Nirvana customers share their experiences and insights
According to recent surveys, about 50% of our customers are now trading options. Nearly all of those I have spoken with who have made the moves to Options will never go back to trading just stocks. i recently asked some of them to relate their experiences, perspectives, and insights, which I hope are as inspirational to you as they were to me.
I just started trading options several months ago in order to make best use of my resources, and have been suspended trading equities fro now. I have not had a Return on Investment on my winning trades of less than 40% and I have only had ONE losing trade.
Investing in stocks looks attractive but the capital requirements are huge. Options, on the other hand, provide a low cost entry to the market and can provide diversity with hundreds of stocks, indexes and futures that offer options opportunities.
I believe the confusion for the aspiring option trader is the many combinations of calls,puts, long and short positions that can be derived. The inclusion of weekly options and LEAPs just compounds the decision in what to trade, when to trade, and what combination of strike price and time element.
Nirvana’s software integration with gxtrader will enable me to quickly set my buy/sell position, and instantly have my target price and stop/loss level confirmed. Plus,I do not want to be at my computer during the entire market trading day.
My favorite strategy is controlling a significantamount of stock with very little money—if any at all. A few years ago IBM was around $90 per share, it would have been expensive to buy 1,000 shares,so I purchased 10 calls at the strike price nearest the price of IBM four months out, then I sold 10 puts at the same strike price four months out.
This actually put money into my pocket because the puts paid for the calls plus some. This also created a“synthetic long” position with Delta at about 100%(which means, for each point of movement in IBM, my position would move the same amount.) This was done on a Friday, On Saturday I left for Austin, Texas for the annual Nirvana Club Meeting.
When I returned Monday evening the price of the stock increased $6. Therefore, when I liquidated my positions Tuesday I had a profit of $6,000.
I presently trade a subset of the CBOE Weekly out-of-the money options, which have a much reduced Time-Value as a component of their pricing model and therefore arerelatively inexpensive.
I only buy Calls and Puts. I do not require the Greeks, the Black-Sholes option valuation model, or any complex hedging models. The Strategy that I use is a fairly simple Momentum Strategy that has a Hit Rate that approaches 100% with a worst case downside risk limited to the amount that is invested in the option contracts. The potential ROI realized through this Strategy is 100% to more than 1000% Per Week!
My favorite Strategy is selling naked puts. There seems tobe a lot of fear surrounding the potential of naked optionsgoing against you and wiping out your trading account. In over fifteen years I personally have never experienced this phenomena. I have successfully used naked ITM or ATMPuts to buy a stock which I intended to buy anyway, andhave it “discounted” to me as a result.
I routinely increase my profi ts by using covered “in come generating strategies”, when holding equities that are trapped in a range during sideway markets, or writing Collars to protect my profits.
I think that OptionTrader, especially with its upgraded features, will make option trading more accessible to the trader who understands that option trades have many permutations other than simply buying Puts or Calls.