from open to closure, for me 2 weeks is a good rule
  • #4,493
  • Aug 18, 2014 12:25pm Aug 18, 2014 12:25pm
bull market unstoppable, SnP new high just 20 pts away. CB head (Yellen, Draghi) dovish onslaught on tap, could float us there this week, no problem. I am eyeing 9/20 SSO $121 short and UVXY $22 short legs with concern. The latter I'd bet will be ok, SSO maybe not...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,494
  • Aug 18, 2014 12:25pm Aug 18, 2014 12:25pm
Quoting The Fool
{quote} Well, you, sir, are a true stud in my book. I thank you most sincerely for gracing the pages of this thread and inspiring us with your lofty example. Karen getting 30-50% per year on a $100mio bankroll is amazing, too, even considering she has 6 or so other full-time traders helping her carry that load. Do you track your performance rigorously, keeping tabs on Sharpe ratio, etc, etc? Euan Sinclair has a good chapter on trading performance assessemnt in his "Volatility Trading" that I recommend to anyone rading... My goal for the next months...
Hey TF,

Lol - Thanks for the compliment but I certainly wasn't fishing for one. Rather, I don't mind sharing my performance it as it is something I wanted to benchmark and compare when I first started trading....I had no benchmark of what was 'good %' performance and 'bad %' performance. Nah, I don't have anything fancy for tracking performance, basically it's how much P/L made as a percent of my portfolio in a month. Yeah, Karen and her performance are certainly an inspiration! If the rest of this week is anything like today has been then we'll have an amazing bull week!
  • #4,495
  • Aug 18, 2014 11:03pm Aug 18, 2014 11:03pm
Quoting njr
{quote} Hey TF, Lol - Thanks for the compliment but I certainly wasn't fishing for one. Rather, I don't mind sharing my performance it as it is something I wanted to benchmark and compare when I first started trading....I had no benchmark of what was 'good %' performance and 'bad %' performance. Nah, I don't have anything fancy for tracking performance, basically it's how much P/L made as a percent of my portfolio in a month.
OK, well, lemme ax you this: do you have any set trading rules you live by? For instance, max drawdown rules? What max percent of your trading equity will you put at risk? Will you roll out of a short position at a given delta threshold?

I am in nothing new. Still don't have much free margin but I might be looking for a rejection off of $1,99x if/when the SnP gets there, my gosh maybe this week. Will use SSO in a short-term play if that idea pans out.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,496
  • Aug 18, 2014 11:31pm Aug 18, 2014 11:31pm
Quoting The Fool
{quote} OK, well, lemme ax you this: do you have any set trading rules you live by? For instance, max drawdown rules? What max percent of your trading equity will you put at risk? Will you roll out of a short position at a given delta threshold? I am in nothing new. Still don't have much free margin but I might be looking for a rejection off of $1,99x if/when the SnP gets there, my gosh maybe this week. Will use SSO in a short-term play if that idea pans out.
Some 'generic rules' I use.....

Max drawdown - I don't like anything above 5%
Max margin utilization - around 70%
Roll at a delta around - 0.25 to 0.35 but this depends on if I think there will be further risk of being tested
Sell puts on a down day and calls on the up days

Not much else apart from that....
  • #4,497
  • Aug 19, 2014 1:12am Aug 19, 2014 1:12am
Quoting njr
{quote} Some 'generic rules' I use..... Max drawdown - I don't like anything above 5% Max margin utilization - around 70% Roll at a delta around - 0.25 to 0.35 but this depends on if I think there will be further risk of being tested Sell puts on a down day and calls on the up days Not much else apart from that....
nice and simple, thanks njr.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,498
  • Aug 19, 2014 7:01am Aug 19, 2014 7:01am
Quoting Cecil Gee
{quote} USD although has gone higher than the price quoted it has struggled to close above on any day, it needs to close above 81.64 ish to take that euro down deep deep
trading above USD 81.64/ like to see if we're above that after FOMC minutes and weekend/ already we're edging closer to 2000 on s/p before the data with it looks like two strong days in the indicies
  • #4,499
  • Aug 19, 2014 7:27am Aug 19, 2014 7:27am
Quoting njr
{quote} Some 'generic rules' I use..... Max drawdown - I don't like anything above 5% Max margin utilization - around 70% Roll at a delta around - 0.25 to 0.35 but this depends on if I think there will be further risk of being tested Sell puts on a down day and calls on the up days Not much else apart from that....
Hi njr.
How far OTM do you go? On 1 SD or more?
I have seen that you mostly sell ES mini options and YEN futures options, do you trade anything else?
Hope is dangerous in this game.
  • #4,500
  • Aug 19, 2014 11:21am Aug 19, 2014 11:21am
Quoting StrayDog
{quote} Hi njr. How far OTM do you go? On 1 SD or more? I have seen that you mostly sell ES mini options and YEN futures options, do you trade anything else?
Hey SD,

Generally 1.5+ SD OTM. I've previously traded various asset classes such as spot FX, CFDs, Stocks, Commodities, etc but I now only trade the OTM options mainly on ES mini, YEN futures, occasionally SPX...
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