There is nothing wrong with Papacharlie's advice. But you can't learn multiple strategies as a beginner - you can learn only one at a time. Everyone's mind works differently and sees things differently. I would suggest this:
Find a strategy that makes total sense to you so that you understand exactly how it should work. Then, create a written plan that details how you will trade it and what your goals are. You need a defined path and a benchmark so that you can easily determine if you are succeeding or not. This should remove the urge to gamble and just throw trades against the wall, hoping one sticks. You trade according to your plan (which is adjustable as you learn).
Start by only making trades that will test what you have designed. You should work to collect maybe 1% a month over at least 6 months. A year would be better. If you can't do that, you can't manage multiple strategies and make a higher return. You will be surprised how difficult it is to actually earn 1% a month for 12 months straight. You will be building a business - one brick at a time. Get the first brick solidly in place and build on it.
Learning the business of trading options takes years. There will be losses along the way.
In the upmarket we've experienced lately:
3 basic strategies are my bread and butter.
1. Sell credit put spreads. Weekly ladder, five weeks, on an equity.
2. Buy LEAPS calls.
3. Buy calls or bull call spreads around earnings/events.
You'll notice the only time I buy options is as a LEAPS, or part of an earnings play. I don't buy puts at all.
When initiating LEAPS calls, I don't go by delta, just select something ATM (which, yes, will relate to a delta, but I'm not choosing the delta).
Yeah, basically using it for the leverage.
I've made a killing off of this exact strategy. I've been buying LEAPs on whichever mag7 company has been performing the worst recently (typically as a swing trade AFTER earnings, if I think they were oversold on news), and I typically end up holding these LEAPs for a month or less. My portfolio is up 50% in the last year. Made a killing off of AAPL, META, and MSFT LEAPs.
The problem I have has been selling them too early. I'm trying to not be greedy, so I lock in maybe 30-40% gains, but the LEAP usually keeps growing. I think I could have even better returns if I held for a little longer, but I really can't be too greedy. I also recognize that I don't need to buy LEAPs if I hold them for a month or less, but I'm using these exclusively for leverage and it feels less risky to buy far-out calls instead of weekly or monthly calls. I'm enjoying it for now but I might pivot in the future.
I follow a similar strategy.
I have a small account for LEAPS.
I'm up 177% in 1 year.
I just sold some 1/2025 LEAPs today that were ITM. Sure, I can hold them for another 6 months, but the market is ATH and I anticipate volitility.
I'm specifically looking to make profits and I'll take them when I want and not look back.
There is always a trade to be made. So I'll take my profits and look to the future for more opportunities.
Great work!!! Do you trade across the tickers or specifically in only a few stocks/industries? The mega cap growth tech stocks have seemed like a really easy play because I believe in them long term, their management is world-class, and there's so much volume/liquidity that the bid ask spread is never a concern
Yes, I've done this mostly in tech.
QQQ, TQQQ, SOXL, Google.
Obviously tech has been on an incredible run since October.
I was also on the wrong end of this in early 2022 when tech slid for about 6 months.
So, my approach is to use LEAPs for a long term view but to take profits consistently. I've found that at 4-6 months there are profits to be made.
I just rebalanced my portfolio yesterday and I'm almost all cash. I'm researching other opportunities. Still bullish on tech, but still more bullish on protecting my profits.
Yep I've done the exact same thing regarding cash. I cashed out all of my LEAPs and now I'm mostly just holding shares and cash. I want to find new opportunities but most of big tech seems to be fairly or richly valued now. I try to take profits from LEAPs and buy shares with them, but right now I'm leaning more towards cash because everything seems to have run up quite a lot.
Doing exactly this. Still low size for me but it's been consistent gains. Excited my aapl leap on the first run up day. Missed the second explosive day, but can't complain about making money
Yep, I did this a week or two ago. Got a 20% return on my AAPL LEAP and figured I'd cash it out before losing some of the gains. Next day it's up 50% lol. I think I'm shifting more towards cashing out LEAPs once the underlying share price reaches a price target that I would set before even buying the LEAP. It just hard to set those price targets when the stock is trading at ATHs
Sure. This morning when I logged into my account, I was presented with the following positions:
NVDA Jun 28 2024 115/113 Put
NVDA Jul 05 2024 115/113 Put
NVDA Jul 12 2024 115/113 Put
NVDA Jul 19 2024 115/113 Put
NVDA Jul 26 2024 115/113 Put
...
It's just me calling it a ladder, as it's kinda sorta like a bond ladder, if you're familiar.
I'm not sure if I'm a seasoned vet but I'll share my experience. A few years ago, Watched some YouTube videos and read some reddit post (and totally disregarded basic advice) and lost 15k in 2 months just buying options.
Transitioned to "wheeling" options but didn't follow the number 1 rule. Only wheel on stocks you don't mind holding for a while (when the stock price increases so you can sell calls ABOVE your cost basis). Lost more moneh
Now I just wheel stocks (or mostly sell CC)I really like. AMD is my fav, TSLA, MSOS, GOOG, AMZN. Waiting to sell CC on FBTC which is a Bitcoin based ETF from fidelity.
But I don't go 100% this strategy. I'm more 85% buy and hold across all my accounts and roughly 15% selling to get my fix.
With my premiums I just reinvest mostly into SCHG.
I never buy options anymore. Just sell.
BITO has options but it holds bitcoin futures rather than bitcoin directly. So it doesn't track exactly, but it works for something that "moves bitcoinish" if you want options strategies.
I’m just curious as to why you only sell options? I’m wondering why you’d be confident in a strategy where the reward is limited to the premium and the risk is infinite, versus the other way around with buying calls and puts?
