Options Trading Rules

[Edit 19.05.19] This article is now obsolete, I am not trading Options anymore and will never do again in the near Future. At least the way I did it was pure gambling. If in the future I have the capital and the right strategy I might come back, but for now I am focused only in Bitcoin and everything else is noise.

I use options in order to acquire more capital to invest in Bitcoin. However I am not a good trader because of the fear of losing out. On my quest to improve I want to set some rules that I need to follow religiously.

My issue is that I close my winning positions too soon. I do not leave my losing positions running for too long, but the moment I see that a position is winning I tend to close it immediately.

Also I check the markets constantly and this stresses me therefore I need to reduce it.

During the last week for example 90 % of the positions that I closed ended up to run on my directions minutes, not even hours, after having closed my position.

Since I am not using a margin account I can only buy  Calls or Puts but this is fine with me.

I have lost 50 % of my small Capital since I Exit positions too soon. The following rules I believe, if followed, will allow me to improve substantially.

  1. Buy Calls/Puts that expire at least 2 weeks after the current date. Never open positions shorter than that
  2. Always set take profit limit
  3. Check the markets maximum 5 times per day, ideally 2
  4. Ignore and avoid completely if possible news articles and third opinions
  5. Never ever open a position if I am emotionally invested. All initiated positions should be thought a day before opening them, or during the day’s close. If I am getting emotional or irrational , I need to put the phone down immediately and distract myself
  6. Never trade on news. Trade based on them but never be guided by them
  7. Never open positions before earnings. IV will kill me.
  8. Trade only a couple of different stocks or SPY/QQQ
  9. Trading Ideas should ideally come to my head when I am doing something completely different than looking at the markets
  10. If a trade is done, it is done. Do not open new positions immediately  after having closed one on the same underlying. Open only during the next day.
  11. Do not overtrade.  2 -3 open positions every two weeks are more than enough.
  12. Before opening a position consider the premium paid as money lost.
  13. Never open a position unless all rules above are satisfied.
  14. If after 2 months of religiously following the above rules does not work, revisit this list. Next Revision date is 22.03.2019
  15. Don’t be stupid

 Now with those 15 rules I feel more comfortable opening a position. For now I leave my current positions open and once I find a trading opportunity I will follow all  rules above and then open the Position.

Also I Need to have in mind the following:

  1. Markets always give opportunity. Eliminate the fear of missing out on big moves.Every trade not taken is money good invested. There is an infinite amount of positions that are profitable every single day.
  2. Market Manipulation is a part of the game, if you do not like it or use it as an excuse then do not trade.
  3.  Patience is the number one characteristic that I need to preserve.
  4. Even when my p0rtofolio is 90 % down, there is still 10 % available.
  5. Buying Options is by default against me, so from the beginning it is a losing game that can be turned around. We start from a Position of loss trading to make it profitable by doing nothing. If market moves the other way , we follow the rules and there is always the remaining of the portofolio to use with the lessons learned.

My current plan is to revisit this article on 22.03.2019 since by then most of my Options will have expired. I will take notes of what has worked and what not and improve from there.

Revision on 22.03.2019

Today is 22.03.2019 and I have already recovered a great position of the portfolio I lost in the past months since January. I have no points to add at the moment, next revision date is 22.04.2019.

Maybe a small note that I was not able to only watch markets maximum 5 times and I pretty much overdid it. I will work on this point during the next month.

I also traded on news, I bought a couple of SPY straddles the day I knew the FED will announce interest rates policy. I made just a small amount of money. I should avoid this in the future since it is risky and it does not match my character.

Revision 28.03.2019


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