In Play

I will no longer be maintaining this page (duplicating effort). I have to keep this page active since there are links to it.

Please look for open and closed spreads on their respective pages by year. Click on the tabs above. Thank you.

Parasuram Geetha

Dear Jeff,
Hope everything is going on well in your trading and personal world. Some time back you recommended I read Jeff Augen’s book ”The Volatility Edge in Option Trading”. I also happened to buy his book on “Trading Options at Expiration”
For someone who is new to options, these books opened up a world of common sense and dynamics of options. The first time around I did not grasp more than 25% of the subject. But on repeated reading and back testing trades, based on better understanding of the basics I learned a lot. I am not using his strategies, but have been able to evolve my own trading plan and level of risk tolerance. I am excited by the thought that I will continue to grow.
For the past month, I have been able to stick to the first rule of trading “preserve your capital” and the second rule “don’t forget rule number one” I have made modest profits and have you and Jeff Augen to thank for that.
Do you have any other books to recommend?
Regards
Geetha

http://theoptionguru.com/blog Jeff W

Well, Geetha, you must have the ability to concentrate and focus because those books are not written for the novice. I very pleased that you have started your trading and making some money. I’ve heard that 95% of traders lose money in the market. Keep it up.

I have two other books, both written by Mark Douglas: “The Disciplined Trader” and “Trading in the Zone” for you to read. Both focus on the mental attitudes needed to be a successful trader – at least according to the author. Both of these books take a deep dive on looking into yourself; and examination of the motivation, behavior and personality many of us display in our trading, and what the proper attitude should be to be successful.

Let me know what you think of these.

◄Jeff►

Parasuram Geetha

Thank you Jeff.
I am just lucky that I have a lot of time on my hands to do as I please. I did loose money initially, before I chanced on your site.
Thanks for the titles – will let you know. I certainly need to develop trading discipline. There are days when I sit on my hands to stop myself from taking risks.
Regards
Geetha

http://theoptionguru.com/blog Jeff W

Geetha,

Since I’m retired, I have more time to ‘get into trouble’ as well. Let me recommend that you read “The Disciplined Trader’ first. Based on your comments, I’m reading it for the third time. Seems I’m unable to ‘get it’ yet.

One concept Mark has in his book that is valuable is this: we have been brought up to respond to certain situations without hesitation, but the market is another environment completely – and we have no training or learned responses to fall back on. In sports it’s called muscle memory.

I hope you enjoy his books. ◄Jeff►

Frank Kao

Hi, Jeff,

May I know how do you control your risk? I found that sometimes you will use 2 contract sometimes 1. May I know what’s your methodology ?

http://theoptionguru.com/blog Jeff W

Frank,

I have a set of rules for maximum position sizing that’s pretty simple: never risk more than 2% of my total account on any one trade and never have more than 20% of my total account at risk for all open trades.

So based on a $50,000 account, that means a max risk of $1,000 for each individual trade. If all open trades are $1,000, that means I could not have more than 10 positions open at any one time. Most of the time I am well under that.

If I want to get to the max for a trade, based on the price of the option or the total spread risk, I may have to ‘size’ that trade to get to the max. There are a few ways to do this – increase the strike price spread or increase the number of spread lots, which I think is what you are asking about. You can find this information in my Spread Trading Plan.

I hope this helps.

◄Jeff►

Dellcnu

Hello Geetha
This is Shri from Texas and good to see someone have similar interest in trading options
I may not be as advance as you seem to be but any good advice would be greatly appreciated
Wishing you success
Shri
Dellcnu@yahoo.com
Jonnyvan1_99

Jeff,
You haven’t posted in a while. I am curious as to how you adjusted your profit tent with the recent run in major indicies. Specifically, the verticals you have in place. Did you roll up to farther strikes? close before move? Did you completed put side of IC during run up? Did you ever place any calendars for july as vol dropped?
Thanks,
Jon

http://theoptionguru.com/blog Jeff W

Jon – I had a couple of personal issues surface the end of June and my hands were pretty much tied since I had to put all my trades on ‘auto pilot’ and lost a sh*t load of money because of the big Bull move early this month. So, to answer your questions: I had to put stops in place around my break-evens so that was all I could do. I didn’t add any calendars. ◄Jeff►

Geetha Parasuram

Hello Jeff.
You might be aware of this, but I could not help sharing this info on your page so someone else could benefit.
There is a webinar on CBOE options institute, today, June 30th CST 3.30pm on Calendars by Dan Sheridan.
I have been listening to his archived sessions and found them very useful, including those on adjustments.
Geetha

http://theoptionguru.com/blog Jeff W

Geetha – sorry for the late response. Also check out the TOS seminar (recorded) from July 13th featuring Dan and the topic is “Income Generating Trades in a Volatile Market”. I will be posting more on this topic soon. ◄Jeff►

http://theoptionguru.com/blog Jeff W

Geetha,

Congratulations on reading Augen’s entire book! That takes a lot of discipline, since as you said, he can get pretty deep. I also like the way the methodically approached your strategy.

When I am doing a Calendar, I don’t use any greeks as a decision point. I’ve learned that it’s best to avoid any IV that is too high because there is a danger of collapse – which will cost you a lot of money. So stay away from underlyings that have earnings in the front month. Underlyings that have earnings severely limit your opportunities because of the volatility bump. Consider using index ETFs.

The strike price of your Calendar will determine your delta, of course. If, as in the XOM example you gave me, your Calendar is a directional trade – in your case bearish – your delta will be negative. The opposite would be true on a Bullish trade and almost zero delta on a Calendar ATM. So delta is only telling you your bias on the trade and where you think the price of the underlying will be some time in the future.

Good work – keep it up.

◄Jeff ►

Geetha Parasuram

Thank you.