Over the next two months, I will review a series of articles that describe my systematic approach to the negotiations. This week we start with an introduction to methods. There are several option trading approaches. Regardless of which one you approve, we should have confidence in it.In the light is that we start this series of articles. my approach my commercial personality fits and after 17 years, I have very strong opinions about what works and what doesn't.
In this first article, I would simply like to outline some of the best trading philosophies.
Flexible – There is no silver bullet strategy that will always work. The tactic is a function of my stock market bias, my mind and total trading environment. You must monitor the changing conditions and to adjust, for example, right now the option implied volatility is near historically low levels. This is not a time to sell premium. I should be looking for buying opportunities.
To directional – type of opinion on the stock and are quite sure to tell the world Large returns from is on the right side of a movement, not far away from all your risk. Solid research is the key. The idea comes from my desire to make good money, no attempts are made. It is very hedged neutral and distribution and months consistent performance can be taken immediately by a bad trade.
Start by purchasing – all analysis must start with the market. Seventy five percent of all stocks, follow the market and if I'm on the wrong side of me would lose money three out of four times. Watch for seasonal patterns, resistance end-of-month/beginning of the month, trading and finish trends. For example, we are moving in a circle at the end of the month, and there is an opportunity for market power. After that, in September is usually one of the worst months of the year.Taking into account the comments made me so far, I can conclude that I will use every Rally to buy cheap put premiums to the end of the week.
Simplicity – Complex hedge positions I mean me away and I am uncertain about the result. Commissions and bid/ask time will reduce my profits.Also it would be difficult for me to take profits, since there are many obstacles to trade. Had never trade where you are right, but you cannot make money because they were spread your hung from? trade and vaporized. The "simplicity" philosophy helps me to reduce frustration.
Commit position – when I trade options, I have to pay a premium for increased funding and risk reduction.The premium comes in the form of premium supply/ask time, loss of time and commissions.When I insert a commercial option, I have a higher level of commitment. postures are wider and I know I can't jump and undertaking.Usually, I'm currently out for trade a selection will be made and I do not consider returning.
Form a strong opinion of stock Perhaps importantly my rule.If you cannot provide a particular opinion, I will keep better looking ... my opinion is critical, since this will determine the strategic choice would write extensively about this issue in the coming weeks.
Try to stay balanced – balance in terms of market bias means that I carry posts daily and bearish stock option with relative strength and weakness; thus, reducing the risks of the market. balance may be also means a balance of long and short option premium strategies if the environment implied volatility is at one end; for example, may require long and places and may have put credit spreads and call credit spreads in stocks.
These are some of my General option trading philosophies in the next post, I discuss what I look for when forming my opinion and how I influence my conclusions.
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