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?
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).
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.