SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

Profit With Non-Directional Trading


Directional and non-directional are two variations of trading strategy. Directional trading strategy is simpler, but many traders are successfully using non-directional trading strategy. Non-directional trading strategy is the best option for traders who do not want to bet on the direction of the markets or individual stocks.

While many traders are already using the non-directional strategy, some are still learning it. In conventional trading method the traders use to think that market runs in a single direction and predict prices accordingly to buy and sell things. Directional trading strategy no doubt is a very risky especially when the market runs in the opposite direction. This is when the role of non directional trading strategy comes in.

With non directional trading, you don't care which direction the underlying is moving. You can make money in any market.

Here are some of the most popular non directional strategies:

The following infographic explains what is a non-directional trading, and gives some examples of non-directional trading strategies.
 

steadyoptions (2).jpg

 

 

 

What Is SteadyOptions?

Full Trading Plan

Complete Portfolio Approach

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • Options on Options

    Traders have long known that options can be opened on many different securities. Among the most ingenious of these are options on options. There are four types of these: call on a call (CoC), a call on a put (CoP), a put on a call (PoC), and a put on a put (PoP).

    By Michael C. Thomsett,

    • 0 comments
    • 153 views
  • The Wheel Trade

    The “wheel” trade is variously described as a beginner’s strategy, a combination to exploit features of both calls and puts, and as “perfect” solution to the well-known risks of shorting calls, even when covered. The wheel could be defined as any of these, but a larger question should be: Is the wheel an elegant method for making profits consistently, or just a gimmick?

    By Michael C. Thomsett,

    • 0 comments
    • 460 views
  • Chooser Options

    Most options traders see their world as a choice between calls or puts, alone or in various combinations. But there is more. With a chooser option, traders can open a position and decide later whether it will be a call or a put. This is also called an as you like it option.

    By Michael C. Thomsett,

    • 0 comments
    • 399 views
  • Leveraged Anchor 2020 Year In Review

    Steady Options has now been trading the Leveraged Anchor strategy for two years, and, somewhat to my surprise, 2020 went even better than 2019. On the year, Leveraged Anchor was up 31.7%, while the total return of the S&P 500 was 18.4%.

    By cwelsh,

    • 2 comments
    • 1,171 views
  • Ratchet Options

    The “ratchet option” is so-called because as a series, each successive position activates when the previous option has expired. The trader ratchets up (or down) to the next position. Each one is set up to be as close to the money as possible. It has many names, including cliquet, moving strike, ladder, lock-in, or reset option.

    By Michael C. Thomsett,

    • 0 comments
    • 422 views
  • Steady Momentum 2020 Year in Review

    Steady Momentum Put Write (SMPW) is one of the available subscription services at Steady Options. We launched the strategy in early 2019, so we now have two years of performance to evaluate on both an absolute basis and relative to the strategy’s benchmark, PUTW (WisdomTree CBOE S&P 500 PutWrite Strategy Fund). 

    By Jesse,

    • 0 comments
    • 401 views
  • SteadyOptions 2020 Year In Review

    2020 marks our 9th year as a public trading service. It was an excellent year for us. We closed 130 winners out of 194 trades. Our model portfolio produced 117.1% compounded gain on the whole account based on 10% allocation per trade. We had only three losing months in 2020. 

    By Kim,

    • 0 comments
    • 684 views
  • The Jump-Diffusion Pricing Formula

    One of the more complex areas of options analysis involves pricing formulas. The best known among these is the Black Scholes Model (BSM). This is a widely cited method for attempting to determine what the option’s premium should be, but it is deeply flawed.

    By Michael C. Thomsett,

    • 0 comments
    • 445 views
  • Ranges of Exotic Options

    The standard call and put are well known to all option traders, but many exotic and more advanced options can also be opened. Whether a specific broker allows trading in these, and whether a trader has the necessary trading level, are questions to be addressed. This article just defines many of the exotic options that are possible.

    By Michael C. Thomsett,

    • 0 comments
    • 528 views
  • What To Do Before Committing To Trading

    Trading cryptocurrency has become a very popular and significant part of life. While it’s not for everyone, it’s certainly for an awful lot of people. There’s money to be made and areas to be invested in, and people will do what they can to make either a quick buck or an amazing figure.

