What are your top issues and challenges with Option Trading?

[predator001]

I was recently talking to some friends whom I would classify as between beginner and intermediate level traders. We got to talking about trading in general, and the options markets in particular, the challenges facing beginner and intermediate level option traders.

It was an interesting discussion, since the same problems seem to be cropping up several times (although worded differently). I thought I would ask in here to find out if other traders have faced (or are facing) the same problems. Not wanting to bias the results, I have deliberately not spelt out what the common problems/pit falls are, but it would be interesting to see if the same problems come to the fore again.

So, what are your top issues and challenges with trading in general and option trading in particular?

 

[scose-no-doubt]

trading - empty sack
options -being ar53d to sit down and figure out how the f*ck to price them

 

[predator001]

Hehe, ok, I hear you ...

The pricing issue comes up again (I can't say I'm surprised ) - however, care to clarify what you mean by trading - empty sack?

 

[scose-no-doubt]

I have tiny, tiny balls when it comes to putting money on the line so I stick around here and wax lyrical on the more academic (safe) aspects of trading and engaging in all manner of lulz.

 

[predator001]

Ah, I understand. at least you're honest ...

 

[Martinghoul]

There can be only one issue and one challenge in trading (options or otherwise): how to make money .

 

[scose-no-doubt]

I agree, martinghoul. May I recommend an intensive aviation course to address the issue.

 

[the hare]

I agree, martinghoul. May I recommend an intensive aviation course to address the issue.

quality lulz

 

[marameo]

why would anyone choose options instead of futures?

 

[Hittfeld]

Because they are options - not futures!

 

[Wwill]

and because options are very very deferent vehicles compared to futures... as they offer more flexibility due to their complexity and this is why they are more difficult to understand... and understanding does nor guarantee successful implementation in practice. The header of this thread is too general but my top issues currently is the ability to properly assess and apply timings and adjustments :innocent:

 

[marameo]

The header of this thread is too general but my top issues currently is the ability to properly assess and apply timings and adjustments :innocent:

Adjusting means accepting a new risk/reward scenario. Worst still is selling options to collect premium to adjust. Just wrong? cut the position...

 

[Martinghoul]

why would anyone choose options instead of futures?

People choose them for a variety of reasons. The right reasons are to be long a liquidity (gap) option and also to be able to add dimensions and risks to your trading strategy.

 

[Wwill]

Adjusting means accepting a new risk/reward scenario. Worst still is selling options to collect premium to adjust. Just wrong? cut the position...

Yes, a new r/r scenario but by doing this I try do keep delta-neutral overal position which happens to be harder to achieve in reality than in theory and requires constant monitoring... and cannot be easily automated.

And also options offer variable leverage in cotrast to futures... deep OTM are more leveraged, deep ITM are less leveraged so being aware of this gives us another useful tool...

 

[Just4Fun]

There can be only one issue and one challenge in trading (options or otherwise): how to make money .

Surely it ought to be the other way round, no or yes ?
The mission ought to be not to loose money.
After all, the great majority (both calls and puts) expire at the money, out of the money or even worthless.
Then the great majority of punters are in the majority, on the loosing side.
The small minority are on the winning side, no or yes ?
But the small minority are just that, a small priviledged group.
Gaining admittance to any small priviledged group cannot be easy.
Then the mission is to find a way of joining the small priviledged group and avoiding the majority, interesting conundrum...:cheesy:

 

[Martinghoul]

Surely it ought to be the other way round, no or yes ?
The mission ought to be not to loose money.
After all, the great majority (both calls and puts) expire at the money, out of the money or even worthless.
Then the great majority of punters are in the majority, on the loosing side.
The small minority are on the winning side, no or yes ?
But the small minority are just that, a small priviledged group.
Gaining admittance to any small priviledged group cannot be easy.
Then the mission is to find a way of joining the small priviledged group and avoiding the majority, interesting conundrum...:cheesy:

If you're a trader, your mission is to make money. It's very easy for a trader not to lose money. Doing nothing is a sure fire way to accomplish the latter. If you're using options for hedging, your mission is not defined by what happens to your options.

The fact that most options expire worthless is irrelevant and people have to stop saying it, as it has nothing to do with the profitability of options strategies. And yes, pretty much in any field where some skill is required, only a reasonably small number of people among the many actually know what they're doing.

 

[stockkevin]

I would say an issue would be with liquidity. Options aren't as liquid as stock are because not as many people trade options compared to stocks.

 

[lloydbee]

I would say an issue would be with liquidity. Options aren't as liquid as stock are because not as many people trade options compared to stocks.

I guess it depends on what exchange you are trading but I cannot see how this could be an issue in the US unless you are trading 10's of thousands of contracts each trade!

For me, one of my challenges with trading options is sticking to what I know works. I have an adaptive and creative personality and at times it takes me off the path of just doing what works. My mind wonders so to speak after months of winners and I start thinking of 'what if this, what if I do that' and before I know it I stop trading what works in favour of trying something new and take a hit or several until I realize and go back to doing what works.

 

[MinutemanX]

gotta say my biggest pain/issue with options is when I buy a call and the stock price falls. Or sometimes when I buy a put, and the stock price goes up...

Bottom line: if I can call the market, I make money. My favorite plays are bullish consolidations at the trendlines with positive momentum on the MACD.

My other big issue is PATIENCE. I'm very impatient. If a couple weeks go buy and I haven't found anything that looks good, there's the danger I'm gonna force a trade, oh I'll do it too!

Time Value/Time Decay is fairly meaningless to me personally. I play options extremely tight, near the money, at least 50 days out, hold 1-3 days targeting support/resistance and out the moment it doesn't do what I want.

 

[Skynets]

Finding for a reliable way of making money, that is a common issue I guess.