Thinking in Option Trading (by Bobobobo)

the book I read was "The Option Trader Handbook: Strategies and Trade Adjustments "

conclusions from my option trading

1, must set 20% stop limit. option is one of the most emotional plays in this world. even a fool has chance to make 100%, however, it's possible you lost your underwear before you can make 100%. don't ask me whey set it to 20%. according to my experience, if a option call down 20% from my enter price, it will dip another 20% in one day.

for call

2, play with under valued stock/going to break out stock, these are the best ways to prevent time decay. I don’t like straddle.

3, don't call stock in the downtrend, don't call stock with rsi close to 80, william % close to 0.

4, if the stock price doesn’t change that much but option price up huge, sell.

5, if option price up over 100% in a day, which isn't in OE day or there is not very good news to support the break out, sell.

6, once the price meets your expectation, sell. one of my friends told me that I can sell 50% and let the rest run on themselves. it doesn’t look like a good idea to me.

7, for stock with good fa/ta/undervalued, at the beginning of month, play out of money option. by the end of the month, you can only play with in the money option whatever how good the charts/news is.

8, don't put all the eggs in one basket. usually, i have 50% money in oil, 25% each in others. Oil is very stable income, I have never lost in oil stock.

9, strongly recommend you start with oil/drilling equipment stocks. the reason for why oil is long bull is because the baby boom generation put most of their retirement investment in oil sector. since the stock is in long term uptrend, it is a lot more easy to predict the top and bottom. every time 2.5 to 3.5% price interval can bring you with 20 to 30% nice gain.

10, long term call. I have just started after re-studied mummy's post.

11, in the oe day, if the out of money call price is <=0.1 for a very active stock, and the strike price is within 5% of current stock price, use <$500 to gamble, you may have big chance to win more than 3 times in half day. My best record is to make 100 bucks become 700 bucks in 2 hrs.

For put

12, I am bad at this. all i know is to put goog when market down. :)