*Official* Options trading thread: Why Alpha/Beta when you can Theta?

[jafomofo]

congrats on your gains, brah!

my strategy is simply covered calls on stocks I own. Sometimes I will take a short term position on a stock in an uptrend and sell calls. Have not bought options (to open) so far this year. Tempted many times but passed. I am more interested in base hits, not home runs. The general goal is to earn 0.25% - 0.5% every week. I usually sell 20ish delta weekly calls or 10delta or lower puts. I look for simple, easy, reliable and consistent gains, therefore, I try not to squeeze every dollar from a trade. For example, there is no point in trying to sell 35delta weekly calls to maximize and end up rolling two weeks in a row because they expire ITM.

when you say 20 delta calls you mean literally calls where the delta is close to 20? So as an example for KMI, 8/18 18C has a Delta -0.1625. If i sold that contract it says i would make 7 dollars. That hardly seems worthwhile. I think Im missing something.

oh looking at aapl its 60 bucks for a weekly 187.5C. That still seems like a really low return for risking getting your stocks called away but i guess you get a fair return on the sale of the stock at that point as well and can re-buy?

[looxmatter]

I'll add that if you are trying to scalp contracts then you should definitely have some idea of support and resistance and have stop losses. If you are letting your contracts go to 0 then you need to work on cutting your losses. More so in options, managing your losses plays a huge role in your ability to do it for the long term. Also I would create a spreadsheet of all your win/losses so that you can remain accountable. It's all too easy to remember that one big win and ignore the pile of $50 losses. Simply looking at your portfolio balance can easily skew your perception because your unrealized gains may hide your realized losses. Good luck.

Appreciate the advice. I draw resistance and support levels every morning. My issue currently is taking trades and my stop loss getting hit but eventually the underlying asset hits my price target location. It's so annoying to me. This happens to me frequently even if I use a 10 to 20% SL. I don't think I have ever let any of my contracts ever hit 0 or expire worthless.

I also take screenshots of every daily chart and log it in my onenote with small descriptions of what I was thinking, what went wrong, etc. It has been riodiculous how accurate I have been able to predict where and when a price will go but just setting SL too low seems to be the biggest issue for me atm.

Reps for life boyo. We're all gonna make it!

[usersignup2]

when you say 20 delta calls you mean literally calls where the delta is close to 20? So as an example for KMI, 8/18 18C has a Delta -0.1625. If i sold that contract it says i would make 7 dollars. That hardly seems worthwhile. I think Im missing something.

oh looking at aapl its 60 bucks for a weekly 187.5C. That still seems like a really low return for risking getting your stocks called away but i guess you get a fair return on the sale of the stock at that point as well and can re-buy?

correct on all counts. Not every stock is ideal for selling covered calls, however, the strategy doesn't change. I don't change the delta because I'm not making enough premium; I just use another holding to sell calls. Stocks with low volume, low volatility, dividend stocks generally don't pay much premium. Growth stocks are the opposite and generally pay more premium, however, you need to be able to mentally handle the price swings which for some, isn't suitable for long term holdings.

[usersignup2]

Appreciate the advice. I draw resistance and support levels every morning. My issue currently is taking trades and my stop loss getting hit but eventually the underlying asset hits my price target location. It's so annoying to me. This happens to me frequently even if I use a 10 to 20% SL. I don't think I have ever let any of my contracts ever hit 0 or expire worthless.

I also take screenshots of every daily chart and log it in my onenote with small descriptions of what I was thinking, what went wrong, etc. It has been riodiculous how accurate I have been able to predict where and when a price will go but just setting SL too low seems to be the biggest issue for me atm.

Reps for life boyo. We're all gonna make it!

if your stop loss continually hits before reaching your price target there could be two factors.

a) volatility is not properly accounted for, i.e. price swings are greater than you are willing to account for/above your mental tolerance
b) you are consistently entering your trade too soon

if b),
are you waiting for confirmation of price direction before entering?
are you watching other timeframes for confirmation?
are you waiting for technical signals?
are you trading the same ticker consistently?

