Today, VC was discussing about some trading fundamentals and some people in chat were interested but was not able to listen in on the conversation. So here’s a brief summary of the topics discussed. I might have missed some things or got some things wrong so feel free to reply, edit, and add anything if so. These points were sourced from Kryptek, Holi, and MeltedCrayon’s discussion.
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Nobody knows when the market is going to crash. Likewise, nobody knows when the market is going to peak. People have been predicting where the top and bottom of the market is for a long time but truth is, nobody knows. These are crystal ball questions and everyone will have different opinions about it based on what the data and numbers in front of you shows. You can only look at the data and made an educated guess about it.
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LEAPS have many definitions but generally, LEAPS are deep ITM options. We use LEAPS because it is leverage as they are like holding 100 shares but cheaper than actually buying 100 shares of the underlying. Buying LEAPS are a pretty safe and profitable strategy. If you’re starting off with options, you can start off with LEAPS as they are pretty simple.
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Define what your profit and loss limit numbers are. We become emotional traders when we do not have these numbers defined before a trade and adhere to them. These numbers are based off your own risk tolerance. This applies especially more to options compared to stocks since you are fighting time or theta. When talking specifically about profit, there is no right or wrong answer when to take profit. It is up to you and how you feel with the ticker. Some people say 20% is good enough for them. But sometimes if you feel especially bullish with a ticker, for example like IRNT, you can hold out longer.
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Everyone has their own personal trading strategy. Overtime, you will develop your own strategy. Keep asking questions in this discord, learn from its members, and you will be golden. For example, Kryptek started off day trading FDs on SPY. This strategy was not consistent for him since it was too volatile. He found a better strategy selling calls/puts on inefficient stocks since it is more consistent for him. He defines inefficiency as people not choosing the smart trend. Example is when he saw AMC double to 60, so he sold 145c FDs. This was because AMC price had to more than double again in order to even reach 145 and IV was high, so everything was in his favor here. This strategy works for him.