Jon H. Ryan said:

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What would you suggest as a minimum beginning balance?

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quick answer at least a $1,000 (allows you to put on almost 15 modest verticals at a time). 15's kind of the magic number for that strategy to see the probabilities play out in your favor consistently. (keep in mind you kind of need to be tuned into uncorrelated underlyings for that to play out as it should---search countless tastytrade videos on that topic)

Depends. If you are just playing with strategies and want to have a decent number of occurances so the probabilities play out more or less as they should, doing vetical spreads (safe risk defined, basic options strategy that is not real capital intensive) a thousand or so. Obviously the more the better (a few thousand) and more if you actually want to make some money. But for getting real learning with real money, that'd be the way to go. You wont make much but you wont really lose anything significant either and more valuable in that process you'll learn to trade and manage your own money.

Then when you are ready to take it to the next level and more heavily fund your account and take more advantage of selling premium and taking advantage of not just probability but time decay you'll be set. It's a beautiful thing being dead wrong on direction but winning when an underlying is going up, down or sideways. That'll take time learning wise and in being comfy getting short premium, but its the core of what I do and when you can really start generating cash in any market environment consistently.

The low fee structure of tastyworks really helps for keeping overhead low on commissions ans doing the "small and often" tastytrade method (its a key reason they went back into the brokerage side of things, so it was eaiser for retail traders to do that method without getting gouged on commissions).

But in short it doesn't need to be a lot of starting funds if you are just trying to learn by doing. You could get by with less for that purpose but i just threw out $1000 so you've got room to have a few things on.

Just stay small, and the sooner you learn to be mechanical in managing the opposite ends of fear and greed the better. Thats not all going to come from just doing safe vertical spreads but its a good start and you start getting a feel for how the options and markets move.

Tastytrade has some great segments for beginners and those with small accounts.
-Several series of Where Do I Start are great for beginners
-Tastybites segments are great for people with small accounts
-market measures are great segments in general learning, i still follow those, always loaded with great takeaways

redsox34 said:

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bjh19 said:

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Anybody know the easiest way to invest in the VIX? Had been thinking about it recently - all time lows, budget/funding in congress, now North Korea.

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The easiest way to do it would probably be to buy VXX, but that's not something I would recommend. Volatility is not really an investment.

The best way would probably be some type of options strategy, like a short put vertical spread for instance.

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This verticals in the VXX. Dont get too sold on thinking the market has just gotta drop or go up, especially attaching news stories to it. I lost a lot of money early on, so convinced i knew what was going to happen. Not preaching just saying when things seem most doomed, market sense isnt often or ever common sense.

But with vol this poor that'd be the play if you think it pops here soon and with vertcials you can set your max loss going in. Good luck.

That's awesome Aggiemetal.

Curious what level of income you are able to produce; not in real dollars, but say in relation to what you did before? Did you replace it plus some? Or slightly less but enough to justify leaving and being free to roam?

62strat said:

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That's awesome Aggiemetal.

Curious what level of income you are able to produce; not in real dollars, but say in relation to what you did before? Did you replace it plus some? Or slightly less but enough to justify leaving and being free to roam?

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thanks..the latter, just a hair under comparable

but that's more due to the size of my account and having my principal taking a hit buying our RV outright last fall (we're a full time RV family which was part of the plan in my retiring from teaching early and doing this)....before we made that investment last fall I was making more each month (provided I was a teacher before but I digress LMAO )

aggiemetal said:

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62strat said:

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That's awesome Aggiemetal.

Curious what level of income you are able to produce; not in real dollars, but say in relation to what you did before? Did you replace it plus some? Or slightly less but enough to justify leaving and being free to roam?

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thanks..the latter, just a hair under comparable

but that's more due to the size of my account

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So second part question; what % of your account total is created as income? In other words how much are you working with to pay your self 'X'. 4X? 10X? 50X?

Currently, the fidelity accounts of my wife and I amount to about 2X yearly hh income.. but a large majority of that is pre tax dollars.. you have to be working with post tax dollars correct?

I'm genuinely curious in learning this lifestyle, but more for supplemental.. I don't know if we could give up the house, which means the mortgage payment remains. But my plan is to have us both retired by mid to late 50s, and kids just finishing college at that point.

You've come a long ways from the burning midget days my friend!