[looxmatter]

if your stop loss continually hits before reaching your price target there could be two factors.

a) volatility is not properly accounted for, i.e. price swings are greater than you are willing to account for/above your mental tolerance
b) you are consistently entering your trade too soon

if b),
are you waiting for confirmation of price direction before entering?
are you watching other timeframes for confirmation?
are you waiting for technical signals?
are you trading the same ticker consistently?

a.) I agree on the mental tolerance. I see a big red number or % and even if it's before my stop loss I just take the loss. Entering too early not much of an issue tbh. just the mental tolerance

b.)
I am trading the same ticker consistently but Need to look out for more technical signals/confirmation before direction before entering, and loking at higher time frames.

Do you have any good books or videos to watch? I would greatly appreciate it.

[usersignup2]

b.)
I am trading the same ticker consistently but Need to look out for more technical signals/confirmation before direction before entering, and loking at higher time frames.

Do you have any good books or videos to watch? I would greatly appreciate it.

everything I know I learned through trial and error. I've watched the odd video but not a lot has stuck with me other than the general Tasty Trader strategy of selling calls at 30-45 days out, 30delta.

most trading platforms will have technical indicators and scripts. I use Bollinger Bands, Parabolic SAR, Ripster EMA Clouds, volume and MACD on TradingView.

Keep in mind nearly every technical indicator/technical strategy on the trading platforms is the same. They just show the information differently. Therefore, if you are looking for an indicator, choose one that you can read the information easily and quickly and one that has a clear buy/sell signal so you can backtest it.

MACD is really helpful because it tells you at a glance, what stage of the trend a stock is at.

Parabolic SAR has tick by tick buy/sell signal but in the default settings, it is an early signal (it will show buy/sell signals earlier than the others).

I like Bollinger Bands because it can tell you when a candle is overextended so it can give you heads up that momentum is exhausting - I leave it in the default setting and when the candle extends quickly and sharply outside of the bubble, it usually indicates pause or reversal.

Ripster has a clear buy/sell signal and shows Ichimoku clouds (price action can drag when going through the clouds). Ichimoku is predictive - it bases potential future movement based on past price action. All other indicators show trailing information only.

I set my charts to logorithmic because a $1 move on a stock when it is trading at $50 should show proportionately smaller than a $1 move when it was $10.

A word of caution with indicators. They are only tools and work only as well as your ability to read and act on the presented information but it is by no means, a guarantee of successful trading. Using indicator alone you should not expect more than 51% success rate. Second, less is more. Only use what you are able to analyze efficiently. Hope some of this helps.

[usersignup2]

not a lot of option trading in the last while.

a bunch of stuff were called away. Covered calls were deep ITM and week to week premium net was virtually non-existent, added to continued bull rally meant it was best to use my capital elsewhere instead of hoping the calls would eventually expire worthless. Therefore, had to let go of TSLA and AMZN. In total I probably collected about 60K in premium over a period of 20 weeks. I haven't gone through my spreadsheet because I'm too lazy. It goes without saying that I would have profited greatly if I had not sold the calls but such is trading. OTOH, the other alternative possibility would be that I was all cash during that time and tried to daytrade...and done poorly.

Have had a little success selling calls on some swing/shorter term trades. TGT, NFLX, and various 3X ETF. Roughly averaging 700-1K weekly. I learned that CC on 3X ETF is a disadvantage, at least at this current market. Intraweek volatility means that daytrading would be more profitable than selling calls, assuming you could take advantage of a minimum 0.5% daily swing (from a total 1.5% intraday swing).

Have had some good success last two weeks with daytrading, namely TSLA, NVDA and VFS, the latter netting 16K holding over the weekend. August monthly net was roughly 33-35K realized gains, that includes option and daytrades.

Building up bearish positions on QQQ, SOX and TSLA via 3X bear ETF and am anticipating unwinding them by end of September.

[looxmatter]

everything I know I learned through trial and error. I've watched the odd video but not a lot has stuck with me other than the general Tasty Trader strategy of selling calls at 30-45 days out, 30delta.

most trading platforms will have technical indicators and scripts. I use Bollinger Bands, Parabolic SAR, Ripster EMA Clouds, volume and MACD on TradingView.

Keep in mind nearly every technical indicator/technical strategy on the trading platforms is the same. They just show the information differently. Therefore, if you are looking for an indicator, choose one that you can read the information easily and quickly and one that has a clear buy/sell signal so you can backtest it.

