I Set Aside $1000 to Learn Options Trading
***UPDATE February 26th, 2021: I’m back in the game! So to speak. I’ve recently been using “the wheel” trading strategy, where you continually write options (starting with a put, typically) to earn premiums on companies you perhaps would like to own stock in anyway, even if the trade goes against you. I built a market-wide options screener, The Wheel Screener, which can be accessed here:
Full disclosure: It’s been 100% built by me, and to unlock the full options dataset you’ll need to subscribe to a premium plan for $5 / month. And again, none of the info on wheelscreener.com is professional advice.
Alright Everbody, I’ve Been a Horrible Social-Media-Real-Time-Updater-Content-Producer-Millenial-Thingamagig-Person
I know. I haven’t done ANY of the following:
- Posting every trade to Twitter
- Keeping up with posts here on Medium
- Posting on my personal blog (https://chrisfrew.in), or really anywhere else for that matter, about trades or research or securities of interest
Actually, the only thing I’ve really been updating is the content on this link, which will eventually hold all my trade post-mortems.
The bad news for you is that any interesting stuff I find or have found won’t be posted in real time, the very, very good news for me is that:
I’ve profited on literally every trade I’ve made since moving my trading to Tastyworks!
I know, this sounds definitely too good to be to true… “this idiot lost almost $800 on Robinhood options and now suddenly has earned that all back (and then some!) on Tastyworks!? Get outta here kid!”
But its true! Look! I started with $2100 in my account so I could use some bigger strategies and open multiple positions, and now:
Yes, yes I know, I’ll have to pay taxes on my profits, but this number is including commisions (which, for the amount of trades I’ve been doing, has so far only amounted to $156.44 — not bad Tastyworks!)
Indeed — total I’ve only earned about $300, so there’s a long way to go. And for these recent trades that I’ve all made on Tastyworks — it’s either that I’ve been very very lucky for my past 10+ trades, or, I’d like to think I have an idea I know slightly what I am doing — and trust me, it’s not much: no fancy formula or algorithms, just some simple research.
A Few Research/Process Tidbits
Just a few pointers while I get around to filling in all my trade posts in detail:
- I’ve really been loving bull put verticles (will probably get around to bear put verticles) from around 60–70% (usually more around 70%). These are net credit trades that you can buy with the underlying already ITM (in the money). If the underlying moves against me, I can sell before really starting
- I like using analysts’ target price predictions. If they are right 70% of the time, and I open a trade with 70% probability of payout, I’m feeling a lot more confident than just, especially if I agree with the analyst. This is how I’ve profited on Twitter, Netflix, and Micron (If I don’t agree with the analyst, I have to do a bit more looking myself to see if I can convince myself otherwise)
- Iron Butterflies are fun, but never perform as well as my put verticles. If you can find a high IV underlying, you can set up trades with 50% probability of profit, but with a P/L highly skewed towards the P side. I quickly got out of an NVDA iron butterfly that was going south a few days after earnings, but still made about $90 for only $40 of max risk that was present in the trade when I sold the butterfly before earnings.
- I do check my trades every day the market is open, and I don’t see a way around that. I like to check around open, at midday, and at the close. This is how I saved that NVDA trade before I lost any money. If I have more time and the energy/interest in the market for the day, I will spend more time doing research and such. Otherwise, just those three checks.
- I don’t use any charting techniques. Recently with the small spike in volatility and a lot of the Twitter-influenced nonsense that has been going around, I think for a lot of securities charting just doesn’t make sense — but I’m still open to learning if anyone objects — leave a comment. For technical analysis side of things I only use 3 indicators: MACD, CCI, and RSI. Check this video out for how they work:. So far however, a majority of my decisions have been around the target prices from analysts (not playing on the prices themselves, but the direction of the analysis, the financials of a company (is anything blatantly scary or out of place), and the recent environment / opinions of the press on the company.
- Algorithm / Wall Street plays. MTCH and EXEL are examples of this, it dropping huge percents (both 20%+) because of bad press (in the case of MTCH, Facebook’s dating app news, in the case of EXEL, a failed stage-3 drug, which hasn’t even contributed to the companies revenue yet, and is not one of their main products) In both cases, looking at the fundamentals, it was clear there was nothing existentially wrong with the company, either a bunch of trading algorithms or big players decided to shed shares. For MTCH the fundamentallys ultimately won out as it crushed earnings and sprung back to its price before the bad press within a few days. As for EXEL, it has made some recovery, but not as much as I’d like. My calls have still 80+ days, so we’ll wait and see.
- I’m getting nervous now. My Tastyworks perfect record could be ruined with one bad trade! Well, I’m obviously going to try to keep my profitable trade percentage at 100, but more importantly I’m trying to focus on not letting this dumb number make me too defensive with my trades. After all, you gotta spend money to make money in the options world.
That’s all for now. I promise I will fill in all the trade posts as soon as I get a chance-I have to, before I forget why I made them in the first place!