Maximum Safety, Maximum Reward Option Trading
I want to talk about what Maximum Safety and Maximum Reward option trading is all about. It’s been the motto of San Jose Options mentoring program for quite some time now. First of all, let me tell you how this concept came about.
This motto has bleak and humble origins from my early days of options trading. I had some rather horrible experiences when I was starting out because, just like other option traders, I started trading Iron Condors. I knew a little bit about credit spreads at the time, but never actively traded them. One look at the risk graph and I could tell, credit spreads were risky business.
I traded the traditional option spreads that have been traded for decades, but couldn’t help thinking there could be a safer way to trade. I had my winning months, but they were always followed by one rock bottom day. Thousands of dollars I successfully made always managed to find its way out the window from a single large move on the market.
I had been giving options trading a lot of serious thought. There must be a better way to trade than these tired, traditional strategies. How could I get anywhere if I continued being dealt large losses on my trading account? A bunch of small victories doesn’t add up to much after one large loss.
I came up with Maximum Safety, Maximum Reward option trading years ago. I was trying all the idea I could possibly think of, with great results. This has been working for me for several years now and I don’t see any sign of me stopping. I came to realize, I need to maximize the Greek called Theta, while minimizing Gamma and Vega. Once I have that down, I’ll have what I’m looking for.
I have to say, we’ve made great leaps of progress over the last few months. While comparing a strategy we call “the Revolver” to the traditional Iron Condor, we found that we can get the same Theta as the Condor, but with much lower Gamma and Vega. For example, while having the same amount of Theta, the Iron Condor would bring about a $8,000 loss on a 10% move to the upside. On the other hand, our strategy will only feel a $200 loss with a similar move. Our Revolver is proving to outperform and be at least twice as safe and the traditional Iron Condor.
To conclude, I just want you to know this; if you really want to be successful in trading options, you really need to focus on Maximum Safety and Maximum Reward. Remember to maximize your Theta and keep Gamma and Vega to a minimum. I hope you found this article helpful and informative. Best wishes on your option trading. Until next time, have a profitable day!