At the end of 2011 I started playing around with the idea of creating market-neutral portfolios and adding options to the mix of my trading arsenal. While I have traded options in the past, I never did more than buying calls or puts, keeping things simple.
But lately I have been experimenting with all kinds of options strategies that stem from statistical probabilities, giving me an edge over the retail option trader. You see, when I trade forex I trade based on a discretionary style that has worked extremely well for me over the past two years. But options are a different game and different market, thus I don’t treat all markets the same.
What I found with options is that you are almost doomed to fail if you do not have a statistical method of trading them. I tried trading stock options with my discretionary ways, but I ended up failing miserably, which led me to every piece of option trading literature I could find.
I read, re-read, studied, and re-read books like Options Volatility and Pricing, The Volatility Edge in Options Trading, and Day Trading Options, but the book that really sparked my recent success in statistical option trading was Microsoft Excel For Stock and Options Traders. This book opened my eyes as to how to construct a strategy, extract data, and analyze results based on statistics and probabilities, not a gut feeling.
Will this book teach you everything you need to know about options? Of course not! I had many hours of trial and error, phone calls to extremely successful options traders, and demo trading to get to the point I am now. And I will still continue to adapt, tweak, and refine my strategies as the markets change.
I will still continue to trade forex, but options are going to make up a large part of my foundation for the 2012 trading year. I’m excited about the new change and the new opportunities that options bring to the table, and I plan to share my journey throughout the year.