Happy New Year, All. Any options traders out here yet? I want to start a thread focused on US Equity Options only…Looking to just share ideas, trades, etc for 2021.
Welcome, can you explain what is US Equity Options just for beginers in details?
Option contracts are leveraged instruments that are derived from individual stock- you can trade them long or short. From the long side, your risk is defined and you’re generally looking for volatility expansion. On the short side, your risk is typically undefined and you’re collecting a premium to insure another’s position- looking for volatility contraction.
While your risk is undefined when selling premium, you’re able to quantify probability of success and margin requirements easily. Selling premium is inherently more profitable than buying.
The main differences between buying/selling stock and trading options are a) leverage b) time component c) premium.
There are no markets on Earth more efficient than the derivatives space. And, no other instrument offers clearly defined probability-based entries and exits.
Gove- did my answer help? Would be interested to learn more about how you interact w/ the markets.
Ooh yes. I know a bit about it but not enough to have the guts to try it - the min contract is probably what’s scaring me. Would you say you need at least $10k to start? 
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10k is probably a healthy starting amount- I did it with less (around $5k). My average margin requirement per trade is ~$1k, so you’d really only want to keep 2-3 positions open at a time. However, I only sell naked options.
You can get in the game with less (around $1k) if you’re selling spreads. The margin requirements are just the difference between the strikes- so usually $100-$500 per trade, for most newer options traders. Nothing scary about that at all because your risk is always defined and you can calculate it out however far you need (2, 3 standard deviations, % increase/decrease in the underlying, etc etc).
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As far as I know, the US equity markets will improve in the coming year. Looks like 2021 will be a year of renewal and the investors will have to think global and make gains in the form of capital gains and dividends.
Daaaaayum. Balls.
Yeah I think $5k is prob my max if I want to try it out and man have I been missing out. I have friends who have been actively trading options within the last year and wow, it’s been awesome for them.
haha - honestly, the industry makes it seem much more risky than it actually is. Anyone can lever up on any product and get way too extended on the risk spectrum. You can craft naked positions (strangles) that are mathematically very high probability set ups (typically around 60-80%), with little buying power effect. The key is staying small, and taking profits quickly. Rinse and repeat that as many times as possible, and you will be profitable.
(1) Selling options is inherently profitable.
(2) Risk is undefined, but, margin requirements are easily calculated.
(3) Fear is the only human emotion that has been commoditized (in the form of the VIX), and is naturally mean reverting. Selling premium when it trades “expensive” relative to itself is inherently profitable.
(4) Trying to guess direction is VERY challenging- strangles are directionless.
On top of that, most platforms allow traders to easily beta weight their entire portfolio against a benchmark, making it super simple to hedge off deltas and essentially trade directionless.
I can keep going for days and days…hope this doesn’t get buried and everyone wakes up to these types of strategies… 
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Sounds like a lot of trade watching no? Well I guess you can just set it and forget it also.
Strangles are absolutely fascinating but all the time decay, volatility etc. still seem so alien to me. Im reading about it slowly and will probably join the fun before the year ends!
Not at all. When the markets close (4PM EST), I close down and don’t look again until the following morning (or, sometimes I’ll check CNBC to see what the major global indices are doing just to make sure I stay engaged). It’s actually the most liberating way to trade that I’ve ever experienced.
Of course they’re fascinating because they’re directionless!!! You don’t have to pick a side.
The mechanics of the derivatives market are PURPOSELY/MEANT TO seem confusing to the average person- to keep them out of the market (this is my opinion). Just like anything else, when you practice, it becomes silly how simple it is to grasp. Especially when you think about how daunting everything looked and felt when you first start learning about options.
I look back on those days, and ALLLLLL the times I wanted to quit, and think - wow, only if more people knew about this market. It truly is the most effective way to take personal control of your finances (and financial future). I still maintain a 403b (gov’t employee), but am banking on my options trading account to be my true source of income.
My advice is to just jump in. There are incredibly safe bets you can make, with 100% defined risk (selling butterflies, selling condors) that will get your feet wet in the game. After that, you’ll start selling naked strangles and ask yourself- why did I wait this long to try this?
My progression (And most that I’ve talked to) was:
Long calls/puts
Covered calls (still have a strategy for these today-- very profitable).
Cash secured puts
Then graduated to:
Long spreads
Long condors
Then took it to the next level (where the pros are):
Back ratios (primarily on the VIX)
Delta hedging (beta weighting portfolio to the SPY)
Short spreads
Short condors/butterflies
Naked strangles/straddles (never looking back from here).
Flinching at the thought of naked strangles/straddles. But like you said, perhaps it is because I don’t understand it.
Can you tell me how much time per day you put into just options? I have friends who are into this (which is how I know some of the concepts) but they seem to spend a lot of time reading and just looking at charts. I don’t have much time for that right now - which is why simple fx/equities trades that run for days/1d charts work for me.
Also are you using thinkorswim?
Yes
Tough to quantify. I’m at my desk standard 9-5 (for work), and, have a separate trading computer on. On any given day, I’m doing anywhere between 15 minutes to 2 hours of “actual trading” - making adjustments, researching opportunities, journaling.
I stay engaged though by listening to CNBC pretty much everyday. Bit in the morning pre-market, and then from 5-6 for “fast money”. Not for ideas so much as just listening as to what’s happening in the markets.
Nothing really to read.
No charts to really look at for me. A price chart is basically the last thing I check- and, even then it’s really only to make sure that I’m not trading into an event (unless I want to), and/or that price hasn’t gone parabolic or tanked recently.
I’d argue you can eventually get to a place, based on strategy, that you’re checking 1-2x / week for adjustments/opportunities.
Yes. It was either ToS or TastyTrade. Former, I feel, is more robust. Plus, ToS is VERY customizable and “coder friendly”. I have custom scans that I pieced together that drive my ENTIRE operation. So, I’m watching for my scanners to give me opportunities to research further.
2 hours or less per day definitely sounds doable. Okay ToS is my next step then! Will keep you posted. And will for sure hop in here again if I have any questions!
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In order to invest in the US equities, you will have to open your account with a broker that lets you do so directly through its trading platforms. There are many domestic brokers that have their tie-ups with stockbrokers in the US and can act as intermediaries to help you execute your trades.