MACD is really helpful because it tells you at a glance, what stage of the trend a stock is at.

Parabolic SAR has tick by tick buy/sell signal but in the default settings, it is an early signal (it will show buy/sell signals earlier than the others).

I like Bollinger Bands because it can tell you when a candle is overextended so it can give you heads up that momentum is exhausting - I leave it in the default setting and when the candle extends quickly and sharply outside of the bubble, it usually indicates pause or reversal.

Ripster has a clear buy/sell signal and shows Ichimoku clouds (price action can drag when going through the clouds). Ichimoku is predictive - it bases potential future movement based on past price action. All other indicators show trailing information only.

I set my charts to logorithmic because a $1 move on a stock when it is trading at $50 should show proportionately smaller than a $1 move when it was $10.

A word of caution with indicators. They are only tools and work only as well as your ability to read and act on the presented information but it is by no means, a guarantee of successful trading. Using indicator alone you should not expect more than 51% success rate. Second, less is more. Only use what you are able to analyze efficiently. Hope some of this helps.

I don't check this thread as often as I do the other one. I apologies for not seeing this until now. MACD is my bread and butter and through trial and error in my early trading career using indicators alone is dumb and never going to work. I've started to look into how bond yields/DXY/etc have an effect on equities.

For example I noticed that DXY broke and then bounced off of 103.7 as resistance and knew that if the DXY was going top up that equities would have a big sell off. I ended dup buying SPY puts with 0 days expiration and ended up making a solid 20%.

I really wish I was able to take more finance courses in college to understand this stuff better. If you or anyone else has any videos/lectures/books that describe the interconnections of the stock market and how everything works I would greatly appreciate that information.

not a lot of option trading in the last while.

a bunch of stuff were called away. Covered calls were deep ITM and week to week premium net was virtually non-existent, added to continued bull rally meant it was best to use my capital elsewhere instead of hoping the calls would eventually expire worthless. Therefore, had to let go of TSLA and AMZN. In total I probably collected about 60K in premium over a period of 20 weeks. I haven't gone through my spreadsheet because I'm too lazy. It goes without saying that I would have profited greatly if I had not sold the calls but such is trading. OTOH, the other alternative possibility would be that I was all cash during that time and tried to daytrade...and done poorly.

Have had a little success selling calls on some swing/shorter term trades. TGT, NFLX, and various 3X ETF. Roughly averaging 700-1K weekly. I learned that CC on 3X ETF is a disadvantage, at least at this current market. Intraweek volatility means that daytrading would be more profitable than selling calls, assuming you could take advantage of a minimum 0.5% daily swing (from a total 1.5% intraday swing).

Have had some good success last two weeks with daytrading, namely TSLA, NVDA and VFS, the latter netting 16K holding over the weekend. August monthly net was roughly 33-35K realized gains, that includes option and daytrades.

Building up bearish positions on QQQ, SOX and TSLA via 3X bear ETF and am anticipating unwinding them by end of September.

Nice. Going to take some notes on your strategies.

Th only two solid plays were based on DXY breaking below support of 104.18 and caused a big jump in equities. I bought SPY calls with 0 dte and made 30%. Same thing on Friday when DXY broken resistance of 103.7 but bought puts when the market had a sell off.

I need to understand the market better this will be my goal for the rest of the year. Need to get back to reading books and how to understand/spot leading indicators of price movements.

Cheers. have a happy weekend!

You must spread some Reputation around before giving it to usersignup2 again.

[TugOfPeace]

Any thoughts on this strategy:

I want to make ~$400/month with CSPs.

With SPY, I can do 0DTE CSP where delta is -.1166 or so, which yields $20. So in practical terms this would be a CSP @ $424 strike when SPY is priced at $430, with 1DTE.


Do that every day and net $20/day or $400/month.

Eventually as my account grows I can do more than one CSP so this would double my profit.




Edit: The risk is a large market crash.. which would suck ass, and if I'm doing this every day, one day I will get destroyed.



Edit: Not going to try this. Market crash could really fuk it up.

[usersignup2]

getting back to the safe and simple grind.

TSLA 262.50cc x20 that I rolled down mid week to 255c as delta decreased

one scalp on TSLA and dividends on SQQQ which I am now green, adding to the week

2600 net for the week