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"Bread and Butter" Option Trades for Intermediate Level Traders

Discussion in 'Options' started by Dave A, Jul 5, 2015.

  1. Dave A

    Dave A Active Member

    Hi Everyone, my name is Dave Andresen and I am a newbie here.

    I have a couple of general questions that I could use some help with, if anyone is willing.

    I consider myself an intermediate level options trader. I've been studying options for about 2 years and I have a good grasp on the fundamentals and I have traded enough live positions to be comfortable with the real life trading environment / challenges. Right now, I am trying to find a good solid “Bread and Butter” trade that I can trade in real life while I continue my options education. I have been looking at the SMB website and I see the M3 trade seems to be designed for someone just like me. I also see the “Broken Wing Butterfly” trade program as well and I am very interested to see what that may offer. I'm not sure which path is the best to take, so I figured it might be a good idea to ask a group of people who have already been down this road.... Does anyone want to share their thoughts ?

    Basically I'm trying to find something that is a little more advanced then a strict “rule based / out of the box” trade and something that can point me in the right direction towards a more sophisticated path. I'm open to any suggestions, it doesn't have to be a program from SMB, that's just what I have found so far.

    Thank You in advance for any help / advise, it is greatly appreciated !!

    Dave Andresen
    Temecula, CA
     
  2. ACS

    ACS Well-Known Member

    The M3, a weirdor/Jeep or a BWB can be the foundation of a solid trading plan. There are lots of recordings here to give you guidance. If you want to be able to follow what others are doing then I'd give the edge to the M3 since it is the trade that shows up here the most and you can follow John Locke's weekly Monday morning updates. The basic M3 also opens the door to more advanced position management and John's Rock trade.
     
    Dave A likes this.
  3. Venkat

    Venkat Guest

    I second this great suggestion by ACS. Start with M3 and/or Jeep/Weirdor and expand upon it. These are among the top "Earning while Learning...." trades out there...
     
    Dave A likes this.
  4. RayM

    RayM Well-Known Member

    >>> Does anyone want to share their thoughts ?
    >>>Basically I'm trying to find something that is a little more advanced then a strict “rule based / out of the box”
    >>> trade and something that can point me in the right direction towards a more sophisticated path.

    I would encourage you to also check out Tony Sizemore - Option Elements Combo Tactics Course
    http://optionelements.com/option-combination-strategies-live-course/
     
    Dave A and Chuck like this.
  5. Dave A

    Dave A Active Member

    Thanks for the replies ... I really appreciate it !! I have been looking at the M3, Bearish Butterfly and ROCK programs offered by Mr. Locke and I am very interested. I have also taken the Option Element Combo Course as suggested by RayM (Thank You RayM). I think both Mr. Locke and Mr. Sizemore have great programs and are great traders.

    It looks to me like Mr. Locke's programs require moving a lot of contracts up and down the matrix. I am in no position to doubt his tactics, but I would be curious to hear from some of you who are using Mr. Locke's Bearish Butterfly and ROCK programs. Are there a lot of moving parts involved with trading his programs ? (or does it just look like it because I am not familiar with his tactics) ...Are your real life results similar to Mr. Locke's simulated results ?

    Thanks again for the replies. I have learned so much in the past from listening to experienced traders, so please feel free to offer any and all advise you may have !!
     
  6. RayM

    RayM Well-Known Member

    >>> I am in no position to doubt his tactics, but I would be curious to hear from some of you who are using Mr. Locke's Bearish Butterfly and ROCK programs.
    I do personally use them.

    >>> Are there a lot of moving parts involved with trading his programs ?
    >>> (or does it just look like it because I am not familiar with his tactics) ...
    Once you "see" what John is sharing, there are very few moving parts.

    >>> Are your real life results similar to Mr. Locke's simulated results ?
    yes, and many times the result is better than the web ones he post and shares about on Monday's
     
    Dave A likes this.
  7. Dave A

    Dave A Active Member

    Hi RayM... Thanks for the reply. That's extremely helpful to know.