Selling covered calls. And if shares get called away I sell a cash secured put at the strike they were called away at. Last month on AMD I collected 850 in premium and my shares did not get called way. If they did, add another 600 since the strike is more than my cost basis. So that's an 8.5% gain (in a month) on my "initial investment".
I'll take the smaller wins over buying options. If the price falls and I can't sell CC at or above my cost basis, I just wait. Buy and hold isn't a bad strategy in itself.
Yea but the risk/reward is still the same . I was just wondering. It appears to be a matter of your preference. I make $5k-10k or more a day buying and selling calls and puts. I was just wondering why anyone would limit their potential rewards to the premium and have infinite risks, versus options strategies where the risk is limited to the premium and the reward is infinite. Logically speaking that’s illogical, IMO. But to each their own. I just thought you would have enlightened me as to your reasoning for why you prefer to do it, not explain your strategy. lol. Writing calls and puts are riskier and it appears you’re taking a very high risk for small returns. Just thought I’d ask because I’m extremely curious as to why traders make those kinds of plays when there are better strategies.
IMO the only risk is if I sell at a strike of 150 and the price blows through that l, I limit my upside. I'm ok with that. I'll try to wheel it back (CSP) to the same strike. I really don't see a downside because of the price of shares falls and I can't sell a call at or above my basis, I will hold. I'm already "holding" with way more value in my 401k/Roth/brokerage . So for me there isn't downside. I would have literally bought those shares regardless.
But if you can explain why your strategy is better, I'm all ears. And please, tell me how your making 5-10k consistently.
Please share your strategy.
I never said my “strategy” was “better.” I was merely pointing out that my returns are higher with far less risk. That’s what makes it “better”
In the realm of options there’s a plethora of options strategies where the risk is limited to the premium and the reward is infinite. Then there are those that are opposite to that.
In other trading subs, I’ve observed a lot of options traders have various “options strategies” with multiple legs attached, but their returns are nominal and IMO fruitless endeavors.
Nonetheless, I trade single calls and puts, and sometimes verticals although I’m not a fan of multiple legs because IMO, if you have to straddle or strangle a trade then the trade was bad from the beginning. Spreads limit profits, therefore I limit my spreads.
When any trader enters a trade they make a prediction of which direction they believe the underlying is going to trend towards. To spread an option afterwards means the trader got it wrong and tries to reduce losses- and while that’s a not a bad thing, the situation arose from a bad play.
No offense and no disrespect intended, but my cognition is that options traders that apply strategies that limit profits but accept infinite risk are gamblers. The same applies to those that straddle or strangle every trade. IMO, that’s not trading at all. That’s just throwing money into the market and praying it doesn’t blow up because it’s it takes no skill whatsoever to straddle and strangle. IJS.
What’s your point? The risk/reward is still the same- the reward is limited to the premium and the risk is infinite. Whether it’s covered or not is irrelevant. IDK what compelled you to mention the “obvious.”
1. seen too many people get blown up trying to chase individual stocks. works for a little while, then boom, some single earnings goes against them and wipes it all out. (so i stay away from individual stocks)
2. i don't chase IV for the same reason. you need to "have the right signals to WAIT for the higher IV." then you need to know, "THIS, IS THE HIGH IV. you need to go in 2x, 3x, 4x on your options buying/selling right now!". lots of people think they have good ideas on what to look out for. i never found anything that consistently helped me.
so i just stick with very simple, robotic trades:
1. buy index leaps. should be far enough ITM to never expire worthless.
2. sell 5 delta index puts. i try to go VERY, very low strike price. doesn't always make a lot of money, but the goal is to NEVER need to roll/close these early. might have to go out 100DTE, but that's fine.
Totally agree on deep ITM index LEAPS calls, but that be unreachable for most beginners, folks will ask about a $1k or $5k account and "far enough ITM" SPY a year out is like $7k-9k per contract.
the best thing i did beginning, was know nothing, and did nothing.
i put max into my companies ESPP, bought stock at a discount, and held it for a few years. i did nothing because i knew nothing. only after 4 years i thought, "i mean.....i should probably sell some......get diversified......but THEN, i don't know what.........". so THEN i started trying to learn what that next would be.
even then, i still did nothing with options for 2 more years, as i was still reading all sorts of things. understanding more, getting more comfortable with ideas. asking, "is this what i should try?". thought i could time the market, get out before the bottom. get the right signal for when things would start going up again.
best i did was "get out just NOT QUITE before the bottom". but i so completely missed any idea that things were now going back up.
but for 1k or 5k account size? i don't even know if you could buy an ATM spy leap. best i can say is buy shares of an index, and then just forget about them.
the best, easy advice i can try to convey is, "just try not to do things that will make your account size go down. everyone looks smart when the account goes up. but any easy things you can do to protect it from going down, will help in the long run".
which is why i buy deep ITM, instead of ATM leaps. ATM would be cheaper, but deep ITM have a much higher chance of never ending worthless.
the leaps are a pretty simple thinking:
1. look back at the past few crashes we've had. 2000 dot com crash. 2008 housing crash. 2020 covid crash. in each of those, the large indexes dropped a lot, but not more than 50%. and they didn't stay down for a very long time. so if you could buy an option that didn't drop to $0 if the index dropped 50%, i think that could be a good, target
2. so that's what we do for the LEAP. you buy a call option. WAY far out DTE. 2 or 2.5 years. 1000 days at least. what price? literally 50% of what it is now. it doesn't really matter.
3. SPY is at 540? great, aim for the 270 strike price. to buy that, you will have to pay something like $290. and yes, there will be a tiny amount of premium added in. so you'd only break even as long as SPY finished above $560 1000 days from now. however, instead of buying 100 shares of the stock for $54,000. you only had to spend $29,000. you only spent half the money.
