70232745
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In 2022, inflation will stay high, rates will go up, and Nancy Pelosi will continue to trade![]()
. My goal is to grow capital, no matter whether the market is going up or down. I do not want to have a goal to beat the market or Nancy, because the market may go down or Nancy’s trades may go bad. Quantitatively, my goal is always a consistent and positive return at least better than inflation rate. Absolutely, I can achieve that and do better than that with options. Not how Nancy...
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My wish is to to able to trade options on MooMoo app with just simple click on the options chains and be able to construct a strategy in one single trade order! MooMoo should be to do that and provide necessary risk and P/L analysis on that order before the execution, so if I want to change, I can go back and change my strategy. If I am lucky, I would like to trade futures and options on futures on MooMoo. This will put MooMoo at the same level as players in this space. Finally, having a community focused on options would be awesome! Wish everyone a Merry Christmas and prosperous 2022!!
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Emotions influence human decision making, especially in trading. Algorithmstic trading had already replaced human in market making activities. As a person working full-time with no time to watch market everyday, I have been following the rules and be mechanical as much as possible.
1. Be a contrarian. When everyone is fearful, aka when VIX jumps high, I become more greedy. When everyone is greedy, aka when the market reaches All-Time high after All-time high, and VIX tanks, I become more fearful and need to find hedges. The past few days just showed us how important this is.
2. Implied volatility rank or percental is my friend. As an option trader, I only trade when the IV is higher than its historical average. The higher the better, since IV often be overstated and makes premium selling more profitable.
3. Size is the most important factor. The risk and the size are highly correlated. I looked the size of each trade closely and will control it to 2% of my portfolio size. I will also control my Buying Power under certain percentage of my portofolio size based on VIX level (following rule number 1).
4. Ask Why first. Since I can only control my risk at order entry moment, I ask myself why this is the right trade and when it is not. This help me to pre-determine my profile and loss limit. Sometimes a good trade will become bad. Knowing the why helps me to make quick decision without second guess myself.
5. Only trade something that is liquid enough. This rule not only help me to reduce any slippage in price (the gap between bit and ask), but it also help me to only trade a handful of entities, which is also my next rule.
6. Trade something that I know well. I do not have time to do research or watch a lot of news. I focus on the main indexes and their futures such as /ES and /ZB and 3-5 stocks such as AAPL and Google. They are highly liquid with a lot of transactions and I know them well, foundationally and technically.
7. Take profit early and often and let time cure the pain. If a trade has 25-50% profile or 20 days to expiration, I will take the money and run. I would roll any losers to next expiration and forever, unless my WHY was wrong with new data presented. Recent example is BABA. I will not touch it for a long while.
7 plus or minus 2 is human short term memory capacity. I should stop here and hear from your suggestions, especially if you are trading options.
1. Be a contrarian. When everyone is fearful, aka when VIX jumps high, I become more greedy. When everyone is greedy, aka when the market reaches All-Time high after All-time high, and VIX tanks, I become more fearful and need to find hedges. The past few days just showed us how important this is.
2. Implied volatility rank or percental is my friend. As an option trader, I only trade when the IV is higher than its historical average. The higher the better, since IV often be overstated and makes premium selling more profitable.
3. Size is the most important factor. The risk and the size are highly correlated. I looked the size of each trade closely and will control it to 2% of my portfolio size. I will also control my Buying Power under certain percentage of my portofolio size based on VIX level (following rule number 1).
4. Ask Why first. Since I can only control my risk at order entry moment, I ask myself why this is the right trade and when it is not. This help me to pre-determine my profile and loss limit. Sometimes a good trade will become bad. Knowing the why helps me to make quick decision without second guess myself.
5. Only trade something that is liquid enough. This rule not only help me to reduce any slippage in price (the gap between bit and ask), but it also help me to only trade a handful of entities, which is also my next rule.
6. Trade something that I know well. I do not have time to do research or watch a lot of news. I focus on the main indexes and their futures such as /ES and /ZB and 3-5 stocks such as AAPL and Google. They are highly liquid with a lot of transactions and I know them well, foundationally and technically.
7. Take profit early and often and let time cure the pain. If a trade has 25-50% profile or 20 days to expiration, I will take the money and run. I would roll any losers to next expiration and forever, unless my WHY was wrong with new data presented. Recent example is BABA. I will not touch it for a long while.
7 plus or minus 2 is human short term memory capacity. I should stop here and hear from your suggestions, especially if you are trading options.
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As I mentioned in my other post, since I am an options trader, I prefer taking profit earlier and often, and time is one of the most important factors in my trades. Trading options is the best way for short-term results. With options, I can use different strategies rather than only buy or sell. With options, I can leverage my capital and at the same time, control my risks if I want to.
To illustrate my points, I am using my recent $Chewy(CHWY.US$ earning trade as an example. Chewy would report its quarterly earning after the market closing yesterday. So yesterday morning, I initiated a Dec 10 55-50-45 put butterfly that costed 65c per contract, when the stock price was above 58 dollar. With one day to go until expiration, I expected that Chewy would go down towards $50. If I were wrong, my maximum loss would be 65c per contract. In order for me to reduce the cost, I also sold the Dec 17 70 Call for $1.1 credit, since I did not believe it would jump above $71 in a week, given the re-opening environment, and this was WHY I started this trade, and did not based on any technical indicators. Yes, I was shorting Chewy for one day based on its earning event! But I prefer this method rather than shorting it with stock shares, because I can accomplish the same results with very limited capital and defined risks for bigger return. The result was that $Chewy(CHWY.US$ went down to 51 and I closed the trade with a great return. Obviously, trading on earning events is one of my favorites, but it is not the only way. I would like to listen to your feedback and comments.
#options #strategies #reducerisk
To illustrate my points, I am using my recent $Chewy(CHWY.US$ earning trade as an example. Chewy would report its quarterly earning after the market closing yesterday. So yesterday morning, I initiated a Dec 10 55-50-45 put butterfly that costed 65c per contract, when the stock price was above 58 dollar. With one day to go until expiration, I expected that Chewy would go down towards $50. If I were wrong, my maximum loss would be 65c per contract. In order for me to reduce the cost, I also sold the Dec 17 70 Call for $1.1 credit, since I did not believe it would jump above $71 in a week, given the re-opening environment, and this was WHY I started this trade, and did not based on any technical indicators. Yes, I was shorting Chewy for one day based on its earning event! But I prefer this method rather than shorting it with stock shares, because I can accomplish the same results with very limited capital and defined risks for bigger return. The result was that $Chewy(CHWY.US$ went down to 51 and I closed the trade with a great return. Obviously, trading on earning events is one of my favorites, but it is not the only way. I would like to listen to your feedback and comments.
#options #strategies #reducerisk
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70232745 : Indeed, this year will be a paradise for traders! Buy big, sell small.