    There are several good traders and good programs out there to follow (which makes it hard to figure out which is the best way to go). I'm just trying focus my attention and energy in a good solid direction. It sure seems like Mr. Locke's programs might be the way to go.

    Do you mind if I ask you what Trading Software and Brokerage you use. I have TOS and the ONE Software. It seems like a lot people have IB and OptionVue. What would you recommend ?
     
  8. RayM

    RayM Well-Known Member

    Use and recommend TOS & OptionVue (YMMV - Your Mileage May Vary)
     
    Dave A likes this.
  9. RayM

    RayM Well-Known Member

    If you walk the John Locke Journey (I recommend the following order of Methods YMMV)
    John Locke - System of Various Methods
    SSS-(Super Simple Spreads)
    M9-(Bearish Butterfly)
    M3-(Concepts)
    M15-(ROCK)
    M21-(Checkmate)
    APM-(Advanced Position & Personal Management)
     
  10. Dave A

    Dave A Active Member

    Very Cool, Ray... Thank You.
     
  11. Tps

    Tps Guest

    David - my two cents is that all the great traders learn how to make butters, condors ect their own. i.e., they establish their own rules and guidelines (through backtesting and live trading) and most importantly, are disciplined, sticking to those rules/guidelines. I used to try to emulate everyone else's strategies, but eventually I found success by finding a style that suits me and only me. Your brain is wired differently that John Locke's or any other trader mentioned here.
     
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  12. Dave A

    Dave A Active Member

    Thanks TPS... I agree. I'm just trying to get as much input from experienced traders as I can. You guys have already been down the path I am going, so any and all advice is greatly appreciated.
     
  13. Andrei

    Andrei Well-Known Member

    It looks to me like Mr. Locke's programs require moving a lot of contracts up and down the matrix. I am in no position to doubt his tactics, but I would be curious to hear from some of you who are using Mr. Locke's Bearish Butterfly and ROCK programs. Are there a lot of moving parts involved with trading his programs ? (or does it just look like it because I am not familiar with his tactics) ...Are your real life results similar to Mr. Locke's simulated results ?

    I can tell you that John's programs help me a lot. I only trade M3 and BB, but may add Rock on trial basis. I think M3 should be the first strategy to learn, it has some rules and guidelines, but allow a lot of flexibility. It is pretty forgiving up to about 21 days to expiration, then you really need to pay attention. On two occasions I made some transactional mistakes and ended up paying for them. I trade BB in smaller sizes and so far July was my first losing month.
    All John's strategies are based off OV analysis. I hate the program but there are no other choices. ONE was better, not great, but it does not provide reliable T+0 calculations.
    I trade with TOS (very good platform, not great commissions) and Option House / TradeMonster (great commissions), but all my analysis is done in OV. I just purchase the APM program, looking forward to going through it.
     
    Dave A likes this.
  14. Dave A

    Dave A Active Member

    Thanks Andrei. From all the great feedback I have been getting it seems the M3 is the place to start. It seems like there's a whole pool of people using this trade / concept as their "foundation". Ultimately, that's what I am trying to accomplish right now, find a good foundational trade / system that can help me learn some more advanced trading skills but MORE IMPORTANTLY also work as a base for me to build my own trading style upon. That's why I am asking for this advice. I want to make sure the NEXT 2 years of my options education is all being built upon a solid platform.

    I am considering buying the entire M21 Series in order to own the whole course. I understand that I need to take these courses one by one and master the fundamental concepts before moving on to the more advanced series in the program, but it seems to me that once I get started, I'm not going to want to stop.

    Any feedback about buying the entire M21 series. Typically, how long does it take to work through each course and build enough of a foundation to be able to advance to the next level. I understand this is a very subjective question, but I'm just trying to get a "feel" for what's ahead. If it takes years in between courses, I rather wait and buy each individually. Conversely, if it can be done in weeks (if someone is extremely committed), than I would probably like the entire series. I know there's no "right" answer to this question, but I would like to hear everyone's feedback / personal experiences, please.

    Thanks Again !!

