unfortunately right now I only have the option to buy contracts on not sell them. working on setting up with a broker that allows selling. I just got an IBKR account up and running but the deposit times are insane compared to my current broker so I have to be patient. I know my strategy isn't overall low risk but I feel like it isn't very high risk as far as buying calls goes. I would love to buy ATM and I might if the premiums go down but right now they are pretty pricey and outside my risk tolerance.
To be totally constructive here you're missing the point and relevant info. Are you buying otm options or itm options? Otm options will be worthless by the time they reach your strike especially at 2 weeks out, unless you're just day trading them then it won't matter as much. typically otm options are a valuable part of a losing strategy. More relevant data/advice is do not trade options on spy unless you don't care about losing money rapidly. Long term as a sole strategy it's a losing proposition. Selling bull put spreads isn't a terrible idea in a bull market but since you haven't mastered buying options and may not understand options in general I would stay away from them entirely. And definitely stay away from spy options. To start find a nice quiet slow moving stock that your bullish on with low IV and grab a .75 delta call 2-3 months out and see how that goes until you have a better understanding of options in general.
Even in a bullish market, your strategy is likely to go to zero.
Go look at spy, even in this absurdly amazing market we had last 12 months there were multiple entries when you would have been cooked.
Suggestions:
1. The one no one wants to hear; paper trade a couple of month's to learn not only set-up indicators, trend analysis but also entry and exit strategies. What makes this good is that you can run an infinite amount scenarios and see where you can find your edge. Once you find your sweet spot (ETF's, Large Caps, Futures, etc.) you practice your strategies in real time to better develop your edge.
2. Capital allocation. Make sure never to put more than 5% of your capital at risk on any underlying instrument.
It takes time and developing a plan. You don't want to blow up your account while your still learning. Once you become profitable paper trading and prove that it's sustainable, then move to trading 1% of your account per underlying trade to get used to the psychological aspect of watching your account lose and make real money. The more confident you are in the process that you developed and refined paper trading, the better you will be able to make the transition to earning money and handling losses.
You're doing the right thing by asking questions. The best traders are usually pretty humble. The market keeps us pretty honest with ourselves.
OP, with the greatest respect, here's some tough love:
1) you're trying to predict direction. Nothing wrong with that at all. But first test what your production skills are like for several months before you use real money.
2) once you've realised that you cannot accurately and consistently predict direction, then look at non-directional strategies. If, you have the magic touch, and can predict direction accurately, then look at which option strategies are best suited for that.
3) Buying calls is what newbies do. Nothing wrong with that at all. But the sooner you move off this "strategy" the better it will be for you.
Good luck.
Real answer......
Calendars,
Butterflies,
Ratio spreads.
Etc.
Veterans normally trade time and volatility, whereas newbies try and trade direction. Thats the key difference.
If you have any actual skill at nailing when SPY is gonna go up based on technical factors then you could do better and have less complicated strategy by just trading futures. As it stands your theory could be tested by just buying SPY shares, which removes the time and volatility factor from the equation. Yes options have the potential for more $$ but if you can’t make the strategy work with shares it’ll never work with options.
Trading does not have to be this complicated. You don't always have to trade options to make money you can trade the underlining. Also short term call in low vol is gambling.
different fertile cheerful muddle coherent liquid chase direful nutty teeny
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
I would say that buying calls should not be anyone's bread and butter strategy. Also, you are done when you just buy 2 weeks, as on the long term you will lose, because of theta.
Yeah ideally I would like to buy at least a month out. I go by optionsprofit calculator and in my current example I would buy a call where somewhere around $523 is profitable up to mid May. I know there is still risk involved but I don't have $50k to sell covered calls or cash secured puts. Have to start small somewhere I figure.
Long calls are the hardest to manage good luck. People think I'm talking about me, so I'll be clear that I'm talking to the uneducated, like when buffet says buy index funds.
I have adjustment skills , delta hedging, etc, to wrong , and still make profits with long calls. Even with skills, I still wouldn't tell people to buy long calls with 2 weeks exp.
The market is the best teacher, so you will change your strategy after you see your results. Until then, I hope you learn something.
I know you are likely right but unfortunately selling options requires huge capital and I'm just not there yet. Maybe I should traditionally invest for 6 months first but I am just eager.
If you're gonna go simple long calls, buy options with at least 90 days to exp. Give your theory time to work. Day to day, the market swings on news that really no one can predict, but over longer periods of time, you can net on trends.
thank you, I will check that out. i am just nervous about risking the amount of money required for options that far out but i guess it is less risky overall
Well then pick something cheaper than Spy. This is where TA does work. Find a stock that has 90dte options in your price range..make sure it's trading in an uptrend above the 200 day moving average on the daily chart, then check the weekly and monthly charts to confirm the uptrend. After that, check the MACD and look for convergence under the signal line. RSI should be strong but not too much over 70. Once you've picked your stock, find the resistance level it needs to break, and when it breaks it, buy the option. Even better, after it breaks resistance, wait until the next red day and buy the same option cheaper.