62strat said:

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aggiemetal said:

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62strat said:

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That's awesome Aggiemetal.

Curious what level of income you are able to produce; not in real dollars, but say in relation to what you did before? Did you replace it plus some? Or slightly less but enough to justify leaving and being free to roam?

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thanks..the latter, just a hair under comparable

but that's more due to the size of my account

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So second part question; what % of your account total is created as income? In other words how much are you working with to pay your self 'X'. 4X? 10X? 50X?

Currently, the fidelity accounts of my wife and I amount to about 2X yearly hh income.. but a large majority of that is pre tax dollars.. you have to be working with post tax dollars correct?

I'm genuinely curious in learning this lifestyle, but more for supplemental.. I don't know if we could give up the house, which means the mortgage payment remains. But my plan is to have us both retired by mid to late 50s, and kids just finishing college at that point.

You've come a long ways from the burning midget days my friend!

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sorry but not real comfortable going public on the personal finance side, you guys are probably way smarter than me in that regard so I'll let ya'll figure out that and your family situation/needs...I'm just here to give you one mans consistently successful approach to taking money out of the markets..I will say we definitely paired down our lifestyle, that was the whole idea behind it, simplifying things and not being a slave to crap and the rat race, missing the bigger picture as we had been...we were doing fine in the "real world", nice house and neighborhood, all that but just not happy. . . not saying it's for everyone but we desperately needed a change....nice to be self employed at 40 and waking up loving what I do everyday, I'm not making millions but I keep us living and travelling and when you've got a job like this not many days feel like work, even on the stressful down draw events, I know it's creating opportunity, it's kind of fun playing the game and thinking your way through the given challenge and beyond all that, it's no where near the stress level I had as a teacher...plus it's pretty cool one month trading in the Florida Keys looking at water bluer than windex over my laptop and the next starring at mountains in Colorado (beats even a really nice house in the Burbs for me, plus it's awesome for the kids all around)

funny you remember that (who is this?) ....Burning Midget was great times but death metal vocalist and trader is the same requisite skill set:
*ability to count to 4 and sometimes 7
*a set of balls

LOL j/k ...I'm a put your mind to it guy. I'm not dumb but I'm rarely the smartest guy in the room. However, there won't be many in that room that'll out work me when I'm into something and put my mind to it. Not tooting my horn just reiterating this can be done but like anything you can't cicrumvent cultivating the skill set. Why I keep saying anyone can do this though.

Only x factor is you do have to have some risk tolerance/temperament in being tested in a position and ability (very learned in my case) to curb emotion and manage fear when things ain't ideal and greed when a position is going your way (I always manage winners at 50%, not the number of contracts but say I collected 3.00 up front per each sold put, I without fail take it off at 1.50 at most---tastytrade back studies show that to overwhelmingly increase your chances of success, not leaving yourself out there and exposed just to lose it or just waste buying power trying to pick up nickels in front of steam roller, when you could have exited and reset out to a next expiration cycle at 3.00 again....more agressively if it comes in quick 30% or so if it comes in within days which can often happen after a Vol pop and then the market bounces and you get a Vol crush plus the price action which created that as extra wind at your back)


tastyworks account opening link

I understand not wanting to divulge anymore.

I have seriously considered asking my employer to cut my salary 17% and give me June/July off... wife is in education, so it would be a great situation. Kids will both be in full time school in 5 years, so then the daycare bill goes away, which means the salary cut would be a wash anyway!

While my screen name suggests otherwise, you know me as a drummer. (My FB picture shows me playing guitar.) My old screen name here was 'metaltim'.. that might give you a clue

62strat said:

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I understand not wanting to divulge anymore.

I have seriously considered asking my employer to cut my salary 17% and give me June/July off... wife is in education, so it would be a great situation. Kids will both be in full time school in 5 years, so then the daycare bill goes away, which means the salary cut would be a wash anyway!

While my screen name suggests otherwise, you know me as a drummer. (My FB picture shows me playing guitar.) My old screen name here was 'metaltim'.. that might give you a clue

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that'd be awesome if your boss will go with that and it doesn't hurt your standing there (assuming you care LOL ) ...daycare is brutal on the wallet

ha nice meeting people here I already knew well, cool to see you on this board brother...knowing you, your mind would be great for trading (way more naturally dialed into the math side than myself)

I've only been here 2 years, but it's totally laid back, and I can easily do my work from home (Project estimator, all my work is emails and using pdfs/bluebeam and excel.) My boss is the owner of the company. I'll push to have a day home a week maybe in a few years, then by 5 years from now, maybe I can convince him to let me do a few weeks in the summer remotely.. increasing it over time. Might not even have to do the paycut idea at all if I can swing the telecommute idea.