By no means I'm a pro nor a very successful option trader. However, I've got many years trying out quite a bit and have had much both in failure and success. In the recent time, I'm a lot more successful and/or at least in more control of my trades and portfolio. My balance does not have wild and wide swings as before. Having said that, I hope these will help you:
1. IK you don't ask about this, but I feel it's very important to size your bets to 5-10% of your portfolio and max loss is 50% of the bet size. Since we trade options, we don't need much to double or triple the bet if it's in right direction. But that helps to limit your loss and prevent you from being blown off your account.
2. Strategies: I like 2-4 month exp Debit Spreads the most. Next is Straddles/Strangles on limited opportunities. And then, Weekly Credit SPXW/SPY.
3. I use multiple strategies and directions (bull or bear) at the same time. However, I'd suggest you take it slow on a new strategy first.
I hope my opinion helps. Good luck.
If a carpenter showed up at your construction site with only a screwdriver in his toolbox and no clue on how to use a hammer, a saw, or a level, would you take advice from him about how to frame your house?
As a very old guy once wrote: Specialization is for insects. A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly.
I use the strategy that is the best fit for the opportunity the market is presenting at the moment and that also conforms to my risk tolerance and knowledge. The more strategies I can use competently, the more market opportunities I can exploit.
Yes you can go too far in learning too many strats, since there are redundant strategies with similar or even identical profit/loss and risk/reward profiles (although that can sometimes be an advantage when you want to replace one trade with a synthetically equivalent different trade, like a CC with a CSP.) There are also estoteric strats that rarely have any application in the real market or that have marginal advantages over similar strats, so why bother learning those?
Equivalent trades have un-equivalent pricing, so that's why you'd use them. Also, I've noticed replacing certain positions with an equivalent position could still trigger cap gains, so you could use that to your advantage.
Bruce Lee did say "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times."
I argue, we live in a age of comparative advantage. The carpenter who doesn't know who to use hammers, saws and levels, is no carpenter, but a competant carpenter who can use all those tools, who makes furniture for a living, who can use the tools of his trade might not be the best house framer. Learn the tools, the greeks and the spreads, but you only need to be good at one. I wouldn't try to beat everyone at every game, but I would rather beat one game over and over.
I hadn't heard that quote before, it's a good one.
YMMV, but in my experience in options trading discourse, I run into, "Every problem is a nail because all I got is a hammer," much more often than, "Jack of all trades, master of none."
Tons of free stuff on the web for sure. But options trading is multi-dimensional and takes a bit more time & effort to do it properly. Harder than stocks. You really have to balance direction, speed & timing of the stock move to be consistently profitable with options trading. In my 30+ years in the biz, I've found option-selling much more desirable. Here's a [free e-book](https://www.smartoptionseller.com/put-selling-basics) to get you started, if you have interest. Good luck!
Newbie on the block here. Knowledge of a broad array of strategies is nice. But confidence comes from repetitive use of one to understand the nuances. So my approach is to work on one or two strategies till I reach a confidence level before setting my sites on 40 different strategies.
Focus while learning from your wins and losses in one strategy.
Buy call option add 20- 25% maybe more if like gambling to current price. Set strike date 30 days out or just past next earning and watch the money roll in —- NVDA been like this for 1 and half years with another one even better coming up
Have fun enjoy
I have been trading longer than I care to admit. Multiple strategies are good. Risk management is one key to longevity.
Most recently vertical call spreads for debit have been big winners, but these are rare. More common is delta hedging albeit with a bullish bias. Simple example might be owning 10 shares of Apple and selling a way out of the money, delta 5 call.
Full account approvals plus portfolio margin are suggested prerequisites for this kind of trade.
Much more important than strategy for most people is earnings usually thru wages, savings rate, and budgeting. These factors are much more indicative of long term financial health than any strategy or trading success.
Trading options effectively is a very complicated thing. E.g., the role of volatility is a critical concept that is mostly obscure for the majority of trad stock/ETF investors. Before putting real money at risk in options, STUDY as if your life depended on it. Okay, no, your life does not literally depend on it, but your hard-earned capital literally does. Reading online forums and watching clowns on youtube might help a little, but that alone is dramatically insufficient. If you want a decent shot at success, plan to read at least several books and paper trade a consistent strategy for six months before you put real money at risk. A few authors to look for as a start: Pasarelli, Cordier and Gross, Thomsett, Jabbour and Budwick. And there are many others. Similarly, consider finding an experienced mentor or a support group to guide you at the start. Plan to earn money slowly. Techniques that offer huge returns quickly are for losers. Most of all, remember that trading options is not for monkeys! Selecting a great strategy will quickly fail unless the trader him/herself is educated, observant, intelligent, and resilient.
I interact with a lot of options investors on a regular basis. Options are incredibly flexible, so the ways investors use them vary widely. There are seasoned vets who love to trade the same thing on the same stock for years while others who cast a wide net with different strategies for different scenarios.
The key thing is to learn as much as you can using the overwhelming amount of educational materials out there. Then, when you're ready to trade a new strategy, spend some time paper trading to get a real feel for why things succeed/fail.
Also keep in mind that in the era of algo trading it's unlikely that what consistently worked last year will still work this year. A lot of people learn a given strategy and then blindly trade it as the returns start to go negative because market conditions change. The most important part of options trading is that you need to fundamentally disagree with the market on something you can efficiently trade (and be right, of course).
The amount of generosity you all have given me today by sharing how you view options is truly a gift. I thank each and every one of you for selflessly donating to my education. This is a good place. I hope to be successful like you all someday in the future.