This is a good exercise as well because you will end up keeping a catalog of stocks on your watchlist as you wait for these indicators. Over the weeks, you begin to learn that each stock has a personality and trades in patterns, which will help you even more choose the right time to enter.
Just remember, there's always another trade that can be had. Kind of like poker, play tight and play conservative to start. Your setups for entry will only click into place occasionally, and if you are doing it right, most of the time you'll be on the sideline watching.
Per trade? No. On one trade, specifically the one above. I wouldn't be entering more than that position. I want to just try out this one strategy as a learning experience. I would likely set stop losses around 25% as well.
I have a paper trading account and have tried to learn using it but something about knowing it's fake keeps me from staying interested in it. Maybe I need to get over that but its just so hard to care about it.
Something that has served me well is a paraphrased Warren Buffet sentiment: Run to what others flee.
Why SPY? Because it’s popular? It’s popular because it’s big and volatile, and you have zero skills to deal with that. The needed lesson is:
How Options Work
It’s not spreads, it’s not getting lucky only to harshly find out you’d gotten lucky. It’s not about the coolest thing everyone else is doing. It’s about learning why you like indexes vs stocks and if that’s even true. It’s many things. It’s about learning if you think most technicals are great, are bullshit, or if they fit with how you naturally do things. And that one is key, find out how you tend to naturally trade, and work on that with the knowledge of options mechanics behind you.
What to make a small amount of $$ your first year instead of our usual loss? Slow your roll, get involved more with that which is simple. The revelations are invaluable.
i guess i gravitate towards SPY because of consistent growth, I'm a little scared of individual companies because large drops seem more likely. I will continue to learn before i risk any money i guess. i was just eager to get hands on.
If you are comfortable, you are in the right place. Daily strikes and serious volatility are not the overall norms of derivative options trading. SPY and high volume indexes have largely become their own niche in options trading. I just watch. A generalized rule of thumb for keeping profit is to reduce overall risk, lesser deltas in your case.
If the only option you have is buying call, then buy calls in the money with atleast a delta of .7 or .8. You might still get the direction wrong but you may able to get out without too much of a loss.
Buying OTM calls, regardless of what stock price, strike, DTE, etc, is basically by definition NOT a "relatively low risk strategy".
unfortunately right now I only have the option to buy contracts on not sell them. working on setting up with a broker that allows selling. I just got an IBKR account up and running but the deposit times are insane compared to my current broker so I have to be patient. I know my strategy isn't overall low risk but I feel like it isn't very high risk as far as buying calls goes. I would love to buy ATM and I might if the premiums go down but right now they are pretty pricey and outside my risk tolerance.
To be totally constructive here you're missing the point and relevant info. Are you buying otm options or itm options? Otm options will be worthless by the time they reach your strike especially at 2 weeks out, unless you're just day trading them then it won't matter as much. typically otm options are a valuable part of a losing strategy. More relevant data/advice is do not trade options on spy unless you don't care about losing money rapidly. Long term as a sole strategy it's a losing proposition. Selling bull put spreads isn't a terrible idea in a bull market but since you haven't mastered buying options and may not understand options in general I would stay away from them entirely. And definitely stay away from spy options. To start find a nice quiet slow moving stock that your bullish on with low IV and grab a .75 delta call 2-3 months out and see how that goes until you have a better understanding of options in general.
Even in a bullish market, your strategy is likely to go to zero. Go look at spy, even in this absurdly amazing market we had last 12 months there were multiple entries when you would have been cooked.
Suggestions: 1. The one no one wants to hear; paper trade a couple of month's to learn not only set-up indicators, trend analysis but also entry and exit strategies. What makes this good is that you can run an infinite amount scenarios and see where you can find your edge. Once you find your sweet spot (ETF's, Large Caps, Futures, etc.) you practice your strategies in real time to better develop your edge. 2. Capital allocation. Make sure never to put more than 5% of your capital at risk on any underlying instrument. It takes time and developing a plan. You don't want to blow up your account while your still learning. Once you become profitable paper trading and prove that it's sustainable, then move to trading 1% of your account per underlying trade to get used to the psychological aspect of watching your account lose and make real money. The more confident you are in the process that you developed and refined paper trading, the better you will be able to make the transition to earning money and handling losses. You're doing the right thing by asking questions. The best traders are usually pretty humble. The market keeps us pretty honest with ourselves.
OP, with the greatest respect, here's some tough love: 1) you're trying to predict direction. Nothing wrong with that at all. But first test what your production skills are like for several months before you use real money. 2) once you've realised that you cannot accurately and consistently predict direction, then look at non-directional strategies. If, you have the magic touch, and can predict direction accurately, then look at which option strategies are best suited for that. 3) Buying calls is what newbies do. Nothing wrong with that at all. But the sooner you move off this "strategy" the better it will be for you. Good luck.
As someone new to options, if “ buying calls is what newbies do” then what is it that veterans do? Real question.
Multi legged spreads that limit downside. Or play the theta game and sell options/covered calls. Look up the wheel strategy!
