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I sent this Saturday afternoon and never saw it posted. I've made a few
corrections anyway. Forgive if it's a dup...
>> I was wondering if anyone has reviewed Ken Trester's Options Trading Camp
video program.<<
I read a couple of his early books and thought they were junk. I know
nothing about his course.
Here is my Ten-Step Approach for a "Trading Camp for Options."
1. Read Larry McMillan's masterpiece ("Options as a Strategic Investment").
You will probably lose money with options, certainly will some of the time.
Learn about what you are dealing with, in an educational (versus commercial)
setting.
2. If you still want to do this, start with US$10K that you absolutely do
not have any other use for. Be sure that you can afford to lose all of it.
Promise yourself to always keep half of it in cash.
3. When this stash goes to 50%, STOP TRADING until you can replenish it
back to $10K. This gives you only $5K to risk, which for options is on the
low side, but still easier than if you were trying to trade the underlying.
This may disappear in a flash (if you trade on the long side... quicker than
a flash if you trade short), but at least then you still have 50% of what
you started out with. If your timing is good, risking 50% on a 10K account
should be a good indicator of how fast to move forward (or otherwise) with
your trading.
4. Pick a couple of stocks or indexes that interest you, and get some
history... daily, hourly, and 5minute charts. Get a sense of the nature of
the underlying market you intend to trade options on. Pick markets that
have options that trade actively, for example over a couple thousand total
contracts daily (though the real opportunities are in thinner markets... so
is the real risk). Stay shy of illiquidity, and equally shy of market
orders. Don't chase a position just because it moves in your direction,
away from your order. So you were right... get used to the idea.
5. Become acutely aware of volatility. Learn to discern if the underlying
market that you are interested in is currently "slow" or "fast." Develop a
mental discipline that prompts you to buy when they're cheap (slow), and
sell when dear (fast). This complicates the buy/sell decisions
substantially, but options are complicated. The fools (who get in thinking
this is easy) and their money are quickly disintegrated.
6. Become acutely aware of the time element in options. Be especially
careful with low-priced options with less than four weeks of time remaining.
These can be spectacular opportunities, but most of the time are boring
failures if you trade them on the long side. Be equally careful paying for
too MUCH time when buying options long. If you expect to be in the trade
for a week, it doesn't make any sense to buy a series with a lot of time
premium. These are better selling (or spreading) candidates .
7. Find a daily chart for the underlying that is in a trend, established by
you and your eyeball/indicators for trendiness. Pick a market which is
trading at new 10, 20, 40 day highs/lows, according to how fast/slow you
want your trends and which direction you want to go in that market. Be
aware, at least peripherally, of the overall market, as well as the market
segment that you are trading.
8. Always, every time, regardless of any other strategy, take some profits
if the market moves in your direction. With options, this is probably more
important than a stop strategy, but at least as imperative. If you don't
capitalize on being right with at least part of your stake, you might just
wind up not being right after all. The options markets move very fast, and
couldn't care less about the small players. Actually, we're the one's they
feed on, and we have to be careful...
9. As with all trading, the best trade is one that moves immediately in
your direction. Set parameters for what constitutes success/failure before
you get into the trade, and STICK WITH IT! You can change your mind when
trading the underlying, but it will kill you with derivatives.
10. "Options are for trading." These are not investment vehicles. They
include parameters, like time and volatility, which no other investment
strategy enjoys. If you assume to make a 50% profit when you open the
trade, don't get caught up in the mind-game of staying in the whole trade
for yet another 50% when your primary goal is met. Taking some money off
the table when it's there for the picking will help you stay in the game
longer.
Dick Crotinger
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