You asked now you got it.
Brevity ain't my thing and I tend to post in War and Peace length bursts. Digest and ask questions later, I can't promise a quick reply but I'll get to it. Randy's the only one I'll communicate with during the trade day and it's usually just when market hit's or nears an extreme as his macro reads are spot on (something I honestly can't really do) or if I see something in my novice TA glimpse I want confirmed.
There are more ways to skin a cat in this game and if you make money consistently in outright stocks or even buying options (I don't recommend the latter if you aren't really really good at technical analysis, unless you just like giving away all your money to the other party
). Seriously though, more power to you if those are your style, just outlining my style here and the thought process behind what I do here.
I'll preface this by saying most of what I learned on the options side was from the all free online trading network
tastytrade so if you have deeper interest I'll refer you to their awesome site of resources and the awesome beginning option trader platform they built and can use if you have a TDAmeritrade Acct
dough. They have archived videos and studies, a learn tab with a glossary that not only defines terms in a concise blurb but also has accompanying videos on the topic. You should also check their market measures archive as they are an awesome place to start. They have a kind of whimsical approach to the network so if you don't have a sense of humor or just a strait line one take it with a grain of salt, the information is nails and literally life changing (as much as you want to work at learning the domain). I'm very loyal to them as they are so accessible, literally answering all emails (they do ask you try and keep it brief b/c of that policy) and even going to bat for you on commissions with TDA (they built the ThinkorSwim platform and sold that company to TDA for a little under a billion). Anyways b/w them and Randy I/you've got some amazing mentors who don't just shoot the bull on the subject but all consistently know how to extract money out of the market and have done so for decades. It's not luck, it's not guessing, it's a skill set.
I've been blessed by GOD to make a living off my passion/hobby and work where I want (today I'm poolside at my moms, and I just paid off our Class C RV so soon I'll be trading in the Rockies and wherever the road takes us as my wife home schools our kids around the USA). I'm content trusting probability and hitting singles and doubles everyday, with the occasional triple and even homer, but mostly slow and steady is my race and I'm usually on the medal stand (I get it, this metaphor sucks and I'm crossing sports I don't even watch
but you get the gist ).
I'll do some basic TA (tech analysis) but just for very vague engagement, for me in my ability with it, it's like a map that gets you close but just more a general, gets you to the vicinity more where things are trading relative to it's range and have a rough idea where it might go and I'll use it for future scalps intraday (I'll explain later but it's just my hedge so it doesn't matter it's not perfect, not my money maker just my hedge which will always be outpaced by my core position) . . honestly though for the way I trade my secret is I don't know s * & t and I don't pretend to know s * & t and I don't really care (barring extremes) b/c with short options premium, I win up down or sideways on my core position which is usually naked short puts usually in /ES (S&P futures options) vs. enough short /ES outright futures to balance my delta (always make sure your deltas are weighted, with /ES it's self weighted but when it's not an index based underlying, say you are selling puts in AMZN you can weight it to the SPY or in that case better yet the /NQ since it's in the nasdaq index) . . .anyways I sell puts far from the money (about 2 standard deviations or more out or 95% probability of expiring OTM (out of the money).
Quick elevator pitch on selling options vs. buying options vs. buying/short selling stock
1. Stock buy or shorting--it's by definition a 50/50 proposition, no matter what you thing you know that's the odds
2. Buying Options (buying puts -short, buying calls-long) ou not only have to be right on direction, you have to be right pretty quickly or the theta decay (time decay) that is part of my bread and butter as a premium seller will eat you alive--it works for Randy b/c he doesn't go in unless he's pretty certain based on his TA he's going to get that pop in either direction but for me after years of pissing away money thinking I knew something I rarely touch them, in fact it's usually only when Randy sees something
3. Selling Options ( selling puts is long, selling calls is short)--when you sell an option you don't have to be right immediately or even right at all on direction, you can win up, down or sideways...theta decay (time decay) allows eats at that premium you collect up front once you put it on, when you do this you also ideally put it on when volatility is high so you also have vol crush in your favor, throw in actually being right on direction and that's just icing on the cake
3a THE TRADE OFF here---so everything has a trade off:
1. your risk is theoretically undefined but in honesty you can also have a stock go to zero theoretically odds are low though
2. your max profit is set at entry, while a stock or bought put/call can theoretically run forever you go in with a set max profit, the premium you collect up front---again while that may be a turn off for some if you were in Vegas and you came across a table that offered awesome gains for 95% probability of not losing you'd be parked there all weekend, hell you may never leave
. . .you are the house and your only risk are the big outlier moves but as you'll see later, there are ways to hedge your position so you aren't totally exposed be it selling premium in verticals where you can define risk or as I do preferring to be an outright premium seller and cutting down on verticals and iron condor commissions you can just sell outright futures against your puts (appropriately balancing the deltas---either balanced or skewed either way for directional assumption if you choose to play it that way)....you can also sell calls but the skew in premium favor puts heavily so unless vol is really ramped up I don't mess with that side as much as I used too unless I'm selling covered calls in high implied volatility stocks (great for stock that's been beaten up that you'd like to get long, the call in more juiced so it helps lower your basis or in a bad case scenario it greatly reduces downside if the stock keeps tanking--one of the safer market plays out there in any style)
Ideally I put the position on after we have some volatility ramp up. Been pretty awesome since Friday b/c volatility os so ramped up and I can go even "safer" further away to collect same premiums and or collecting premiums at the 95% level still which are way fatter than I'd normally collect
When we were up towards market highs I'd do this strategy with the outright short future perfectly balanced or skewed a little heavier than the puts b/c you knew at some point we'd breakdown and if not the theta decay on my puts would outpace any modest up move. Now that we're down here I'm using the short future some but more balanced towards the letting the puts do their thing (theta decay, vol crush, and any price move my way is just icing on the cake)....when things feel sketchy I'll cover my backside and throw the short future(s) hedge back on and it's good practice scalping them around the position, but I don't care if I really make money on that side (though I've built up good basis since Friday, where I can leave them on and basically be covered for free up to about 20 pts above).
Now that we finally have a two sided market. I'm more aggressively managing the winners, instead of 50% I'll take a good winner pretty quick, b/c good odds we'll swing back down and vol will swing up as will the price action both fattening up short puts to reset with (I was more stingy before in hanging on longer b/c market has been so brutal grinding up for so many years and taking away any offered volatility right back away so quickly). It may happen again soon, but so far it's finally getting the feel that it's here to stay (sorry I probably just jinxed it for everyone and the FED will rip it back up next week and it'll never be allowed a healthy needed correction
). Again though, I don't know jack about direction, in fact the only time I lose money is when I think I do LOL. Randy however, is nails on the big trend and spotting direction in various stocks that hit his screener.
(sure there's lots of typos but i've got to run and I want to post this before it gets deleted)
