All good points. I don't trade options, only blocks of 100 TSLA shares, but the lessons above apply to stocks as well, different sides of the same coin you might say; the same risks and anxieties and methods apply to shares. I'd like to add to your points above since I know there are others here who follow this thread but don't trade options, just share blocks.Kirk has 5 rules for success. It's all or nothing. You must follow all 5:
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#1. Don't bet the farm even if you feel your trade is 100% right, because reversal is instant and you won't see the black swan coming. Remember Tuesday 2pm's SPY 1 million puts? 10-pt drop in 14 minutes while you were napping. Remember Hertz / Evergrande? You want to escape but there's no room. You can't wiggle out if you're already all-in. This is Kirk's #1 rule: don't use up all the capital you have.
To me, #2 is key. Options is a casino, which means you want to be the house and not be the gambler, which means YOU make ALL the rules, which means you set the rules in your favor, which means probability of OTM, which means respecting STDDEV / delta. Options is all about probabilities and statistics. It's a numbers game. Don't look at news, chats, feelings, sentiments, AI, FSD, CT release, etc. Look at delta. TA helps, but don't bet on it. Example is yesterday: all day long, 61% fib was safe, until it wasn't in the last hour. Can you imagine making at bet at 3pm based on the fib because all the candles said it's good bet?
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So if we can't trust TA, who can we trust? TA is only a helper that looks at the past. Stock heat maps can be faked. Dark pool can be faked. We can only hope for the next best thing: the chain. This is Kirk's rule #2. If you want to be successful, you have to look at HIGH probabilities. Those are his exact words: "with a high probability of success". Don't even trust OI / Volume. How do i know? Last Friday highest enormous tall call wall was 250 ALL WEEK LONG, yet we closed 253.50. So, near-the-money bets would be extremely risky since delta is high.
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#3 is TSLA, clearly.
#4 is not rocket science. You can't sell a covered call at MMD. A small change in volatility changes premium and you're instantly at unrealized loss right out of the gate. All because you were not patient.
#5 means you need churn / volume (ie round 2 same day, etc.) This is why i do IC laddering. Why sell IC once a week if i can sell once a day, moving my new strikes up/down to where the stock price is?
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He explains it better:
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Learn how to generate consistent income trading options with Option Alpha's guided video lesson.optionalpha.com
1) Point one above applies equally to share blocks. Absolutely don't bet the farm. That can't be stressed enough. Live to trade another day is good guidance, because you can't play this game if you kill yourself (Like Buffet says, "In order to succeed you must first survive.") SURVIVAL must be first and foremost on the brain every day. My trades are but small portions of my overall portfolio, and I hope, in the long run, my long shares will make me the real money over the years. The trading is just to feed a sickness or something, I can't help it. But in order to do so I need to maintain a split-personality, where I keep my trading-self in an entirely separate compartment of my brain to my long-term-investing self. Keep trades small so you can sleep at night and prevent ulcers. I never use margin. I used to, and I've only lost. Face it: if you can't win with 20 shares, you can't win. Start small, learn by doing, with skin in the game. You can't do a double-back flip on a motorcycle without first learning how to kick the bike over and riding it on level ground.
2) Points two and four overlap, because "A High Probability of Success" depends on "Using the Right Strategy." Another way of saying this is: Find Your Edge, and that edge has to be as simple and uncomplicated as possible. I have developed my own edge that tips the odds in my favor, nothing more. This also means adjusting the dosage of your betting (ie, Trade Small Positions, but not too small, because, after all, the goal is to make money so you can buy/do whatever you want). I'm a strong proponent of DEVELOPING YOUR OWN STRATEGY AND KEEPING IT SIMPLE. Unlike Yoona, I do keep up with Tesla news and take a cursory glance at headlines in the morning, watch Tesla Daily each day, among other things. I have no gurus and think for myself and blame only myself for trading failures. My strategy encompasses tivoboy's comment a few weeks ago "to let the shareprice come to you;" to me this means not telling myself stories about future "probabilities" and then place trades based on fantasy probability projections. Find an unemotional, simple strategy and stick with it. Let chaos unfold naturally. Don't get on the wrong side of chaos. The options trader Nassim Taleb has a great series of books called the "Incerto series" on probabilities, chaos and reality--I can't recommend it enough, a good beginners guide to thinking about probability.
3) I'm strongly against the "As Many Times As You Can" strategy. I do better the less I trade. I used to trade too much, and that got me into trouble. It's very rare that I put in more than one or two trades a week. I'm very content with a $500-3000 week (or not making money at all, that's fine, I just hate losing money), but that goes back to my point above: COME UP WITH YOUR OWN STRATEGY, AND ADJUST THE DOSAGE OF YOUR BETS BASED ON YOUR NEEDS AND YOUR PERSONAL SITUATION, NOT BASED ON THE COMMANDMENTS OF A GURU OR OPTIONS CHAIN OR TA.
4) I don't know what stacking or laddering is, but I'm guessing it's analogous to using blocks of shares. So for example, when I place a bet, I only buy/sell one or two blocks of 100, and adjust later using additional blocks. Obviously the goal is to buy low and sell high, but that's not always possible. I only allow myself 500-600 shares MAX (so five to six blocks). And when my blocks are used up, I'm done. No questions asked, and I give myself a time-out until the SP recovers so I can't do any further damage to myself. If that means waiting a whole year, that's what I do. Once again, surviving and avoiding ruin is paramount.
5) Finally, I don't panic. Ever. Emotions/anxiety are your enemy. I never rush to my computer to make a trade (in the beginning I used to and I'd just screw myself, hell I'd even make clerical errors and buy or sell when I meant to do the opposite because I'm working in a hurry). A calm, patient mindset is key. Good sleep is everything to me, because if I can't sleep, I can't think right, and if I can't think right, I make emotional, bad decisions. But that's just me, that's just part of my personal strategy/edge. Again, coming up with your own strategy is everything, in my opinion. There is no one-size-fits-all.
