Remember Canarsie Capital, the hedge fundrun bythe former head of risk management at Morgan Stanley and a 28-year-old former Galleon trader, which blew up in January, prompting Owen Li, the former Galleon trader, to tell investors that he was "truly sorry" for losing all their money? Well, Lipled guilty to securities fraud.
I'm asked many times if we can use unusual options activity to make some good profits. In my opinion, using unusual options activity as an indicator for impending price moves is difficult, subjective, and dangerous. Yet many "options guru" pretend to build a whole "secret system" around this phenomenon.
It is so tempting to begin trading options. Too many novices hear/read stories about earning 10% per month and, believing that nonsense, want their share of the ‘free money.’ They take a couple of lessons or read a chapter or two and believe they know what they are doing. A typical mindset is: ‘How difficult can it be if people are making 10% per month?’
Iron Condor is a very popular strategy used by many options traders. It can perform very well many months, but the real question is: how much will you lose when the market volatility explodes? Many condor traders give back all of their profits during the 2-3 losing months each year when the markets make large moves because they lack a detailed plan for risk management.
After seven years of strong bull market, many investors became complacent. They forgot how bad it was in 2008. However, many still would like to get some protection in case things go south again. We know that bull markets don't go on forever. But protection usually costs money. What if you could be protected AND get paid for it?
One of our members posted a link to an excellentpostfrom Mark Wolfinger. Mark responded to a question from one of his readers: "For the past 2 years, I've been selling naked options (mainly puts, a few calls) to generate monthly income. My position returns just over 1% per month on average on the total account value".
I came across the following question on Quora: "If an event happened that would sizably move a stock price (ex. poor earnings) from its original point, wouldn’t buying both a put/call option on that price be a guaranteed win? No matter which way the stock price moves, I would make a large return (even if I lost money on the other option)."
Few days ago I came across an excellent article by Dan from Theta Trend. The article is called Awareness and Taking Losses and discusses some of the aspects of trading psychology, especially how traders react to their losses. I respect Dan very much and I found out that we share a lot in terms of trading philosophy.
When adopting an iron condor trading strategy, there are several decisions to make: Choose the underlying stock or index, Choose an expiration month, Choose strike prices, Decide how much cash you want to collect when opening the position (this will be your maximum profit for the trade). Read the stock option advice below to start learning the basics of trading iron condors.
Thirty years ago, legendary trading coach Dr. Van K. Tharp sat down with two top traders Ed Seykota and Tom Bassoand and discussed the importance of psychology in trading. They decided that the factors of trading could be broken down to three parts:
In our continuous effort to expand our strategies, few weeks ago I presented a new exciting strategy to SteadyOptions members. The strategy is buying a Reverse Iron Condor (RIC) before earnings on stock with history of big post-earnings moves. RIC benefits from a big post-earnings move, but requires less movement than a straddle or strangle.