Daycare is brutal; wife could have stayed home, but she'd miss valuable years in her pension plan. Her net pay (after family medical premiums) is still more than daycare (albeit, not a whole lot), so it was a no brainer for us. She's on track for age 56/57. If she took off 5 years now, she'd be almost 65 to receive same benefit; it's not linear.

Man I use to sit in my office in Houston and wish I could be by the mountains too, so we both quit and just moved to CO hah.

I figured out who you were shortly after our fb connection and saw your fb posts about selling furniture/house and buying an rv, then a few days later I was reading a random post on this thread about selling house, buying rv, leaving job as a teacher. I was like dang that sounds like ****, then I saw the name posting it was 'aggiemetal' and said woah that HAS to be him!

Hit me up when you come to CO again.

I just started taking part in active investing recently, about a year or two ago. By that I mean, not just putting money in managed account/target date funds; I have picked and chosen a few individual stocks to buy/sell. So still pretty basic in the grand scheme of things. I have watched a few videos on options/calls.. I understand how it works, I'm just not knowledgeable on how to gauge what, when and why.

Fantastic post bonfire!

Apple has great products and incredibly valuable customer LOYALTY. Apple's customers prefer Apple's products even if the competition has a product temporarily better. I have also been adding to Apple and will continue to add on pullbacks.

That is good insight. I just increased my aapl holdings about 20% to 70 shares. I bought the majority at $107 and a bit more at $140.

But they are long term holds for me.. I'm hoping those are 6 figures by the time I retire.

My 401k vanguard fund is 3% Apple, still considering adding some shares because I agree that the stock is undervalued.

Aggiemetal, what is the bob the trader promotion you posted on the previous page?

Sanchez earning call on now.

aggiemetal said:

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Only x factor is you do have to have some risk tolerance/temperament in being tested in a position and ability (very learned in my case) to curb emotion and manage fear when things ain't ideal and greed when a position is going your way (I always manage winners at 50%, not the number of contracts but say I collected 3.00 up front per each sold put, I without fail take it off at 1.50 at most---tastytrade back studies show that to overwhelmingly increase your chances of success, not leaving yourself out there and exposed just to lose it or just waste buying power trying to pick up nickels in front of steam roller, when you could have exited and reset out to a next expiration cycle at 3.00 again....more agressively if it comes in quick 30% or so if it comes in within days which can often happen after a Vol pop and then the market bounces and you get a Vol crush plus the price action which created that as extra wind at your back)

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On my strangle with AMD, they were basically in freefall after earnings (after I made the trade). Stock was basically at $15 at trade initiation and I figured the put side at $13 was pretty safe, especially with less than a month to expiration, after the earnings release. After several days of it showing no signs of reversing its downward trend, I bought back the put at nearly double what I paid. While it was hard to do, I had to decide not to take any more risk and gamble a turnaround. Plus, having a second side to the trade meant that overall I would still come out ahead in total on the trade. Looks like I will only make about 13% of max profit (still haven't closed it out, but trying to for $0.01). But learning to just take any profit, even if it means taking a bad loss on one side that would make you think it was a terrible trade is probably just as important as managing a winner from the start. Today AMD is at $12.85 or so with 2 1/2 weeks to go. $12 is not out of the question and helps realize if you can guarantee a profit at any point when it doesn't start out like planned, go ahead and take it.

I had asked previously if they had a paper account for practice, and while they don't, they do allow a snapshot of any trade, even if you don't enter into it. With this you can simulate trades you would liked to have entered into without deploying any capital. Then as you track it with snapshots throughout the duration, it can help you see how trades can react in different scenarios. On one with JCP, a vertical short put would have started at 68% POP, gone up to 70% at one point, but then dropping to 59% today. However, it has already hit its 50% max profit, so if that is a set strategy, likely it would have already filled and been a winner.

Main things I have learned is that you really have to take emotion out of it and stick to a strategy and take profits whenever possible. Entered into a short put vertical with HD yesterday and it's already at 25% max profit. Hoping it gets to 50% before earnings next week so I can close it out. My trades are all very small, but it sure beats sticking it in a savings account and hoping for 1% return.