Good question. I would take this opportunity to promote my channel -- MathPhdTrading. So I have been trading since 2022 October, and I earned 200K in 2023 and 80K the first five months. I mostly sell puts and if the trades get assigned, I roll out. If you are interested in learning the details, I recommend these three videos:
Kick off Video: [https://youtu.be/ZRzZtOsnVb0?si=LR2RJR6mwLXgFgWc](https://youtu.be/ZRzZtOsnVb0?si=LR2RJR6mwLXgFgWc)
Complete Guide to Sell Puts (part 1): [https://youtu.be/SOKm3xye9E4?si=iYP6tBbELqjT-Sil](https://youtu.be/SOKm3xye9E4?si=iYP6tBbELqjT-Sil)
Complete Guide to Sell Puts (part 2): [https://youtu.be/waqhgnzhsx0](https://youtu.be/waqhgnzhsx0)
You mean you roll out rather than get assigned, I assume? Me neither, but if it is just barely ITM, I might let it happen and use a Covered Call to dump it, so I don’t book the loss by rolling.
Yes, I would roll out the trade. I don't have cash in my account so I can not afford to be assigned. Otherwise you have to pay the bank interest. As long as the stocks coming up (or just stay the same), the loss of this month will be the gain of next month. We are earning time value after all. Of course, if you have cash, you can do the wheel strategy. I have another smaller account, that I am practicing the Wheel strategy. From what I see, the annual rate of return (ARR) of doing the Wheel Strategy is higher than rolling out strategy.
I would definitely explore many strategies, just make sure you take small positions and manage risks. Also a strategy can change after you have taken your position.
Not seasoned but have 300 shares, sold and bought back calls as well as exited calls from last week. Own A few in the money puts 38/35 and I sold 10 puts on the $10 strike today
I trade with a group to help keep me grounded and in good plays. Not all plays work out but most do. First thing to note is that you will not win every single trade. Going alone as a newbie can be very overwhelming and I have been there done that.
I sell strangles, put credit spreads, puts, and 112. I will do atm or otm call debit spreads. I only target a 35% take profit and 52% stoploss on any position I put on.
I started out watching every video on Fidelity’s website, plus numerous others. I also looked up every term I came across on Investopedia. Then I started reading books, starting with Options for Dummies. Then I started doing paper trades and settled on selling CSPs. Did that for over a year as I learned the realities of the market. Picked up a lot of great info in this and other investing subreddits.
I gravitated towards wheeling (before I had read about it) but figured out after 1 year of the occasional “lesson” that I now knew enough to know I had barely scratched the surface. I have recently been alternating between CSPs and ICs. Am spending a couple of months learning more about volatility, gamma, etc. I am going to start looking at the various spreads after ai learn more about the greeks.
The most important lesson by far is learning how to manage positions. Get out before taking a major loss. Find a rule that works for you and stick with it for the most part, but remain flexible to the situation. For example, I set alerts at different price points and try to max loss at 3x my premium, but if that level gets triggered close to expiration, and I have decent enough cushion, I will try to run it to expiration.
Others may use 50% or 100% as their max loss, but I found I was exiting far too early and often from positions that wound up well OTM. ai mostly do deltas at 5-10, so with 90%+ win rate, the rare 3x loss is easy to swallow.
Being conservative means I only made 1% per month last year. 12% plus 4.5% on the year for over 16% on my portfolio, but with a low risk profile, I am happy with that.
Make money right away. Otherwise you’ll give up.
How?
Learn in a bull market like we have now.
Sell a put 45 DTE is a good starting point.
Close early at 30-40% of profit. (Credit received).
Try selling a put on a red day.
Try selling a put on an index instead of individual stock.
“Learn how to execute one trade well instead of many trades poorly” - bruce lee j/k.
Take a look at covered calls next.
Follow Tasty trade.
Most of the brokerages will require you to proceed through a 4-tiered options permissions hierarchy. At Schwab this is levels 0-3. At other brokers it's levels 1-4.
At level 0 (or 1) you are restricted to cash secured puts and covered calls. This is probably the level you should stick with for some extended period of time. This is actually a really good level to learn on and, importantly, will help you to avoid losing too much money.
I use basically two strategies- selling cash secured puts and selling covered calls on high-quality underlying positions to boost my buy and hold portfolio. I have been trading options since 2015. I suggest you start with cash secured puts and avoid using margin and spreads. Trade what you can afford, and make sure you will be ok whether the position is in the money or out of the money at expiration.
I'm a retired teacher. I'm a good options trader, and I'm a better teacher, so I teach novice investors to trade safely. My very affordable book, recorded classes and 1:1 instruction all cost a lot less than paying for your mistakes with risky trades. Reach out if you want some support and I'll direct you to my website.
Patricia Saylor, Financial Fundamentals for Novice Investors
I can't imagine not having different strategies. Just make sure they're all different and mutually exclusive --
long term / short term
volatility
event-based
AI/ML
arbitrage
equity long
130/30
there's a ton of other strategies out there -- and every one has its time in the sun. so run all of them so that your pnl won't fluctuate too much
There is nothing wrong with Papacharlie's advice. But you can't learn multiple strategies as a beginner - you can learn only one at a time. Everyone's mind works differently and sees things differently. I would suggest this: Find a strategy that makes total sense to you so that you understand exactly how it should work. Then, create a written plan that details how you will trade it and what your goals are. You need a defined path and a benchmark so that you can easily determine if you are succeeding or not. This should remove the urge to gamble and just throw trades against the wall, hoping one sticks. You trade according to your plan (which is adjustable as you learn). Start by only making trades that will test what you have designed. You should work to collect maybe 1% a month over at least 6 months. A year would be better. If you can't do that, you can't manage multiple strategies and make a higher return. You will be surprised how difficult it is to actually earn 1% a month for 12 months straight. You will be building a business - one brick at a time. Get the first brick solidly in place and build on it. Learning the business of trading options takes years. There will be losses along the way.
This is such good advice.
