Hi Jim,
You make a valid point using statistical analysis. Unfortunately, you need to incorporate all the variables & that is nearly impossible as everyone is different and each trade is different. Still, your stats show that playing options is high risk & most likely a losing proposition for most people. That is a point that you, RR & I all agree on.
IMO, RR's 20% options play with the QQQ's is actually a fairly high R/R winner as long as you understand the risks, can identify the conditions necessary to achieve a winning trade & most importantly wait for a genuinely good set up if you are to close out that winning trade on a consistent basis.
Sure, there will be losing trades. No one can avoid that. This is where a majority of us screw up big time. Folks get slammed because the let that trade grind away into nothing &/or try to make it up on the next trade. In fact, because of the risk involved, I think that buying puts & calls is NOT for most individuals, just like RR has repeatedly said.
This is where your POV has significant merit Jim. You cannot enter an option trade when your confidence is down. You are asking for trouble by entering an option trade after a loss with the attitude that you are going to make it up on this trade. If you let it become an emotional trade or you become overconfident, you will likely set yourself up for hefty losses.
IMO, you have to look at each trade as it's own entity, as if no other trade ever existed. Each entry is dependent on it's own set up. That requires you to treat it on it's own merits or you will surely send your cash to money heaven. Most people cannot do this & this is where the heavy losses mount up.
I know where you are coming from here Jim & for the most part I think you are right. I've made these same mistakes over & over. I've let options that were up in excess of 100% close out worthless or near worthless. I've lost untold thousands of dollars on options trades in the past (not including CC's). I actually quit buying options because I was regularly getting my head handed to me.
However, I still followed what RR discussed about playing options. After a while it began to make sense. I still have a great fear of buying options & have only made a few buys in the last several months. I'm just starting to get confidence in it again. Buying the QQQ's is only an occasional trade for me & only when I see that the R/R is clearly in my favor. I do believe that if one is patient & waits until the probability is genuinely in your favor, one can get in & out with one 20% option trade per month.
However, if one is to play this game, you absolutely must cut the occasional loser post haste & take profits before they evaporate. This is paramount if you want to win at playing options. There can be no if's and's or but's on those two points. |