Metal-really appreciate the continued insight!

I think you said your strategy is less in individual stocks and more into something like the /ES futures. How do you craft a portfolio with something like that? Do you have a set number of positions laddered out at different expirations, each entered into at roughly a 2 SD move? Then keep rolling and adjusting as the market moves?

Would you say your monthly income is somewhat predictable, or is it typical to have a few months treading water followed by a big month that makes up for it?

my problem is always, how do you find these trades? so many stocks, so many different strategies. What is the right stock and the right strategy.

Jon H. Ryan said:

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my problem is always, how do you find these trades? so many stocks, so many different strategies. What is the right stock and the right strategy.

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Tasty trade has filters for liquidity, IV, and IVR. They also have a tasty trade watchlist with stocks that fit their criteria.

The right strategy all depends on you though, and how much risk you can handle. There are strategies with both defined and undefined risk. When first starting out, I would recommend learning defined risk strategies like vertical spreads and Iron Condors.

My problem is knowing when to cut my losses. Instead of being stubborn.

Joseph Parrish said:

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My problem is knowing when to cut my losses. Instead of being stubborn.

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Same... I took a major bath on RAD. I'm half tempted to jump back in on it before 8/16...

leoj said:

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Aggiemetal, what is the bob the trader promotion you posted on the previous page?

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if you fund a tastyworks account you'll have access on the platform to "Bob the Trader" I detailed on one of previous pages. It's usually $900 a year, or $100/mon, $30 for a week. It's a valuable too, especially for beginning options traders.

Basically see all the trades of a select group of traders. If interested in a trade they do you can with one click get the trade setup duplicated on the platform and if you like it you can enter it or tweak it to your risk tolerance. Tom is the featured trader. Was a really valuable tool when I first started. One it's hard coming up with trade ideas when you are starting out. Also it's very valuable seeing how traders manage trades when things go for or against. Third even for veteran traders it's another tool to find underlyings worth trading when Vol is low and it's hard finding stuff worth putting on. And just seeing the various ways you can approach a trade.

It has more details within each trade setup. They have to say it's for "engagement" purposes and not trade suggestions bc legality but obviously it can be used for the latter if one wants to use the ideas as stated above.

I think the promotion is running until August. (It was supposed to be sooner but the CME has made it hard for them to get futures up and running so they've extended it. They are reportedly really close to launching them BTW)

Jon H. Ryan said:

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my problem is always, how do you find these trades? so many stocks, so many different strategies. What is the right stock and the right strategy.

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see the Bob thing I mentioned in previous post, an awesome tool for this when starting out in options

it's free for two years from when you fund your tastyworks account, you can continue it after for sub prices but by then you won't need it

redsox34 said:

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Jon H. Ryan said:

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my problem is always, how do you find these trades? so many stocks, so many different strategies. What is the right stock and the right strategy.

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Tasty trade has filters for liquidity, IV, and IVR. They also have a tasty trade watchlist with stocks that fit their criteria.

The right strategy all depends on you though, and how much risk you can handle. There are strategies with both defined and undefined risk. When first starting out, I would recommend learning defined risk strategies like vertical spreads and Iron Condors.

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this x 1,000,000

then eventually when you get more and more comfy, you can drop the wings on the condor which is a strangle if you it's in your risk window

I will say though with tastyworks it's way cheaper to have those extra legs on the trade commissions wise, so I may get back to doing more defined risk when I can finally switch over there (still waiting for futures and can't wait) ...not just another plug, it cost a lot putting on 4 legs and taking off 4 legs for an iron condor, tastyworks are cheaper per leg opening and don't charge commissions to close trades

khkman22 said:

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aggiemetal said:

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Only x factor is you do have to have some risk tolerance/temperament in being tested in a position and ability (very learned in my case) to curb emotion and manage fear when things ain't ideal and greed when a position is going your way (I always manage winners at 50%, not the number of contracts but say I collected 3.00 up front per each sold put, I without fail take it off at 1.50 at most---tastytrade back studies show that to overwhelmingly increase your chances of success, not leaving yourself out there and exposed just to lose it or just waste buying power trying to pick up nickels in front of steam roller, when you could have exited and reset out to a next expiration cycle at 3.00 again....more agressively if it comes in quick 30% or so if it comes in within days which can often happen after a Vol pop and then the market bounces and you get a Vol crush plus the price action which created that as extra wind at your back)