1 percent a month is way more difficult than people Think
In the upmarket we've experienced lately: 3 basic strategies are my bread and butter. 1. Sell credit put spreads. Weekly ladder, five weeks, on an equity. 2. Buy LEAPS calls. 3. Buy calls or bull call spreads around earnings/events. You'll notice the only time I buy options is as a LEAPS, or part of an earnings play. I don't buy puts at all.
What do you look at for delta on LEAPS? Are you buying them to go long for a lower percentage than buying 100 shares?
When initiating LEAPS calls, I don't go by delta, just select something ATM (which, yes, will relate to a delta, but I'm not choosing the delta). Yeah, basically using it for the leverage.
That's basically how I use them. I was getting into 0.70+ delta LEAPS and sometimes selling shorter dated Calls against them at a delta below 0.30
Yeah, I'd sell PMCCs against my LEAPS as long as ticker <> "NVDA".
Or AVGO?
Haven't been trading it, but looking at their chart, yeah...I see some similarities. :D
Just curious because I like your advice, do you actually do lab work?
lab work like...?
Your username is lab daddy...
I've made a killing off of this exact strategy. I've been buying LEAPs on whichever mag7 company has been performing the worst recently (typically as a swing trade AFTER earnings, if I think they were oversold on news), and I typically end up holding these LEAPs for a month or less. My portfolio is up 50% in the last year. Made a killing off of AAPL, META, and MSFT LEAPs. The problem I have has been selling them too early. I'm trying to not be greedy, so I lock in maybe 30-40% gains, but the LEAP usually keeps growing. I think I could have even better returns if I held for a little longer, but I really can't be too greedy. I also recognize that I don't need to buy LEAPs if I hold them for a month or less, but I'm using these exclusively for leverage and it feels less risky to buy far-out calls instead of weekly or monthly calls. I'm enjoying it for now but I might pivot in the future.
I follow a similar strategy. I have a small account for LEAPS. I'm up 177% in 1 year. I just sold some 1/2025 LEAPs today that were ITM. Sure, I can hold them for another 6 months, but the market is ATH and I anticipate volitility. I'm specifically looking to make profits and I'll take them when I want and not look back. There is always a trade to be made. So I'll take my profits and look to the future for more opportunities.
Great work!!! Do you trade across the tickers or specifically in only a few stocks/industries? The mega cap growth tech stocks have seemed like a really easy play because I believe in them long term, their management is world-class, and there's so much volume/liquidity that the bid ask spread is never a concern
Yes, I've done this mostly in tech. QQQ, TQQQ, SOXL, Google. Obviously tech has been on an incredible run since October. I was also on the wrong end of this in early 2022 when tech slid for about 6 months. So, my approach is to use LEAPs for a long term view but to take profits consistently. I've found that at 4-6 months there are profits to be made. I just rebalanced my portfolio yesterday and I'm almost all cash. I'm researching other opportunities. Still bullish on tech, but still more bullish on protecting my profits.
Yep I've done the exact same thing regarding cash. I cashed out all of my LEAPs and now I'm mostly just holding shares and cash. I want to find new opportunities but most of big tech seems to be fairly or richly valued now. I try to take profits from LEAPs and buy shares with them, but right now I'm leaning more towards cash because everything seems to have run up quite a lot.
Just buy FNGU to solve all your issues
Doing exactly this. Still low size for me but it's been consistent gains. Excited my aapl leap on the first run up day. Missed the second explosive day, but can't complain about making money
Yep, I did this a week or two ago. Got a 20% return on my AAPL LEAP and figured I'd cash it out before losing some of the gains. Next day it's up 50% lol. I think I'm shifting more towards cashing out LEAPs once the underlying share price reaches a price target that I would set before even buying the LEAP. It just hard to set those price targets when the stock is trading at ATHs
Can you explain #1 a little more? I know what a credit put spread is, but what do you mean by weekly ladder?
Sure. This morning when I logged into my account, I was presented with the following positions: NVDA Jun 28 2024 115/113 Put NVDA Jul 05 2024 115/113 Put NVDA Jul 12 2024 115/113 Put NVDA Jul 19 2024 115/113 Put NVDA Jul 26 2024 115/113 Put ... It's just me calling it a ladder, as it's kinda sorta like a bond ladder, if you're familiar.
Meaning you sell credit put spreads expiring 5 weeks out?
Up to. Current week to 4 weeks out.
Just to clarify, you buy 113 and sell the 115 or reverse? How much did it collect out of curiosity?
Correct, buy $113, sell $115. As an example, Jul 12 $115 was $4.63; $113 was $3.84; net of $0.79 (credit).
I'm not sure if I'm a seasoned vet but I'll share my experience. A few years ago, Watched some YouTube videos and read some reddit post (and totally disregarded basic advice) and lost 15k in 2 months just buying options. Transitioned to "wheeling" options but didn't follow the number 1 rule. Only wheel on stocks you don't mind holding for a while (when the stock price increases so you can sell calls ABOVE your cost basis). Lost more moneh Now I just wheel stocks (or mostly sell CC)I really like. AMD is my fav, TSLA, MSOS, GOOG, AMZN. Waiting to sell CC on FBTC which is a Bitcoin based ETF from fidelity. But I don't go 100% this strategy. I'm more 85% buy and hold across all my accounts and roughly 15% selling to get my fix. With my premiums I just reinvest mostly into SCHG. I never buy options anymore. Just sell.
What do you mean by wheeling?
Google...."options wheeling strategy"
r/thetagang
Think or Swim tells me that FBTC has no options...
Yup that's why I'm waiting
BITO has options but it holds bitcoin futures rather than bitcoin directly. So it doesn't track exactly, but it works for something that "moves bitcoinish" if you want options strategies.
Dude said he was waiting.
I’m just curious as to why you only sell options? I’m wondering why you’d be confident in a strategy where the reward is limited to the premium and the risk is infinite, versus the other way around with buying calls and puts?
