My Options Trading Unlocked – Newsletter 10 Dec 2023

“How options traders can grow and to improve their skills when market opportunities are scarce.“

When the market presents fewer opportunities for our options trading and our portfolio, such as during periods of low volatility or when your capital is fully committed, there are still valuable activities beyond just monitoring market movements. We, options traders, can use this time effectively to develop and refine our trading skills in several ways. Such a calm period can be a perfect opportunity to strengthen our knowledge foundation, refine our strategies, and prepare for future market conditions. As we navigate through periods where options trading opportunities seem scarce, it’s crucial to remember that these times are not merely pauses in our trading journey but valuable moments for growth and skill enhancement. Here are a couple of key ways I use to improve my option trading during “calm periods”:

Expand my knowledge and practice

I try to use these calm times to deepen your understanding of options trading by (re)reading books, watching option trading webinars, and so on. I try to dive deeper into understanding various options strategies and market dynamics, especially those strategies I haven’t used much before. This can involve exploring new trading techniques or strengthening your grasp of existing strategies. I don’t want to limit this to only a theoretical study but I do try to apply the strategies I learn about in real money trades.

I recently expanded beyond traditional securities by exploring options on futures, such as the 112 trade on /MES (Micro E-mini S&P 500 futures) and /MCL (Micro Crude Oil futures). This way I try to learn and understand the nuances of futures options, such as their expiration patterns, leverage, and how they differ from standard equity options while applying options strategies with high probability of profit. This involves understanding

I have recently broadened my knowledge about the diagonal spread strategy in stock options, a topic I’ve been aiming to explore for quite some time. This advanced strategy involves simultaneously buying and selling options with different strike prices and expiration dates. It can be a powerful tool in a trader’s arsenal, especially in markets with low volatility, like right now. And of course the next step is to try out the diagonal spread strategy in a live trade, which I did (all trades are available on our discord).

I am convinced that “real trade – real money” application is crucial for getting to understand the practical aspects of strategy execution, managing positions, and adjusting the strategy based on market movements. It provides valuable experience in decision-making, risk management, and adapting to market conditions, the best way to learn.

I feel that these new steps in my trading journey will significantly enhance my trader’s skills and readiness for a variety of market conditions.

Regularly reviewing past trades

On a weekly basis, typically over the weekend, I dedicate time to analyze both my recent and historical trading activities. I firmly believe that this routine is crucial for my ongoing development and progress in trading.

This involves taking time to make a detailed analysis of both successful and unsuccessful trades and to extract valuable insights and lessons. This isn’t just about assessing profits and losses; it’s about understanding the ‘why’ behind each outcome. A comprehensive trading journal can be an invaluable tool in this process, helping you to spot patterns, refine strategies, and evolve your trading plan based on concrete data and personal reflections. To conduct an effective review, I suggest you start by maintaining a comprehensive trading journal that records specifics of each trade, including the strategy used, market conditions, outcomes, and even if you want to be very detailed, your thought process during the trade.

While reviewing, I objectively evaluate what factors contributed to the success or failure of a trade. I consider aspects like market analysis accuracy, execution timing, and adherence to my trading plan. I use data from the journal to identify patterns or recurring issues for specific strategies, and I do make specific decisions about necessary adjustments to my strategy (do’s and don’ts).

Additionally, I do believe it’s vital to assess the impact of external factors such as market volatility or economic news and how they influenced the trade’s outcome. This helps in understanding how to better navigate similar situations in the future. This is also the reason for my weekly newsletter.

I believe that review and reflection should also extend to personal performance, evaluating aspects like emotional responses and discipline. Identifying personal strengths and weaknesses can be as crucial as assessing strategy effectiveness. I think that continuously updating and refining my approach based on these reflections is key to evolving as a trader and improving long-term performance.

Networking with other traders

Based on my personal experience, actively engaging with fellow traders through trading forums and social media platforms has proven to be extremely advantageous for me and those engaged in options trading. Generally, I believe there’s a notable sense of openness and a good inclination towards mutual assistance within these communities.

Social media platforms offer a unique opportunity to engage with a diverse community of traders, ranging from novices to experienced professionals. Through these interactions, traders can gain access to a wealth of knowledge and different perspectives on trading strategies and market trends. For instance, engaging in discussions on forums or social media groups can expose traders to various trading techniques and strategies, such as volatility options trading strategies or advanced techniques for experienced investors. It also allows for the sharing of experiences and insights into how certain strategies perform under specific market conditions, offering real-world context that can be immensely valuable. Moreover, networking can serve as a platform for feedback and constructive criticism, enabling traders to refine their approaches. This collaborative environment encourages continuous learning and adaptation, which are crucial in the dynamic world of options trading. It’s not just about gaining new insights; networking also fosters a sense of community and support, which can be particularly beneficial during challenging market conditions.

In summary, networking with other traders is not just about exchanging strategies; it’s an avenue for comprehensive growth, learning, and staying connected with the ever-evolving landscape of options trading. Hence the reason why I have started our discord channel.

Conclusion

I suggest to use these quieter periods as a springboard to elevate our trading expertise. By focusing on learning new aspects of trading, reviewing my trades via my journal and networking with other like-minded traders, I am convinced that I can optimally turn a period of scarce market opportunities and required actions into a valuable time for growth and skill enhancement.

In embracing these practices, I am not just waiting for the market to present opportunities; I am trying to actively create them. So, as a call to action for you all, I would suggest to take these “calm moments” to commit to your continuous improvement as an options trader. The journey is as rewarding as the destination, and each step you take now lays the foundation for future success.

Have an awesome trading week.

Whenever you’re ready, here are 3 ways I can help you to improve your option trading:

1. For the option traders still looking for a Trading Options Spreadsheet to track their results and improve their trading, check out the EASY “All In Trading Options Journal Spreadsheet”: the ONLY option trading journal designed to focus on parameter-based options trading and account management, as probabilistic-minded options traders like me like it. Checkout this article about the spreasdsheet, the multiple tutorials about the spreadsheet on my Youtube or read about the spreadsheet directly available in our webshop

2. If you are not a Free member of our discord yet : In our discord channels, we team-up with other like-minded option traders, with the aim to support each other and share valuable insights and ideas. I provide live comments, trade alerts, educational info and tools via our discord room. Join anytime ! here: http://discord.gg/cGW6xH4RNT
3. In case you haven’t found me on social media: I suggest to follow me on X @L2TradeOptions and on Youtube @TradingOptionsCashflow to pick up my latest content.