All,
I wanted to post an example of how I like to trade futures options. I like to be long gamma, near expiration, where a relatively small move in the underlying instrument translates to big moves in the options price. Note that here I closed out the positions where there was nothing but time premium left. Returns for each trade were 400% win, 1,000% win and a 100% loss (with a small portion of the profits).
Look at the reward vs. absolute risk. It’s just the way I like it: heavily skewed to “reward”.
Risk small against reasonable potential for big profit. When profit comes, bank some profit and use some of the profit to “roll” into another position, possibly even bigger size in order to compound:
- Risk $250 on a 4 lot, gain $1,375
- Risk $250 on an 8 lot, gain $2,750
- Risk $313 on a 10 lot (profit), lose $313
To good trading,
Todd