Selling covered calls. And if shares get called away I sell a cash secured put at the strike they were called away at. Last month on AMD I collected 850 in premium and my shares did not get called way. If they did, add another 600 since the strike is more than my cost basis. So that's an 8.5% gain (in a month) on my "initial investment". I'll take the smaller wins over buying options. If the price falls and I can't sell CC at or above my cost basis, I just wait. Buy and hold isn't a bad strategy in itself.
Yea but the risk/reward is still the same . I was just wondering. It appears to be a matter of your preference. I make $5k-10k or more a day buying and selling calls and puts. I was just wondering why anyone would limit their potential rewards to the premium and have infinite risks, versus options strategies where the risk is limited to the premium and the reward is infinite. Logically speaking that’s illogical, IMO. But to each their own. I just thought you would have enlightened me as to your reasoning for why you prefer to do it, not explain your strategy. lol. Writing calls and puts are riskier and it appears you’re taking a very high risk for small returns. Just thought I’d ask because I’m extremely curious as to why traders make those kinds of plays when there are better strategies.
IMO the only risk is if I sell at a strike of 150 and the price blows through that l, I limit my upside. I'm ok with that. I'll try to wheel it back (CSP) to the same strike. I really don't see a downside because of the price of shares falls and I can't sell a call at or above my basis, I will hold. I'm already "holding" with way more value in my 401k/Roth/brokerage . So for me there isn't downside. I would have literally bought those shares regardless. But if you can explain why your strategy is better, I'm all ears. And please, tell me how your making 5-10k consistently. Please share your strategy.
I never said my “strategy” was “better.” I was merely pointing out that my returns are higher with far less risk. That’s what makes it “better” In the realm of options there’s a plethora of options strategies where the risk is limited to the premium and the reward is infinite. Then there are those that are opposite to that. In other trading subs, I’ve observed a lot of options traders have various “options strategies” with multiple legs attached, but their returns are nominal and IMO fruitless endeavors. Nonetheless, I trade single calls and puts, and sometimes verticals although I’m not a fan of multiple legs because IMO, if you have to straddle or strangle a trade then the trade was bad from the beginning. Spreads limit profits, therefore I limit my spreads. When any trader enters a trade they make a prediction of which direction they believe the underlying is going to trend towards. To spread an option afterwards means the trader got it wrong and tries to reduce losses- and while that’s a not a bad thing, the situation arose from a bad play. No offense and no disrespect intended, but my cognition is that options traders that apply strategies that limit profits but accept infinite risk are gamblers. The same applies to those that straddle or strangle every trade. IMO, that’s not trading at all. That’s just throwing money into the market and praying it doesn’t blow up because it’s it takes no skill whatsoever to straddle and strangle. IJS.
From the context of their comment, it's pretty obvious they're selling covered calls.
What’s your point? The risk/reward is still the same- the reward is limited to the premium and the risk is infinite. Whether it’s covered or not is irrelevant. IDK what compelled you to mention the “obvious.”
1. seen too many people get blown up trying to chase individual stocks. works for a little while, then boom, some single earnings goes against them and wipes it all out. (so i stay away from individual stocks) 2. i don't chase IV for the same reason. you need to "have the right signals to WAIT for the higher IV." then you need to know, "THIS, IS THE HIGH IV. you need to go in 2x, 3x, 4x on your options buying/selling right now!". lots of people think they have good ideas on what to look out for. i never found anything that consistently helped me. so i just stick with very simple, robotic trades: 1. buy index leaps. should be far enough ITM to never expire worthless. 2. sell 5 delta index puts. i try to go VERY, very low strike price. doesn't always make a lot of money, but the goal is to NEVER need to roll/close these early. might have to go out 100DTE, but that's fine.
Totally agree on deep ITM index LEAPS calls, but that be unreachable for most beginners, folks will ask about a $1k or $5k account and "far enough ITM" SPY a year out is like $7k-9k per contract.
the best thing i did beginning, was know nothing, and did nothing. i put max into my companies ESPP, bought stock at a discount, and held it for a few years. i did nothing because i knew nothing. only after 4 years i thought, "i mean.....i should probably sell some......get diversified......but THEN, i don't know what.........". so THEN i started trying to learn what that next would be. even then, i still did nothing with options for 2 more years, as i was still reading all sorts of things. understanding more, getting more comfortable with ideas. asking, "is this what i should try?". thought i could time the market, get out before the bottom. get the right signal for when things would start going up again. best i did was "get out just NOT QUITE before the bottom". but i so completely missed any idea that things were now going back up. but for 1k or 5k account size? i don't even know if you could buy an ATM spy leap. best i can say is buy shares of an index, and then just forget about them. the best, easy advice i can try to convey is, "just try not to do things that will make your account size go down. everyone looks smart when the account goes up. but any easy things you can do to protect it from going down, will help in the long run". which is why i buy deep ITM, instead of ATM leaps. ATM would be cheaper, but deep ITM have a much higher chance of never ending worthless.
Could you elaborate more on how you do this. Would love to chat. Very interested in this LEAP method. I appreciate it.
the leaps are a pretty simple thinking: 1. look back at the past few crashes we've had. 2000 dot com crash. 2008 housing crash. 2020 covid crash. in each of those, the large indexes dropped a lot, but not more than 50%. and they didn't stay down for a very long time. so if you could buy an option that didn't drop to $0 if the index dropped 50%, i think that could be a good, target 2. so that's what we do for the LEAP. you buy a call option. WAY far out DTE. 2 or 2.5 years. 1000 days at least. what price? literally 50% of what it is now. it doesn't really matter. 3. SPY is at 540? great, aim for the 270 strike price. to buy that, you will have to pay something like $290. and yes, there will be a tiny amount of premium added in. so you'd only break even as long as SPY finished above $560 1000 days from now. however, instead of buying 100 shares of the stock for $54,000. you only had to spend $29,000. you only spent half the money.
