trade option saturation

Discussion in 'General Discussion' started by Jonathan, May 13, 2016.

  1. Jonathan

    Jonathan Active Member

    Hi All,

    Wow i'm feeling burned out. This month i had on a RUT Nested IC, Rut Weirdor, SPX RTT and Tony Sizemore styled RUT BWB on all at once. I was trying to manage all this off my TOS iphone application during work hours. I had something like 18 separate unsorted RUT strikes with all the trades on top of each other. I'm a PM at work and have bloomberg and all the tools i could want but i can't exactly pop open my mac book pro on the trading desk and fire up OV. I'm making 2-5% per month in my personal account using all the collective knowledge i've gleaned from everyone here. DH and AM you guys are the bomb. But my problem is i'm greedy and want the best of every system. I'm not so much looking for answers as putting my "trade overload" status out there. Anyone gone through this and if so how did you come to terms with selection which trades to focus on? To end on a positive i deeply appreciate all the trading knowledge (and wisdom) than has been shared over the past year. I've learned a ton. There is a real spirit of goodness and non-harsh criticism here that doesn't exist in many other place in the financial markets.

    thanks again,
  2. Rich

    Rich Member

    I've experienced option trading saturation a few times. For me it was a constant problem, and occasionally still is, because I tend to drift into too many positions thinking "I can handle it" because I did it in the past. In the early 2000s I used to swing trade 30 to 40 different stocks at once for months on end, consuming 3-4 hours per day. Once all the way into options, I've caught myself with 20 different option spreads open at once, with hundreds of contracts open at different strikes. And stressed out to the max. Too much to track and manage even for an experienced PM.

    <<< ??? RUT Nested IC, Rut Weirdor, SPX RTT and Tony Sizemore styled RUT BWB, .... YOU FORGOT THE John Locke M3, M21, Hedged IC, blah, blah, blah !!! >>>
    All nested in the same account? That's enough to drive a lunatic crazy.

    The only thing I've found that cures it is to trade fewer and simpler positions, slightly larger size, but take on less overall risk and especially less complexity.

    Focus on 1, 2, or at most 3 trade types at once and don't try to do everyone's favorite all at once. Trading too many different types at once is VERY time consuming as you've learned, unless you have marvelous automated tracking tools, rules, and a good knowledge base for each type of trade. What I've done is to open different accounts for each trade type and don't overlap trades at all (That's helped a lot). Mixing different trade types in the same account in the same expiration period is a prescription for baldness.

    Greed with a capital G or "the need to be right and never lose" are hard demons to overcome because they frequently drive overtrading, trading into expiration, taking on too much risk, and ultimately increased losses.

    Give yourself a break by closing as many trades as you need to to be able to manage things without stress. The markets will always be there, but if you overtrade while at work your job may not be there, which will bring more stress. Relax... simplify work ... simplify life. Simplify your trading and enjoy it more. Take your time to learn what works better for you. Ultimately you need to develop a trading plan and style that works for your available mental energy, capital, risk tolerance, and time available for trading without robbing your work or family time. The paradox is that when you simplify and slow down, you will get where you want faster.
    SVL likes this.
  3. AKJ

    AKJ Well-Known Member

    Hi Jon,

    I know exactly the feeling you are describing, and have experienced it myself at several points as I have evolved my trading. My personal experience is that the feeling of being overwhelmed with too many trades usually is quickly followed by an unexpected drawdown/minor blowup in my account.

    It usually starts with me getting overly excited about trading multiple systems that offer differentiated "edges" that they attempt to harvest from the market, while at the same time being low or even negatively correlated with each other. The negative correlation gives me a false sense of comfort and leads to me putting on too much risk. Not having enough time to watch it closely or an unexpectedly large move can cause the high gamma of the book to blow me out. It's not like I'm going to zero in my account, but end up taking a larger loss than I would like.

    I have tried to simplify my trading by reducing the number of systems I trade and trading far enough from expiration that it can be managed with once-a-day monitoring.
  4. ACS

    ACS Well-Known Member

    I've found that the more mechanical the trades are, the more I can have on at once while the more discretionary they are, the fewer I can deal with at the same time.
  5. Boomer34

    Boomer34 Well-Known Member

    Good advice...I'm not to the point of trading multiple strategies...but I already find myself in the mode of wanting to continue to learn the new and updated trades that everyone is talking about...instead of mastering a single trade and then re-evaluating...
  6. Jonathan

    Jonathan Active Member

    thanks all. Some great thoughts here. Appreciate the feedback!
  7. Georges

    Georges Well-Known Member

    If you can make a profit with one or two strategies, you make yourself difficult still use more strategies.

    Invest only 20 to 40% of your account, and keep the rest for when you have a big loss or if there is a black swan.
    In that case, you will always have money available to invest back again, and build up your account.
    When there is a opportunity you have money available also.

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