As an active options trader I would like to bring up an issue:
Even after you've got a solid self education (books, internet sites and webinars, paper trading and even live trading) – the nature of the options world is that there is always a lot to catch up, in this risk/reward sophisticated area. The issue is: after "graduating" yourself… does it make sense to practice with real money on your own (starting with modest amounts, of course), or to get a mentor to walk you through complicated stages like: making the right entry to the right strategy, set up exit points, adjustments, repairs and more. There are companies out there which charge a couple of grand, usually accompanied by risk free guarantee (if you don't make money, you get refund). As for myself, I do try to get around on my own, unless I find some mentoring program in which I pay gradually reasonable amounts, and see results as I move forward. What do you think?
Good questions. And it brings up important points.
There is a huge difference between being a very short term trader and an investor. They develop different skills when learning their craft. You must know which skills you need.
For example, timing is far more important for a very short-term trader than it is for an investor. I consider myself to be a short-term investor. The strategies I teach are not for day trading. They are meant to be held for a period ranging from a couple of weeks to two years (if you use LEAPS options). Thus, timing is not at the top of my list of things I believe someone must master. But, more than that, I don't believe it's a transferable skill. It takes a big effort and years of experience to become a successful market timer. I know those who love technical analysis disagree, but this is an argument that may never end.
"Setting up exit points" is also a method associated with day-trading. An investor modifies such decisions as conditions change.
If you find a mentor who can transfer his/her knowledge of technical analysis and years of experience so that you become able to pick the 'right' entry point for a trade, more power to you. I don't think it can be done.
1) When ready to trade with real money, I prefer to see an investor/trader begin on his/her own, trading a small number of option contracts.
2) It's far too soon to hire a mentor. The new trader must gain real world experience because for some, virtual trading is of minimal help. That's true for those who didn't take it seriously because it was 'only' play money.
You don't want to hire a mentor and say "Teach me." It's better to discover the areas in which you want additional help, and find someone who has a proven record of being able to teach those specific skills.
3) Can a mentor help? Part of the answer depends on how you define 'mentor.' It can be a teacher or a trainer. Some may confuse the mentor with a trading coach.
a) For example you say you'd like help with 'making the right entry.' I believe very few people can time the market and make the 'right' entry. And if you find someone who can do that, as I mentioned, it's not something that can be easily taught.
b) Yes, there is a great deal to more to learn once you begin trading. In my Rookie's Guide, I explain 'what to look for' when entering a position and how to manage risk. That includes exit strategies. But for an investor, it's not necessary to make the 'right' decision all the time. I believe the goal is to make a good decision – I call that process 'making the best decision you can make at the time you must make it.' If you understand a given strategy, if you understand the risk of adjusting a trade compared with not adjusting, if you can take a loss and move on – then your chances of being successful are excellent. Those are not the sort of items you said you are seeking in a mentor.
c) I don't believe a mentor can do those things. If you want to be a very short-term trader, then the strategies I discuss are not for you. As an active options trader, you already know the difference between opening hedged positions vs. naked longs or shorts.
The day trader probably wants to buy calls or puts with high delta, and profit by predicting market direction. I suppose some short-term traders use option spreads, but that's a very difficult thing to do (too many trades, too much slippage). It's much easier to day-trade stocks or single options. But, if you want to be a day trader, then a trading coach may be helpful. To me, that's not the same as a mentor.
d) I consider myself to be a mentor – but not under any of the conditions discussed so far. I believe a mentor is a teacher. Someone who can explain – so the student can understand well enough to go out and make decisions for him/herself. I wrote the book with that in mind. And I reply to follow-up questions from readers.
I also take on a few as clients – when they want to get more detailed information on specific strategies or want to discuss various aspects of using options. But I am not into technical analysis, and never know the best time to enter or exit a trade. I think you are discussing a mentor who is more into helping you learn about active (vs. passive) trading skills.
e) I consider adjustments and repairs to be part of the education process and not something that an option trader learns to think about after positions are owned. I recognize that many trades require no adjustment and thus, the newbie gets less practice in a crucial area. That's one good reason for trading with smaller sums when beginning. It's not just that the trader is a rookie, but it's also because he/she has no experience with the (sometimes frightening) idea of making an adjustment and locking in a loss. It all takes time to become comfortable with the entire process.
4) Regarding firms that charge thousands, promise refunds, and spend a great deal of time (that you paid for) telling you that you need more seminars: Don't do it. They always (randomly) have successful students who provide testimonials, but they will not tell you about the losers. I have no idea how easy it is to receive a refund. There is no need to pay that much money. You have good books. You have the OIC and CBOE web sites. You have blogs such as this one where you can learn and also ask questions. Use the money you would have paid for those seminars to trade, or buy other educational material.
A mentor may be appropriate for you – but please understand just what it is that you want help learning – and most importantly whether someone can teach you those skills. I'm sure someone may be able to help you better understand specific trading techniques: how to enter an order, should you enter a position as a spread or as individual legs (spread is my answer), why one strategy may be better for you (as you discuss your ideas, the mentor may offer good guidance). But teaching you to time the market. No way, IMHO.