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Thread: Options Trading?

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    Senior Member Tarasaurusrex's Avatar
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    Default Options Trading?

    Hello to all you financially savvy, logical, formulaic, money-making and entrepreneurial spirits out there.

    I have been getting acquainted with options trading, still a beginner though. I only have about $5000 to put down. The plan is to start with penny-wide tight markets and utilize iron condors. I was thinking of staying in the pharmaceutical or research sector and maybe taking a risk on selling a put as my first move, even though I know that's not advisable as move #1, but I am interested in a few underlyings, or was interested, last time I checked the market, that sector, and the specific company.

    Has anyone ever done this? If so what was your experience like? How much time and how many trades did you average per year or month? Did you make money? Any other helpful information and advice is greatly appreciated.
    "I can feel guilty about the past, apprehensive about the future, but only in the present can I act." - Abraham Maslow

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    Banned Melonie's Avatar
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    Default Re: Options Trading?

    The ability to trade options basically comes with two different 'levels'. The first level, which just about anyone who has been able to open a stock brokerage account will be able to qualify for, restricts options trades to those types of trades where the loss risk is 'finite'. In other words, a first level options account would allow you to buy 'straight' puts and calls ... because the maximum loss risk is limited to the amount of money you originally spent on the options purchase.

    To trade Iron Condor and other advanced options strategies, a first level options account will NOT provide you with the ability to trade on the 'short' side. That requires that you are able to sell put and call contracts WITHOUT actually owning the shares of underlying stocks which you will be committing to buy / sell at a particular price at some point in the future via the options contracts you are selling ... which in turn exposes you to potential loss risk that could far exceed the present value of existing 'assets' in your options trading account. After the excesses of the 00's, options brokers and their regulators are now VERY concerned about the account holder's ability to cover 'worst case' potential losses, versus those losses bankrupting the account holder thus transferring the loss to the brokerage firm.

    Thanks to recently enacted regulations, qualifying for this second level of options trading now requires some pretty hefty 'credentials ... such as a personal net worth = liquid net worth of >$100,000, plus a hefty level of verifiable annual income, plus an established multi-year history of previous securities trading. I was fortunate to have opened a second level options trading account years ago, prior to this latest round of regulations having been enacted !

    In response to these recently enacted regulations, some options trading brokers now provide 'intermediate' levels of options trading permissions, thus allowing 'new' options traders to progress up the 'ladder' to more advanced types of trades after they have proven their abilities at a lower, safer level. See

    In terms of profiting from options trades, I'll be honest and state that I really don't want to invest the research time necessary to do a 'proper' job with advanced trades. Nor do I want to potentially risk huge amounts of my 'nest egg' by entering into 'short' trades for purely speculative reasons. I mostly use puts and calls to try to take advantage of high probability short term market moves ... with a recent one being the buying of Japanese Yen puts as soon as 'Shinzo Abe' shifted his printing presses back into overdrive.

    However, I actually find that I can now successfully trade the 'short' side without assuming major loss risk ( and at a much lower cost re broker commissions ) in lots of cases via the use of the ever increasing number of inverse ETF's. These are now available for virtually every major commodity, every major currency, and a number of stock indexes and sectors. Thus my options trades are now far fewer than they once were. However, if I want to 'bet' on a particular company's stock, options are still the only way to do that.
    Last edited by Melonie; 01-11-2014 at 06:16 AM.

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    Senior Member Tarasaurusrex's Avatar
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    Default Re: Options Trading?

    Wow, I thought for side-stepping the Margins you only needed 25K.....now it's 100,000+. Yes, I was interested in going short on some pharmaceutical companies, since with ACA implementations = less money for research. Although makers of OTC's with psuedophedrine might be good to go short on, since it will probably be RX only in most states (OR and MS already). That Yen buying was a good move - saw a documentary about how a recreational product in Japan is 2-3 times the cost of other countries. How did you foresee that? Because of the printing press increase?
    "I can feel guilty about the past, apprehensive about the future, but only in the present can I act." - Abraham Maslow

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    Banned Melonie's Avatar
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    Default Re: Options Trading?

    Wow, I thought for side-stepping the Margins you only needed 25K.....now it's 100,000+.
    this was the result of new post 2008 'crash' regulations ... intended to prevent 'amateur' investors from taking high risks which they ( claim ) didn't understand. The 'tin foil hat' crowd would tell you that options brokers jumped all over these new regs as an excuse to cut their own loss risks.

    Re the yen, yes that was based on the relative speed difference between America's printing presses running at 'warp 2' but Japanese printing presses being shifted to 'warp 7'.

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    Default Re: Options Trading?

    Trader here. If you're executing 1 leg of your iron condor at a time via the internet, you'll have to be careful that the market doesn't move on you while you're doing it. Also, you're not necessarily going to have an easy time getting each leg, as the more ITM ones will tend to be quoted wider (unless you want to lose a bunch fo money up front just crossing spreads). HTH
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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