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On my strangle with AMD, they were basically in freefall after earnings (after I made the trade).

not sure if I read that right but be careful/or flat out don't ever trade naked options on earnings (I never would)....in my experience probability is often out the window with earnings, no matter what people think is likely to happen or strong or weak a company seems, it can be a coin toss and a violent move off of that coin toss at that


Stock was basically at $15 at trade initiation and I figured the put side at $13 was pretty safe, especially with less than a month to expiration, after the earnings release. After several days of it showing no signs of reversing its downward trend, I bought back the put at nearly double what I paid. While it was hard to do, I had to decide not to take any more risk and gamble a turnaround. Plus, having a second side to the trade meant that overall I would still come out ahead in total on the trade. Looks like I will only make about 13% of max profit (still haven't closed it out, but trying to for $0.01). But learning to just take any profit, even if it means taking a bad loss on one side that would make you think it was a terrible trade is probably just as important as managing a winner from the start. Today AMD is at $12.85 or so with 2 1/2 weeks to go. $12 is not out of the question and helps realize if you can guarantee a profit at any point when it doesn't start out like planned, go ahead and take it.

Amen, lose a battle not a war, looks like you came out ahead but even if it's a small loss when things don't feel right, bail and go reset with something else (again I keep harping and plugging but it's way more of a no brainer with cheap commission and no closing costs to do this more mechanically)...I can not wait to fund my tastyworks account when they roll out futures here in next week or so ...real life example I'm north of $10k commissions now, would be more in the ballpark of $4K had tastyworks had futures available since Jan 1st, as you can see I'm not just plugging them for the hell of it

I had asked previously if they had a paper account for practice, and while they don't, they do allow a snapshot of any trade, even if you don't enter into it. With this you can simulate trades you would liked to have entered into without deploying any capital. Then as you track it with snapshots throughout the duration, it can help you see how trades can react in different scenarios. On one with JCP, a vertical short put would have started at 68% POP, gone up to 70% at one point, but then dropping to 59% today. However, it has already hit its 50% max profit, so if that is a set strategy, likely it would have already filled and been a winner.

very cool, good to know

Main things I have learned is that you really have to take emotion out of it and stick to a strategy and take profits whenever possible. Entered into a short put vertical with HD yesterday and it's already at 25% max profit. Hoping it gets to 50% before earnings next week so I can close it out. My trades are all very small, but it sure beats sticking it in a savings account and hoping for 1% return.

Yes sir. Emotion part if hardest part early on and even later if you let it sneak in (I'm not above it but I fight it). On greed side Managing winners/losers, keeping discipline on entry. On fear side lose a battle but being able to trust a position to an allowable extent and taking heat so you don't throw the towel in too early. Managing losers is way trickier but set up rules for each (certain loss % or whatever) and try and stick with it. Sounds like you are on the right track, good job by you.

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ColinAggie said:

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Joseph Parrish said:

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My problem is knowing when to cut my losses. Instead of being stubborn.

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Same... I took a major bath on RAD. I'm half tempted to jump back in on it before 8/16...

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probably the trickiest part and one of the most important, try setting a loss parameter as a rule and make the habit of sticking to it (easier said than done I get it and things aren't static but it's at least a starting point)

really hard one for me b/c I have a pretty high pain tolerance, but eventually I've got to lose the battle not the war so I'm not out of business, also way easier if you've got an account big enough to take heat knowing it's going to be fine but you can afford to absorb it even if it makes another big consecutive move against you

Vito said:

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Metal-really appreciate the continued insight!

