Option Trading With Max Safety In Mind
I want to talk about what Maximum Safety and Maximum Reward option trading is all about. It's been the motto of San Jose Options mentoring program for quite some time now. First of all, let me tell you how this concept came about.
This motto has bleak and humble origins from my early days of options trading. I had some rather horrible experiences when I was starting out because, just like other option traders, I started trading Iron Condors. I knew a little bit about credit spreads at the time, but never actively traded them. One look at the risk graph and I could tell, credit spreads were risky business.
I was tired of trading the traditional option spreads. They've been around for decades and I figured there must be a safer way to trade. I had several winning months, but they always ended with a less than satisfying flop. I lost thousands of dollars after one large movement in the market.
I had been giving options trading a lot of serious thought. There must be a better way to trade than these tired, traditional strategies. How could I get anywhere if I continued being dealt large losses on my trading account? A bunch of small victories doesn't add up to much after one large loss.
Maximum Safety, Maximum Reward option trading took birth in my mind years ago. I began testing all of the ideas I could possibly think of. I've been doing this for several years now, and I don't plan to stop anytime soon. What I've come to realize is that I need to maximize the Greek called Theta, while minimizing Gamma and Vega. Once I achieved this, then I will have what I am looking for.
We have made some great leaps over the last few months. Today we were comparing a strategy that we call the Revolver to the traditional Iron Condor. We found that we can achieve the same Theta as the Condor, but the Vega as well as the Gamma are much lower. For example, while having the same Theta on the trade, the Iron Condor would incur a $8,000 loss on a 10% move to the upside. However, our strategy will only incur a $200 loss with a similar move. To the downside, our strategy also outperforms the traditional Iron Condor. Our Revolver is proving to be at least twice as safe and the Iron Condor.
I hope you found this article informative. Remember, if you really want to find success in trading options, focus on Maximum safety and Maximum Reward, Maximize your Theta and minimize your Gamma and Vega. I hope I've been helpful and with you good luck on your option trading. Until next time, have a nice day!
Article Source: FxTradingStock.com
About the Author
Learn more about Trading Options with safety in mind at www.sjoptions.com. If you are tired of the same-old Traditional Option Strategies, then you'll love our mentoring program.
by: Johnny M Junior
Total views: 30
Word Count: 468
Date: Sat, 29 May 2010
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