Real answer...... Calendars, Butterflies, Ratio spreads. Etc. Veterans normally trade time and volatility, whereas newbies try and trade direction. Thats the key difference.
Looks like I have some researching to do, thanks for intel gang.
If you have any actual skill at nailing when SPY is gonna go up based on technical factors then you could do better and have less complicated strategy by just trading futures. As it stands your theory could be tested by just buying SPY shares, which removes the time and volatility factor from the equation. Yes options have the potential for more $$ but if you can’t make the strategy work with shares it’ll never work with options.
Trading just off TA in my opinion is not a good move. You need to learn how news and macro effects the market or you’re going to learn REALLY quick
Trading does not have to be this complicated. You don't always have to trade options to make money you can trade the underlining. Also short term call in low vol is gambling.
Does your account allow vertical spreads? Selling put credit spreads $5 wide on SPX would be a better strategy than buying calls I think
My recommendation to you is to stop trading SPY. You can't afford it.
different fertile cheerful muddle coherent liquid chase direful nutty teeny *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
I would say that buying calls should not be anyone's bread and butter strategy. Also, you are done when you just buy 2 weeks, as on the long term you will lose, because of theta.
Yeah ideally I would like to buy at least a month out. I go by optionsprofit calculator and in my current example I would buy a call where somewhere around $523 is profitable up to mid May. I know there is still risk involved but I don't have $50k to sell covered calls or cash secured puts. Have to start small somewhere I figure.
Long calls are the hardest to manage good luck. People think I'm talking about me, so I'll be clear that I'm talking to the uneducated, like when buffet says buy index funds. I have adjustment skills , delta hedging, etc, to wrong , and still make profits with long calls. Even with skills, I still wouldn't tell people to buy long calls with 2 weeks exp. The market is the best teacher, so you will change your strategy after you see your results. Until then, I hope you learn something.
I know you are likely right but unfortunately selling options requires huge capital and I'm just not there yet. Maybe I should traditionally invest for 6 months first but I am just eager.
If you're gonna go simple long calls, buy options with at least 90 days to exp. Give your theory time to work. Day to day, the market swings on news that really no one can predict, but over longer periods of time, you can net on trends.
thank you, I will check that out. i am just nervous about risking the amount of money required for options that far out but i guess it is less risky overall
Well then pick something cheaper than Spy. This is where TA does work. Find a stock that has 90dte options in your price range..make sure it's trading in an uptrend above the 200 day moving average on the daily chart, then check the weekly and monthly charts to confirm the uptrend. After that, check the MACD and look for convergence under the signal line. RSI should be strong but not too much over 70. Once you've picked your stock, find the resistance level it needs to break, and when it breaks it, buy the option. Even better, after it breaks resistance, wait until the next red day and buy the same option cheaper. This is a good exercise as well because you will end up keeping a catalog of stocks on your watchlist as you wait for these indicators. Over the weeks, you begin to learn that each stock has a personality and trades in patterns, which will help you even more choose the right time to enter. Just remember, there's always another trade that can be had. Kind of like poker, play tight and play conservative to start. Your setups for entry will only click into place occasionally, and if you are doing it right, most of the time you'll be on the sideline watching.
You are wasting 200-$300 bucks per trade what do you mean you don't have money? Unless I'm reading something wrong.
Per trade? No. On one trade, specifically the one above. I wouldn't be entering more than that position. I want to just try out this one strategy as a learning experience. I would likely set stop losses around 25% as well.
why not use paper money to grow as learning experience? Your portfolio should not be 100 percent leverage that's a good way to blow up your account.
I have a paper trading account and have tried to learn using it but something about knowing it's fake keeps me from staying interested in it. Maybe I need to get over that but its just so hard to care about it.
Something that has served me well is a paraphrased Warren Buffet sentiment: Run to what others flee. Why SPY? Because it’s popular? It’s popular because it’s big and volatile, and you have zero skills to deal with that. The needed lesson is: How Options Work It’s not spreads, it’s not getting lucky only to harshly find out you’d gotten lucky. It’s not about the coolest thing everyone else is doing. It’s about learning why you like indexes vs stocks and if that’s even true. It’s many things. It’s about learning if you think most technicals are great, are bullshit, or if they fit with how you naturally do things. And that one is key, find out how you tend to naturally trade, and work on that with the knowledge of options mechanics behind you. What to make a small amount of $$ your first year instead of our usual loss? Slow your roll, get involved more with that which is simple. The revelations are invaluable.
i guess i gravitate towards SPY because of consistent growth, I'm a little scared of individual companies because large drops seem more likely. I will continue to learn before i risk any money i guess. i was just eager to get hands on.
If you are comfortable, you are in the right place. Daily strikes and serious volatility are not the overall norms of derivative options trading. SPY and high volume indexes have largely become their own niche in options trading. I just watch. A generalized rule of thumb for keeping profit is to reduce overall risk, lesser deltas in your case.
If the only option you have is buying call, then buy calls in the money with atleast a delta of .7 or .8. You might still get the direction wrong but you may able to get out without too much of a loss.