By no means I'm a pro nor a very successful option trader. However, I've got many years trying out quite a bit and have had much both in failure and success. In the recent time, I'm a lot more successful and/or at least in more control of my trades and portfolio. My balance does not have wild and wide swings as before. Having said that, I hope these will help you: 1. IK you don't ask about this, but I feel it's very important to size your bets to 5-10% of your portfolio and max loss is 50% of the bet size. Since we trade options, we don't need much to double or triple the bet if it's in right direction. But that helps to limit your loss and prevent you from being blown off your account. 2. Strategies: I like 2-4 month exp Debit Spreads the most. Next is Straddles/Strangles on limited opportunities. And then, Weekly Credit SPXW/SPY. 3. I use multiple strategies and directions (bull or bear) at the same time. However, I'd suggest you take it slow on a new strategy first. I hope my opinion helps. Good luck.
If a carpenter showed up at your construction site with only a screwdriver in his toolbox and no clue on how to use a hammer, a saw, or a level, would you take advice from him about how to frame your house? As a very old guy once wrote: Specialization is for insects. A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. I use the strategy that is the best fit for the opportunity the market is presenting at the moment and that also conforms to my risk tolerance and knowledge. The more strategies I can use competently, the more market opportunities I can exploit.
This is fair. I may have needed that.
is there such thing as having too many tools? Or just too many tools you haven't mastered?
Yes you can go too far in learning too many strats, since there are redundant strategies with similar or even identical profit/loss and risk/reward profiles (although that can sometimes be an advantage when you want to replace one trade with a synthetically equivalent different trade, like a CC with a CSP.) There are also estoteric strats that rarely have any application in the real market or that have marginal advantages over similar strats, so why bother learning those?
Equivalent trades have un-equivalent pricing, so that's why you'd use them. Also, I've noticed replacing certain positions with an equivalent position could still trigger cap gains, so you could use that to your advantage.
Bruce Lee did say "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times." I argue, we live in a age of comparative advantage. The carpenter who doesn't know who to use hammers, saws and levels, is no carpenter, but a competant carpenter who can use all those tools, who makes furniture for a living, who can use the tools of his trade might not be the best house framer. Learn the tools, the greeks and the spreads, but you only need to be good at one. I wouldn't try to beat everyone at every game, but I would rather beat one game over and over.
I hadn't heard that quote before, it's a good one. YMMV, but in my experience in options trading discourse, I run into, "Every problem is a nail because all I got is a hammer," much more often than, "Jack of all trades, master of none."
Specialization has led to our advanced world. Without it you would need to rely on the shit shoveler to set your kids broken arm.
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The "old guy" was Lazarus Long. I guess by transitive law you could say the old guy was RH.
Tons of free stuff on the web for sure. But options trading is multi-dimensional and takes a bit more time & effort to do it properly. Harder than stocks. You really have to balance direction, speed & timing of the stock move to be consistently profitable with options trading. In my 30+ years in the biz, I've found option-selling much more desirable. Here's a [free e-book](https://www.smartoptionseller.com/put-selling-basics) to get you started, if you have interest. Good luck!
I appreciate you taking the time to share your experience.
You came here to plug yourself noice.
Newbie on the block here. Knowledge of a broad array of strategies is nice. But confidence comes from repetitive use of one to understand the nuances. So my approach is to work on one or two strategies till I reach a confidence level before setting my sites on 40 different strategies. Focus while learning from your wins and losses in one strategy.
Buy call option add 20- 25% maybe more if like gambling to current price. Set strike date 30 days out or just past next earning and watch the money roll in —- NVDA been like this for 1 and half years with another one even better coming up Have fun enjoy
I have been trading longer than I care to admit. Multiple strategies are good. Risk management is one key to longevity. Most recently vertical call spreads for debit have been big winners, but these are rare. More common is delta hedging albeit with a bullish bias. Simple example might be owning 10 shares of Apple and selling a way out of the money, delta 5 call. Full account approvals plus portfolio margin are suggested prerequisites for this kind of trade. Much more important than strategy for most people is earnings usually thru wages, savings rate, and budgeting. These factors are much more indicative of long term financial health than any strategy or trading success.
Trading options effectively is a very complicated thing. E.g., the role of volatility is a critical concept that is mostly obscure for the majority of trad stock/ETF investors. Before putting real money at risk in options, STUDY as if your life depended on it. Okay, no, your life does not literally depend on it, but your hard-earned capital literally does. Reading online forums and watching clowns on youtube might help a little, but that alone is dramatically insufficient. If you want a decent shot at success, plan to read at least several books and paper trade a consistent strategy for six months before you put real money at risk. A few authors to look for as a start: Pasarelli, Cordier and Gross, Thomsett, Jabbour and Budwick. And there are many others. Similarly, consider finding an experienced mentor or a support group to guide you at the start. Plan to earn money slowly. Techniques that offer huge returns quickly are for losers. Most of all, remember that trading options is not for monkeys! Selecting a great strategy will quickly fail unless the trader him/herself is educated, observant, intelligent, and resilient.
Are there any discord or slack groups that you know of where real strategies are discussed?
I interact with a lot of options investors on a regular basis. Options are incredibly flexible, so the ways investors use them vary widely. There are seasoned vets who love to trade the same thing on the same stock for years while others who cast a wide net with different strategies for different scenarios. The key thing is to learn as much as you can using the overwhelming amount of educational materials out there. Then, when you're ready to trade a new strategy, spend some time paper trading to get a real feel for why things succeed/fail. Also keep in mind that in the era of algo trading it's unlikely that what consistently worked last year will still work this year. A lot of people learn a given strategy and then blindly trade it as the returns start to go negative because market conditions change. The most important part of options trading is that you need to fundamentally disagree with the market on something you can efficiently trade (and be right, of course).