I think you said your strategy is less in individual stocks and more into something like the /ES futures. How do you craft a portfolio with something like that?

i detail it pretty good way way back in this thread (last summer onwards if you are looking)


basically I like the /ES vehicle b/c it gives good premium, far OTM (out of the money) even when the market isn't giving a lot of vol and way less capital intensive on buying power than SPX (SPY doesn't give me enough juice per how far OTM I'd like to be and plus I can manage /ES around the clock when events make the market go sideways, i.e. Brexit vote June 24, 2016)


Do you have a set number of positions laddered out at different expirations, each entered into at roughly a 2 SD move? Then keep rolling and adjusting as the market moves?

spot on....ideally I wait for good vol and then start building a position and try and ladder amongst several expiration (when a nice big Vol pop facilitates it)...but often like since Trump election, vol is really hard to come by, if I'm only in one expiration it's a target around 45 days out (ideal location for max theta decay, tastyrade's extensively backtested) sometime I have to go a tad farther but I've gotten way better about being patient and waiting for some decent vol to come in before building a position

my roll is basically if something takes too much heat too soon, there's been a huge ramp up in vol (after I was in already) so I may close say a 2160 short put and go sell some down sub 2000 strike area when I'm further away, then i'll build what I would have, plus some to make up for what I lost when biting the **** sandwich...not real common though (again especially since I've addressed my FOMO and gotten more patient with setups)

Would you say your monthly income is somewhat predictable, or is it typical to have a few months treading water followed by a big month that makes up for it?

for the most part, certainly...you know what you are putting on and target profit (if ive' got 9,000 in premium on I'm expecting to make 50% $4500 in a few weeks max)...it's not easy when making a living as you've got bills to pay and if you get wonked one cycle it puts you behind principal wise...It's defintiely made me a better trader though and where as before I thought I always had to have something on (even with crap VOL) to generate some theta and income, again patience pays off way better (Randy if reading this is probably laughing his arse off b/c he's tried to get me to be more patient in trading since 2012)...my biggest wonk was going in too big in May or so the night before the Comey FBI news came out that next day, basically prime example of sticking to staying small or on the sideline until you get some initial Vol pop first, got most back next few days though with the roll and full disclosure had I managed the loser sooner, I'd have come out ahead...always be learning LOL

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aggiemetal said:

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khkman22 said:

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On my strangle with AMD, they were basically in freefall after earnings (after I made the trade).

not sure if I read that right but be careful/or flat out don't ever trade naked options on earnings (I never would)....in my experience probability is often out the window with earnings, no matter what people think is likely to happen or strong or weak a company seems, it can be a coin toss and a violent move off of that coin toss at that

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I started with a short put vertical before earnings, so it was defined risk. The day after earnings I closed that out (for more than supposed max profit...how often does that happen?) and then entered the strangle.

Just took a small position in Blue Apron. Earnings coming out tomorrow.

that was nice, able to load up a bit on some Vol pop overnight and this a.m. and then we run up and close at unched from yesterdays settle more or less

you wouldn't know it from my numerous comprehensive (extremely wordy) posts but most fun intense day trading I've had in a while
(love talking this stuff and served as pretty good distraction from temporary heat LOL)

ColinAggie said:

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Just took a small position in Blue Apron. Earnings coming out tomorrow.

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how are you playing it?

khkman22 said:

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aggiemetal said:

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khkman22 said:

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On my strangle with AMD, they were basically in freefall after earnings (after I made the trade).

not sure if I read that right but be careful/or flat out don't ever trade naked options on earnings (I never would)....in my experience probability is often out the window with earnings, no matter what people think is likely to happen or strong or weak a company seems, it can be a coin toss and a violent move off of that coin toss at that

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I started with a short put vertical before earnings, so it was defined risk. The day after earnings I closed that out (for more than supposed max profit...how often does that happen?) and then entered the strangle.

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gotcha

BTW handy reference for all

list of options strategies given market conditions (forgive fuzzyness, I took it as a screenshot from tastytrade years ago)



and this winning trade management by # of days at time slide:

I figured all the bad is already priced in and the AMZN threat has been slightly overblown (for the time being).

I have a stop-loss on it.

Jon H. Ryan said:

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my problem is always, how do you find these trades? so many stocks, so many different strategies. What is the right stock and the right strategy.

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I have a small account and just started learning so my two main strategies are don't lose money and keep the trades small.

I find stocks by looking on TexAgs, where else. Well, maybe I'm half kidding, but it does provide a limited number to look into to see if there is a trade that may work. Like others said, otherwise it is generally using the filters to see what group meets your criteria and then selecting from there. My biggest issue is that it's hard to find liquid options with a narrow bid/ask spread that will generate enough premium to make the trade worth it. Depending on the strategy, if I try a stock like AAPL or something in that general price range, then my buying power may be limited to only allowing 3-4 trades. So when you're just starting out it may be hard to find trades you're comfortable with.