    Dave
     
  15. Andrei

    Andrei Well-Known Member

    It is hard to say how long it will take to master the entire M21 series. You probably can go through the entire course in about a week, but then you will have to go back many times to every segment depending on the market action. You will not really "master" it until you trade through every strategy and market combination. I find myself going back to M3 and BB courses as I trade through various markets. Buying the entire M21 is probably a good idea if you can get a good discount on the entire package. You still need to buy M3, BB and Rock to make any sense of M21. If there is no discount, just start with M3 and BB. Then add the rest. BTW you can trade BB with smaller lots than 10 lots. M3 is a bit tricky to trade with anything less than ten, although John shows some ways to do it.
    As somebody said every trader goes through five stages: losing a lot of money, learning to lose just a little, staying even, learning to make a little and then becoming a successful trader. I think learning John's approaches will take you to Stage Four (this is where I am now), the rest is up to you.
    Hope it helps.
    Also OptionsTribe will give you 5% discount if you join.
     
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  16. Dave A

    Dave A Active Member

    Thank You, Andrei... I appreciate the feedback. That helps a lot !!
     
  17. m&m

    m&m Member

    Hello, could you share how has the current volatility has affected your trades and adj? Since this is happening live and not OV backtest I thought it will be interesting to see how different strategies are holding up.

    I have an Aug kevlar trade from Himanshu and it is doing alright. less than 2% gain/loss during the whipsaw.
     
  18. Venkat

    Venkat Guest

    When the vols skewed on June 29th, July went into backwardation compared to August and future months. Overall, July has been a tough month to trade for delta neutral traders. Most of the people in my trading community trade Locke's M's and some made good money, some lost a little and closed the trades but majority of them are around break-even. Since some of them are taking the trade to expiration week, it's not yet over but these are my observations, in general.
     
  19. Dave A

    Dave A Active Member

    Hi Guys,

    Just checking back with an update.... As per several of your suggestions, I purchased the M3 and BB programs and I am very pleased. I have gone through them both several times and I have a pretty good feeling for how they work. I am getting ready to start the process of “practicing” the strategies right now using historical data so I can build the confidence to trade them live. I think these strategies will work really well for me... Thanks again for the guidance.

    I have a couple more questions if anyone would like to help.

    As far “Real Life” trading, I have a lot of experience trading Vertical Spreads as well as Calendars and Diagonals, but I have very little experience with trading Butterflies Live. Also, most of my Real Life experience is with the SPX, very little with RUT. So I was hoping for a few tips regarding Live Orders and trading Butterflies.

    In general, when you guys enter or exit the Butterflies (or roll them up or down), do you place the orders as a Butterfly or do you trade it as 2 separate spreads. Like I said, I don't have any problem trading it as 2 separate spreads, but if the fills on a Butterfly Order are decent, it would make things a lot easier to trade it that way. Also, what about orders and fills for a Broken Wing Butterfly... how do you recommend entering and exiting those types of orders.

    Also, I notice a vast majority of experienced traders using the RUT over the SPX. I have a decent amount of experience with the SPX and I am pretty familiar with the challenges of fills. Is the RUT a better place to be trading? I don't really have any idea, so I'm just trying to figure out if I should be studying the RUT a lot more than the SPX, especially as I start to go through my M3 practice trades. In general, are fills and/or complex orders easier to fill on the RUT vs. the SPX, or are they roughly the same.

    Thanks again for all the help !!
     
  20. ACS

    ACS Well-Known Member

    I trade the M3 & BB in the RUT almost exclusively and enter my orders as butterflies or put condors with very few problems once I know what the true price is. The main problem with fills is if the market is moving strongly at the time and that will be true for the SPX as well as the RUT. If you are willing to put up with the higher relative commissions then you can use the IWM instead of the RUT to get your feet wet and you will be able to have 1 ITM call against 10 butterflies for the M3 which will give you a feel for managing the trade with the full size RUT. You can start trading the BB with one RUT fly or even use IWM too if you want to limit your capital at risk while learning. The two things to be careful with in the IWM are the slight risk of exercise and the quarterly dividend, both of which John talks about in the bonus session.
     
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