Copycat Trading

What can I blog about when sitting in an airplane?  I feel isolated being unable to connect to the internet.

Yesterday I posted a live trade for the first time, based on the urging of one reader.  My reasons for refusing to do that earlier are still valid, and I feel more strongly than ever that posting a trade is a poor idea.

I certainly want rookies to earn how to trade options and to have the courage to open a paper trading account.  I also want to encourage those of you who have experience trading options to read my offerings and if you find them educational and if you are in agreement with my general philosophy and outlook, to begin using one of my six recommended strategies

But too many rookies see a ‘live trade’ posted by someone online and automatically assume that the specific trade is suitable for them.  They somehow get the idea that the poster is some kind of trading genius, never has a losing trade, and that the posted trade must be a sure winner.  Those are bad assumptions.

And there’s more to it.  Suppose my comfort zone is violated, and I decide to adjust the position, after posting the original trade.   I don’t want the obligation to remember to post every adjustment and eventually mention when the trade is closed (although I will try to remember to do both).  But more importantly, what happens if the trade violates your comfort zone?  Will you refuse to adjust because I didn’t?  That would be a poor idea.  And would you plan on asking my opinion?  That’s even worse.  How can I know what your investment objectives are and where your comfort zone lies?  I never offer advice on a specific trade.  My goal is to TEACH you what you need to know to enhance your chances of becoming a successful option trader.

That’s why I hesitate to post trades. This specific iron condor was suitable for my investment portfolio for a variety of reasons.  It is not suitable for everyone, and I specifically mentioned that it was NOT a recommendation.  Yet, one reader decided he was going to ‘follow’ the trade every day – until it expires about 12 weeks later.

There is nothing to be learned from that exercise.  The way to learn anything is to try to decide for yourself if buying this iron condor is a good idea for you.  Perhaps the idea of trading 12 weeks into the future is appalling to you – and believe me, many feel that way.  Perhaps the strikes were inappropriate and you would only trade a November position if you received a much larger premium.  Or, you may feel the options were too close to the index price and would only be comfortable with options that were several strikes further OTM.  The point is that you should NEVER open a position just because I, or anyone else, does so. 

The purpose of these writings is to encourage you to learn about options and to understand how options work, allowing you to decide for yourselves if a specific trade is a good idea for you.