McLaughlin is our former Head of Community and now is a full-time options trader. He has years experience trading stocks, commodities, and options. McLaughlin has managed money independently and professionally. He currently hosts the Gimme Some Options podcast that features interviews with real traders as well as insights into his own trading methods. Today, McLaughlin is focused on trading a diversified portfolio of delta-neutral, positive-theta positions designed to exploit mean-reversion tendencies in stock volatilities and price extremes.
What follows is a recap of our live talk. For the full transcript please go here and scroll down. Do you buy out of the money calls after a large vix spike? If you had to learn options from Step 1 again, what would you change? What do you wish you knew then that you know now? Not just about strategies, but about how to make a living in the market. I wish I knew that going in. Do you roll only the losing part of your butterfly or the whole butterfly?
Are some chart patterns not good for your strategy, or you completely ignore price action? When you roll your butterfly, do you roll it at the money again? How do you roll it when the trend is strong? Do you know how many days your average trade is? How many losing months did you have in —? Thanks for your answers, your SMB webinar was great. Do you use some sort of hedge strategy to your portfolio of IC iron condor flys? Depends on how much premium is available on the other side. If I cannot collect a credit, then this adds risk to the trade which is something that does not interest me.
If no opportunity becomes available to roll the same structure to next month for a credit, then I take the loss. So far in , the average days held of all closed trades is 27 days. I had several losing months in —, but I was also trading a completely different strategy then focused in SPX. The further the option is out the money is it more sensitive to the underlying moves and vice-versa? Or do I need to wait till option is breakeven or positive?
There are too many variables to know for sure. For example, what vol did you pay? How much time to expiration? Changes in volatility will more likely have a more meaningful impact on far OTM options.
Start with real money, but do it small. Learn about vertical spreads and build from there. What are your favorite options brokers? I am a long-time ThinkorSwim customer and I believe that they have the best options trading platform for now…. Is the market fun for you? Because, I find it so boring that I avoid it most of the time…. What stocks are good during the summer? However, an expert on seasonality might be able to offer better insight. Is there a formula that I can follow?
I think the better question is: If you want to carry a position into the next month and the option is in the money ITM do you roll it? Or sell and buy? What does over-bought or over-sold mean?
What does average down mean? Averaging down means, buying more at lower prices, which brings your total average cost down. What strategies do you deploy the most? Also, how do you look for opportunities what indicators? My bread-n-butter strategy right now is Iron Flies and Iron Condors. What options strategy should a rookie learn first? What are your thoughts on AMD? How do you manage and define risk within your options trades?
Lots to unpack here with this question. I very rarely will trade naked short options. So risk is clearly defined in most positions. Please share with us how you evolved into a butterfly trader.
What was your path? This would take a blog post or podcast episode to give it a full and proper treatment. MaxPain seems worthless-and so does O. How long can a stock such as PBYI be halted? As long as the regulators or powers that be deem necessary.
Not a situation you want to be involved in if you can avoid it. Where did you trade? I was in 10 year and 30 year options and several pits at CBOE. But, for a time I did rent a booth above the Dow pit. What is your strategy to make money? Therefore, I like to identify stocks with relatively high IV and sell premium there, hoping to buy back cheaper later. Can you change strike price? Not sure I understand the question? If you change one strike price, you change the characteristics of the trade.
What are your top 3 most profitable plays and whats the best time to use them? I use Iron Flies, Iron Condors, and vertical spreads almost exclusively and I apply them to stocks with high implied volatility. Please recommend your top 5 books that helped you become a successful options trader. Also, I have found optionalpha. Not a game I play, but I like the idea. I only buy to open. Buying ATM options is swimming upstream.
Best advice is to quickly find a mentor, then just get started. The best way to learn is by doing. I am looking for solo cheap option trading account. I would recommend opening an account with thetastyworks. Cheapest retail commissions for an account your size. If you do, please use my referral code? How do you manage risk on options? Specifically, a risk and portfolio management strategy. The beauty of options trading is you can always define your risk via the purchase of long options.
How do you feel about futures? Not the options aspect. Just wondering if you feel RR risk: Futures are a great product to trade if you have a clearly defined strategy. If it works for you, do it! Any suggestions when trading leaps for fang type momentum companies? How do you choose your strike price when writing calls?
Is your strategy available somewhere for us to read? Which of the Greeks to you utilize the most and why? At what volume level should an active trader consider becoming an exchange member? What is the best way to approach selling Put Credit spreads? I see lots of high odds ways, but you are making Yeah, typically skew is unfavorable for put spreads especially in index products.More...