    By Kim,

    • 0 comments
    • 689 views

  Report Article

We want to hear from you!


I understand why an options trader might prefer using a non-directional trading strategy rather than, as you phrase it, "bet on the direction of the markets or individual stocks". These non-directional trading strategies certainly minimize your loss potential, but at the same time limit your profit potential.

With proper risk management directional trading strategies can be even more profitable and you can unwind the trade at any point you see the market starting to move against you. With sufficient amount of research and analysis on a specific stock you can predict where the market won't go to in the allocated time frame (expiration month) rather than trying to predict where the market for that stock will go to in the allotted time frame.

There's a hugh difference in the two approaches. In the second approach, which I don't want to take, I'm making a guess at where I think the market will end up at the end of option expiration. That's the hardest game to win. Nobody is that good at figuring out the where and when of a market move. But, if you are somewhat good at having at least a general idea of which way the market is headed (either higher or lower), you can also make a pretty good guess as to where the market probably won't end up at option expiration.

When you sell options, your only concern is for the market to not go pass the OTM option strike that you are short. That's the key. And when you have a general idea where the market probably won't end up at option expiration... you're chances of a profitable trade are pretty good.

Share this comment


Link to comment
Share on other sites

There are many ways to trade options. Directional strategies might work for some people. It is true that non-directional strategies usually limit your profit potential. But with directional strategies, profit potential is unlimited only in theory. In reality, how many times did you get 100%+ gains? And how many times did you lose 50-70% or more?

It also impacts your position sizing. When you know that your risk is limited to 20-25%, you can allocate larger positions to those trades.

Also, don't forget that there are many types of non-directional strategies. Some strategies bet that the underlying will not move much. Others like straddles need it to move - just doesn't matter which direction.

The bottom line is that everyone should find what works for him and stick to it. There is no holly grail, only hard work and discipline.

Share this comment


Link to comment
Share on other sites

Your statements about non-directional strategies are well taken. I completely agree with you that everyone should find what works best for them and stick to it. For me directional strategies have proven to be very profitable. In reality I usually get 100%+ gains around 90% of the time, and I have never had a 50-70% loss selling options. Thanks again for your feedback.

 

Share this comment


Link to comment
Share on other sites

Well, 100%+ 90% of the time would probably make you the best trader in the world.. By large margin. I definitely cannot compete with those results.

On the other hand, my results are fully documented. Our non-directional trading produced 82% 5 Year Compounded Annual Growth Rate (including commissions). I still have to see directional strategy consistently producing similar results (or even half of it). I mean, not some absurd claims, but fully documented track record, with portfolio allocation etc.

Share this comment


Link to comment
Share on other sites

I'm certainly not the world's best trader, but at the same time I'm not making an absurd claim. Since I don't currently have fully documented trading results neatly tabulated to present at this point, I'll have to present them at a later date. To successful trading.

 

Share this comment


Link to comment
Share on other sites
2 minutes ago, Michaelg said:

Since I don't currently have fully documented trading results neatly tabulated to present at this point, I'll have to present them at a later date. To successful trading.

 

I didn't think so..

And yes,  making 100%+ gains around 90% of the time IS an absurd claim. Lets see your directional trading results in real time.

Share this comment


Link to comment
Share on other sites
3 hours ago, Michaelg said:

In reality I usually get 100%+ gains around 90% of the time, and I have never had a 50-70% loss selling options.

 

Michael,

 

Any strategies you'd be willing to share with us?

Share this comment


Link to comment
Share on other sites

I only want to state to support Kim´s words, that it is possible to follow SteadyOptions trade ideas (with the same or slightly different parameters, entry, exits, adjustments, ...) and get similar and from time to time better results (depends on your risk tolerance, Kim is in my opinion quite conservative and wants him followers to be able take similar results). Kim is willing to discuss and share any new approach or idea in options trading. Are you too? Show us any and we can give you our opinion if you want.

good trading

Share this comment


Link to comment
Share on other sites

@Noah Katz

Turns out that the "secret" strategy that makes " 100%+ gains around 90% of the time" is selling naked puts.

According to Michael, "100% gains is keeping the entire option premium that I received as the result of the option contract expiring worthless."

