I Lost Nearly My Whole Account In One Day
Recently, I had an important chat with a stock-option manager who is still seeking for the mysterious formula to yielding dependable returns with option investing each month. He mentioned some things which were so obvious to me and brought up many past memories.
The thing in particular that really stood out to me was when he alleged "Non-directional option investing doesn't mean we will produce a return on investment in every direction. It really means that we produce a return if the asset doesn't move in any direction. Another way to look at it, it's really a directional strategy, sideways." This is very true, and most schools say that it's easy to manufacture returns with options simply because we can produce money for every direction the market goes. This is true in some points of view and false in others.
Those investing with Condors understand what I am saying, especially if you are investing in the Iron Condors which most programs and written materials preach. If you are investing with this option strategy during 2008 and 2009, you most likely aren't doing much good. The reason for this is that the Iron Condor is just as directional as other option positions only that its direction is called "Sideways." For most traders, it's just as difficult to forecast a neutral move as it is to predict an upward move or downward one.
Over the last few months I have had many phone calls from option traders losing most of their trading capital with Condors and Credit spreads. They all have said one thing in common: "I was making great returns at first, and then one day, I lost most of my money." I've heard this tale many a time.
This is precisely why I don't preach the normal style of Iron Condors. If you are a couple days from expiration, and the RUT is right up against the sold contract, subsequently you are investing in the same manner as the average investor does. I'm speaking of the one who has very little investor education, and because of this, shortly you'll be telling your buddies a similar story. However, it's a very different story that you'll be telling your wife! You smile today at this, but you won't be showing your pearly whites during a time when it happens in your own trading. Another serious problem with this aggressive style of investing is that the anxiety level can be so elevated that it really destroys your well-being on a daily basis. Many of you reading this know what I am talking about.
Well, we've addressed this aggressive trading style at San Jose Options Mentoring. We've redesigned Condors and Credit Spreads. Our technique gives the underlying more room for the price fluctuation, giving us breathing room in our trading as well as in our lives. We find the less adjustments we have to make, then the more we bring home at the end of the month.
Besides teaching a safer way to trade Condors, we've also developed techniques to lock-in our profits on them. Most option traders exit their trades when they make a profit, but we can lock-in our profits and stay in the trade.
Also, when we do have a trade go against us, well, we have ways to get a free trade from it. This is another important technique that we teach to our students. While many traders exit with a loss or never exit and sustain a huge loss, we exit and get a free bonus trade that can always lead to returns at a later date.
So there you have it! Whether it's a winning trade or a loser, we have really developed some nice trading tactics that can improve your personal trading immensely.
Article Source: FxTradingStock.com
About the Author
Want to learn how to lock in your profits?? Better your Option Trading Skills today by visiting San Jose Options Mentoring online at www.sjoptions.com. Visit now and receive a Free Option Trading Video on Option Greeks, a $200 value absolutely free!
by: Morris Puma
Total views: 99
Word Count: 642
Date: Tue, 6 Oct 2009
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