Conversation with a Gold Member
Mark, If I may ask, how do you select your trades? The selection of the trade is so critical.
That statement is true. It is also a problem area for me as a teacher. I prefer not not use technical analysis. That means I seldom try to time a trade entry. I admit it – I do not know where the market is headed. Sure, I may lean a bit bullish or bearish on a trade, but I want to earn my profits by skillful management of an option position, rather than by correctly guessing in which direction a stock or the market will move.
If you believe you can predict direction well enough to prosper by doing that (I know you have been a long-term stockholder, and may have an excellent track record for stock picking. But timing is different), then continue. Use what you learn about options to trade positions that are better than owning stock: Better because they are more likely to produce profits, require less cash, allow you to limit losses, etc.
I don’t try to time the markets. I enter trades in a vacuum, trying to be market neutral. Right now, my general plan is to earn cash bu owning positions with positive time decay. That’s working very well now but will not always do so. There are no guaranteed profits. But the bottom line is that I leave the timing of trades to those who have expertise. However, what we can in the realm of timing is to adopt a strategy that feels right for today’s market. Covered calls are okay – but it is a quite bullish strategy (even though most people think it is a neutral strategy).
I am also trying to teach myself the basics of fundamental analysis and technical analysis. This can make you a much better trader. But do not believe it’s a quick study.
FA is generally used for longer term investing, and my stance is that you cannot expect to do better than the pros who do it for a living. And the evidence is there: these people cannot outperform the market averages. Thus, I believe it takes a special talent to earn money as a fundamentals trader. On the other hand, the Cramer idea (I am not a fan of his) of doing research every week on every stock you own cannot be a bad idea. I just don’t know how helpful it will be.
TA is better for the shorter-term trader (one week to couple of months), so it is likely to be of significant value in your options trading – if you have a talent for using it.
Some decades ago, there were the ‘nifty fifty stocks. Owning those worked until it didn’t. That idea crashed badly
I have been reading about this also. I bought 2 books for “dummies” on the subject, and will start these.
The one other site I am looking at is Investors Business Daily- they do fundamental analysis and technical analysis and keep track of the entire market with special attention to the top 50 stocks in the market. But they are not involved much with options (or that is my impression so far-but I do not subscribe to them)
General information is a good thing. Knowing about markets in general is helpful. If you have the time and patience, I love that you are learning as much as you can about all aspects of making this work for you. It’s a lot better than your old buy and hope strategy.
All of this would be easier if I had more time to spend but I have a busy job and a family, so my time is limited.
When we had the crash in 2008 we had our money in a Schwab “private client ” account where we were being advised. I don’t think the advice we were given was very good. Subsequently my husband and I took all our money out of that service, but managing it ourselves is a bit daunting-we are diversified in mutual funds, bonds, ETFs etc.
What I like about options, is that you can actually lower risk. Thanks again for your help!