However, there is a "small" problem: when you sell a naked put, there is margin requirement. And the only way to calculate gains is return on margin. Depending on the stock and the expiration, your return on margin is usually around 10-15% if your sell slightly OTM puts. Nowhere close to 100%+ gain. Yes, you can win 90% of the time if you sell far OTM puts with deltas of 10-15, but in this case your maximum gain is usually 3-5%. 

Unfortunately, internet is full of hype from people that will tell you what you want to hear. In some cases it is ignorance, in others it is intentional misleading. Be very careful when someone makes absurd claims. Usually when you dig deeper, you find out the "fine print".

Share this comment


Link to comment
Share on other sites

What you characterize as intentionally misleading was really a misunderstanding. Granted it may have been ignorance on my part, by misinterpreting what you meant by a 100%+ gain. But to me keeping all the initial premium I received when selling naked puts is a 100% gain or more appropriately said a “100% win”… since that’s the maximum profit that can be made on that type of trade.

There are many recognized options trading experts that promote selling naked puts as a fabulous way to collect option premiums, which generates income for you while you wait to potentially purchase your stock at a lower level.  It’s an alternative way to take advantage of your bullish outlook of the market.

How great is that? Someone will actually give you cash today in exchange for the opportunity to buy a stock at a lower price. You can see it as sort of a consolation prize given to you for your patience as you wait for your stock to get cheaper. As a result, this strategy falls into the “income-producing” category.

Naked put selling is a time-tested, legitimate, and popular strategy. If you’ve ever looked through the educational material published by the U.S options exchanges, you will see the naked put selling strategy is listed right along with all the other strategies like the ultra-simple “long-call” and the more advanced “iron butterfly”.

You only want to sell naked put options on stocks you want to own. But since you are selling OTM put options on these stocks, it's unlikely you will be assigned the shares. Thus, the option contract expires worthless and you keep the full premium. So it’s an incredible way to earn passive income while you "sit on the sidelines of the stock market".

So directional trading, like naked put selling, can be very profitable… potentially more so than non-directional. Kim, even by your own admission in an earlier post in this string you stated: “It is true that non-directional strategies usually limit your profit potential.”

I don’t want to argue which is better, but importantly which method works best for you. I think it would be more prudent on your part to be more careful how you characterize another person’s statements and /or intentions.

Share this comment


Link to comment
Share on other sites

You missed my point.

Is selling puts good strategy? Absolutely! It's not a holy grail (you profit less if the stock goes up a lot), but it's a great way to buy stocks at discount. However, I find it ironic that you advocate this strategy as superior to non directional trading while mentioning that non directional trading limits gains. Isn't put selling limiting gains as well? In fact, it limits gains much more, because some non directional strategies like straddles or calendars can win more than 100% in some cases.

But my main point was about your claim about 100% gains, which turned out to be extremely inaccurate. 100% gain means that if you allocate 1k to a trade, you end up with 2k. With naked puts selling, this is not the case. 

As a side note, your claim "But since you are selling OTM put options on these stocks, it's unlikely you will be assigned the shares." is also inaccurate. If your put is slightly OTM, it will have delta of around 40, which gives you 40% to be assigned. If you go further OTM, you will have higher probability of success, but also lower potential gain since you will get less credit.

I don't know you, and I have no idea if your 100% gains claim was ignorance or intentional misleading. Frankly, it doesn't really matter. Nobody should make such absurd claims. And when you say on your website "What If You Could Always Be Profitable in Today’s Markets… And With Less Money at Risk" - yes, I have a big issue with this statement. It is very misleading, and it doesn't matter if the reason is ignorance or intentional misleading. Not only nobody can be ALWAYS profitable, but in fact, naked puts selling places more money at risk, not less. And if you consider it a safe strategy that can always win, ask those who sold naked puts on S&P500 in 1987 or 2008. Some hedge funds went out of business after doing it.

How To Blow Up Your Account article might help to understand the risks of put selling. Doesn't mean it's a bad strategy - on the contrary. But describing it as a holly grail that cannot lose money is very inaccurate and misleading.

Share this comment


Link to comment
Share on other sites


Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account. It's easy and free!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

Options Trading Blogs Expertido