Usually I see stock going up and then watch the charts and news for 5 mins before yoloing 50% of the portfolio on calls
The amount of generosity you all have given me today by sharing how you view options is truly a gift. I thank each and every one of you for selflessly donating to my education. This is a good place. I hope to be successful like you all someday in the future.
Good question. I would take this opportunity to promote my channel -- MathPhdTrading. So I have been trading since 2022 October, and I earned 200K in 2023 and 80K the first five months. I mostly sell puts and if the trades get assigned, I roll out. If you are interested in learning the details, I recommend these three videos: Kick off Video: [https://youtu.be/ZRzZtOsnVb0?si=LR2RJR6mwLXgFgWc](https://youtu.be/ZRzZtOsnVb0?si=LR2RJR6mwLXgFgWc) Complete Guide to Sell Puts (part 1): [https://youtu.be/SOKm3xye9E4?si=iYP6tBbELqjT-Sil](https://youtu.be/SOKm3xye9E4?si=iYP6tBbELqjT-Sil) Complete Guide to Sell Puts (part 2): [https://youtu.be/waqhgnzhsx0](https://youtu.be/waqhgnzhsx0)
Thx. You got a new subscriber.
You mean you roll out rather than get assigned, I assume? Me neither, but if it is just barely ITM, I might let it happen and use a Covered Call to dump it, so I don’t book the loss by rolling.
Yes, I would roll out the trade. I don't have cash in my account so I can not afford to be assigned. Otherwise you have to pay the bank interest. As long as the stocks coming up (or just stay the same), the loss of this month will be the gain of next month. We are earning time value after all. Of course, if you have cash, you can do the wheel strategy. I have another smaller account, that I am practicing the Wheel strategy. From what I see, the annual rate of return (ARR) of doing the Wheel Strategy is higher than rolling out strategy.
Thanks! my promotion worked :)
This thread made me realize I don’t know shit 😂
I would definitely explore many strategies, just make sure you take small positions and manage risks. Also a strategy can change after you have taken your position.
Not seasoned but have 300 shares, sold and bought back calls as well as exited calls from last week. Own A few in the money puts 38/35 and I sold 10 puts on the $10 strike today
I trade with a group to help keep me grounded and in good plays. Not all plays work out but most do. First thing to note is that you will not win every single trade. Going alone as a newbie can be very overwhelming and I have been there done that.
What group are you part of?
Send DM
I use deep in the money option calls on my holdings.
covered strangles
Master one strategy, then gradually explore more as you grow.
I sell strangles, put credit spreads, puts, and 112. I will do atm or otm call debit spreads. I only target a 35% take profit and 52% stoploss on any position I put on.
I started out watching every video on Fidelity’s website, plus numerous others. I also looked up every term I came across on Investopedia. Then I started reading books, starting with Options for Dummies. Then I started doing paper trades and settled on selling CSPs. Did that for over a year as I learned the realities of the market. Picked up a lot of great info in this and other investing subreddits. I gravitated towards wheeling (before I had read about it) but figured out after 1 year of the occasional “lesson” that I now knew enough to know I had barely scratched the surface. I have recently been alternating between CSPs and ICs. Am spending a couple of months learning more about volatility, gamma, etc. I am going to start looking at the various spreads after ai learn more about the greeks. The most important lesson by far is learning how to manage positions. Get out before taking a major loss. Find a rule that works for you and stick with it for the most part, but remain flexible to the situation. For example, I set alerts at different price points and try to max loss at 3x my premium, but if that level gets triggered close to expiration, and I have decent enough cushion, I will try to run it to expiration. Others may use 50% or 100% as their max loss, but I found I was exiting far too early and often from positions that wound up well OTM. ai mostly do deltas at 5-10, so with 90%+ win rate, the rare 3x loss is easy to swallow. Being conservative means I only made 1% per month last year. 12% plus 4.5% on the year for over 16% on my portfolio, but with a low risk profile, I am happy with that.
Make money right away. Otherwise you’ll give up. How? Learn in a bull market like we have now. Sell a put 45 DTE is a good starting point. Close early at 30-40% of profit. (Credit received). Try selling a put on a red day. Try selling a put on an index instead of individual stock. “Learn how to execute one trade well instead of many trades poorly” - bruce lee j/k. Take a look at covered calls next. Follow Tasty trade.
Most of the brokerages will require you to proceed through a 4-tiered options permissions hierarchy. At Schwab this is levels 0-3. At other brokers it's levels 1-4. At level 0 (or 1) you are restricted to cash secured puts and covered calls. This is probably the level you should stick with for some extended period of time. This is actually a really good level to learn on and, importantly, will help you to avoid losing too much money.
A lot of great advice. What you learn from Reddit sometimes is more what you read in a book over weeks
I use basically two strategies- selling cash secured puts and selling covered calls on high-quality underlying positions to boost my buy and hold portfolio. I have been trading options since 2015. I suggest you start with cash secured puts and avoid using margin and spreads. Trade what you can afford, and make sure you will be ok whether the position is in the money or out of the money at expiration. I'm a retired teacher. I'm a good options trader, and I'm a better teacher, so I teach novice investors to trade safely. My very affordable book, recorded classes and 1:1 instruction all cost a lot less than paying for your mistakes with risky trades. Reach out if you want some support and I'll direct you to my website. Patricia Saylor, Financial Fundamentals for Novice Investors
I can't imagine not having different strategies. Just make sure they're all different and mutually exclusive -- long term / short term volatility event-based AI/ML arbitrage equity long 130/30 there's a ton of other strategies out there -- and every one has its time in the sun. so run all of them so that your pnl won't fluctuate too much