Hopeful said:
I know, but I refuse to ever give up - the market OWES me and I WILL make it pay.
Thanks Madgodan for the book suggestions
Sheldon Natenberg "Option Volatility and Pricing"
• Lawrence McMilan “Options as a Strategic Investment”
• Charles Cottle “Coulda Woulda Shoulda”
• Stuart Johnston "Trading Options To Win"
I have some reading to do...
BTW I'm happy to say that if tax were ever an issue (if I were actually profitable) it wouldn't bother me since I am in another country where income tax is very low!
Connichiwa Hopeful,
Good luck with the readings. By the way, if you’re totally new to options, you may find it easier to start with Bower and work through the others – Natenberg is really good on the “Greeks”, option models, and the statistical background underpinning option theory, while McMilan is strong on Strategies as is Cottle (which is very good for morphing approaches).
Just a couple of points to note. Firstly, be very very careful using options in the real market, these are complex leveraged instruments, and while the profits are magnified, so are the losses. Just keep this in mind, won’t you?
Secondly, MichaelD makes a very good point about trading. If you can’t trade effectively with shares, it’s significantly harder using leveraged instruments. You really need to know what you are doing on several levels. If you’re using straight options for directional trades you have to get the “trifecta” of direction, magnitude, and time right sufficiently to make profits. This is actually much harder than it looks. Throw in volatility, theta decay and delta, let alone the other “Greeks”, and you have quite a challenge to contend with.
Your comment “I know, but I refuse to ever give up - the market OWES me and I WILL make it pay” sends off alarm bells. Your comment certainly flags the possibility that you may have some emotional damage from your past trading experience. This is not a good foundation to commence a career in options trading from. In fact, emotions such as this are the enemy of the trader.
Patience is a prerequisite. You need to be able to be almost “Zen” about the whole thing, be “in the moment”, and flexible in your thinking – pretty much dispassionate. I strongly suggest you consider reading Mark Douglas’ books in addition to the options texts, especially “Trading in the Zone”, this will hopefully help you not to impose your emotional view on the market, and help you to just “see” the market.
So, my standard comment for new options traders is firstly study all you can, try to find veteran options traders to learn from, paper trade (honestly, no cheating) to test your theories and strategies, and then graduate slowly with very small positions (suggest single contracts).
This usually requires around 12 months to get a sufficient grounding before starting to trade real capital. Of course this varies, a full timer may do it in 6 under months, but most people need to learn not only the theory, but the practice (how to deal with market makers, how to understand volatility in reality for example).
Options trading really needs to be allied with good analysis (usually technical, but good long term players can profit very well from sound fundamental analysis), as well as a sound grasp of psychological discipline, a solid grounding in strategy approaches, and a robust system.
Core message – do the due diligence in all areas, learn as much as you can, and do not be under any false impression that this is easy. It isn’t. It is probably one of the hardest things you will do in your life.
Good luck!
Regards
Magdoran
P.S. Just wondering, are you an Australian expat, or a Japanese local?