Maximum Safety, Maximum Reward Option Trading
Maximum Safety and Maximum Rewards have been the motto of San Jose Options mentoring program for quite some time. But how did this concept come about? I’m here to tell you just that.
Sadly, this expression was brought about due to having some less than savory experiences from when I first started trading options. Like most options traders, I started with iron condors. I knew a bit about credit spreads but never really traded them. One look at the risk graph and I knew just how risky those could be.
Anyway, after trading the traditional option spreads that have been around for decades, I came to realize that I had to find a safer way to trade. I had several winning months, but they were always followed by one catastrophic day. Thousands of dollars that I made always seem to find a way down the tube by one single large move on the market.
These less than profitable results got me thinking seriously about option trading. There must be a better way to trade! I knew I wouldn’t get anywhere if I kept sustaining these large losses on my trading account. Several small wins being topped off with a big loss doesn’t get you anything.
Maximum Safety, Maximum Reward option trading took birth in my mind years ago. I began testing all of the ideas I could possibly think of. I’ve been doing this for several years now, and I don’t plan to stop anytime soon. What I’ve come to realize is that I need to maximize the Greek called Theta, while minimizing Gamma and Vega. Once I achieved this, then I will have what I am looking for.
Things have been going very well for us and we’ve made some impressive leaps over the last few months. Today we compared a strategy we call “the revolver” to the traditional iron condor. Our strategy got the same amount of Theta as the condor, but the Vega and Gamma were much lower. Even though they had the same Theta on the trade, the iron condor would bring about an $8,000 loss on a 10% move to the upside, while the revolver will only experience a $200 loss from a similar move. In the end, our strategy outperforms the iron condor and is proving itself to be twice as safe if not more.
To conclude, I just want you to know this; if you really want to be successful in trading options, you really need to focus on Maximum Safety and Maximum Reward. Remember to maximize your Theta and keep Gamma and Vega to a minimum. I hope you found this article helpful and informative. Best wishes on your option trading. Until next time, have a profitable day!
Put Max Safety, Max Reward Option Strategies to work for you! Visit the pioneers of constructing low-risk option spreads at San Jose Options mentoring.
