Can anyone share their option trading strategies?

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<<<Can anyone share their option trading strategies?>>>

Yes.

<<<I understand all of the basics and what all of the types of executions involve. I am interested in deep strategies that have proven successful for different traders.>>>

I don't have anything I would call a "deep strategy". The closest I could come to one is to say that I almost always look for a profit by writing options and collecting the premiums instead of trying to profit from the buying options with the expectation that the option prices will increase.

I also tend to go for diagonal spreads, buying the longer term options and selling the nearer term options. (I like the faster time decay on my short positions.)

<<<How do you select a candidate for the underlying equity?>>>

Usually look for a company that has a high implied volatility and either (1) in which I would like to buy shares or (2) I see excessive emotion by investors. I have also made some trades based on the fact that I already own the underlying stock and I would not mind selling it.

<<<What do you look for and where do you go from there?>>>

I always check the fundamentals of the company and how the stock price relates to those fundamentals. I then look for a spread based on the stock price, the fundamentals, the implied volatility, and my estimation about what will happen.

<<<Do you trade options based on events like splits or earnings reports?>>>

I do not very often. I have done more based, at least in part, on mergers or spin offs.

<<<What patterns do you use to make profit?>>>

I cannot think of any off hand.

<<<Do you use volatility to determine when to enter and exit?>>>

Always when entering, sometimes when exiting.

<<<What tools do you use?>>>

I have used the old "Options Toolbox" from the CBOE and options calculators, but not extensively. Years ago I got a 30-day free evaluation copy of the OptionVue software which was fun to play with but did not help me a lot so I never purchased it. Probably the

http://www.ivolatility.com/

site, if you consider that a tool, is the tool I have used most often unless you consider books to be tools, in which case Option Volatility & Pricing by Sheldon Natenberg is the tool I have used most.

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I do not start with a strategy an then try to find a stock to fit the strategy. I start with an underlying stock and then see if there is an option strategy that fits it. That is probably because I had experience with stock before I started using options very much.

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If you want to know the one strategy I have used most often I would say it is probably a diagonalized put ratio spread.

Example: CompUSA was trading for about $12 per share. I bought 10 LEAPS puts with a $25 strike which expired more than a year out and simultaneously sold 25 puts with a $10 strike that expired about two months out. This trade turned out to be about as close to a wet dream as you can get trading options. Shortly after opening the position the company went private for $10.10 per share. I was able to sell my long LEAPS for a profit and let the short puts expire worthless.

Of course, there have also been the nightmare trades. I established a similar spread on GM because I did not believe the government would let it go bankrupt. I was fortunate in that I was able to adjust the spread a few times prior to bankruptcy, mostly by selling bearish vertical call spreads. That reduced my loss, but certainly did not eliminate it.

If you want an example of a trade based purely on volatility, I can give you an example of a trade I made on a small drug company. There was a news article that the company had submitted the results of a drug trial to the FDA and was seeking approval to sell the drug. The stock was trading in the low $30s, and the $35 put eight months out was selling for $17.50. (I don't remember what the exact implied volatility was, but I think it was around 200% or higher.) I reasoned that (1) the FDA would not issue its decision for some time, (2) until the FDA decision came out there would be nothing to have a significant impact on the stock price and (3) it would be nearly impossible to maintain that high an IV until the decision was issued. I sold the puts naked.

After about six months the stock price had not changed significantly and the option was trading at $8.75. I closed my position because

(1) When I opened the position I was risking $1 for ever $1 in potential profit

(2) I now was risking $3 for every $1 in potential profit and

(3) Enough time had passed that an FDA ruling was likely any time.

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FWIW I have not traded any options in the past couple of years. I have retired and have enough money to live comfortably, so effort of finding an attractive spread, monitoring it, adjusting it when needed and worrying about it just does not seem to be worth it at this point in my life.

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i have attended a lot of seminars, read counless books on forex trading and it all cost me thousands of dollars. the worst thing was i blew up my first account. after that i opened another account and the same thing happened again. i started to wonder why i couldn,t make any money in forex trading. at first i thought i knew everything about trading. finally i found that the main problem i have was i did not have the right mental in trading. as we know that psychology has great impact on our trading result. apart from psychology issue, there is another problem that we have to address. they are money management, market analysis, and entry/exit rules. to me money management is important in trading. i opened another account and start to trade profitably after i learnt from my past mistake. i don't trade emotionally anymore.

if you are serious about trading you need to address your weakness and try to fix it. no forex guru can make you Professional trader unless you want to learn from your mistake.

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