# Where are all the Options Traders?



## MrPCMan (May 3, 2012)

Hi all options traders, what tool do you use for screening Options? 

I have posted the question before and received a few suggestions, but mostly the suggested tools are good for Stocks, which is good (ie. StockRover, FinViz, etc.), don't get me wrong, but not options specifically. So will try asking again...there must be options traders out here, how do you find options to invest in? I can use those tools to look at Fundamentals/Technicals for the underlying stock, but I can't query any specific parameters relating to their Option chains, and data.

Am currently in conversation with Investools.com, however, where our dollar is so low, their US cost for the tool gets overwhelming...and they claim they are the only tool that has Options screening! 

I'd like to prove them wrong, but I can't find any in the internet world. Any ideas would be appreciated, before I bite the bullet and "invest" in their Options Tool?

Thanks in advance...


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## FI40 (Apr 6, 2015)

Is this what you mean? http://www.marketwatch.com/optionscenter/screener

Not sure what kind of trader you are. Is just looking at some relatively recent last quoted prices enough, or are you building vol surfaces and doing some more complicated strategy? You may just need Bloomberg/Reuters in that case.


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## Rusty O'Toole (Feb 1, 2012)

I use Think or Swim and Dough. Dough is not available for trading in Canada but you can use it for screening. High IV (implied volatility) means high priced options, if you like to sell options and option spreads. Dough screens for this.

Think or Swim allows you to screen for stocks and option, ETFs and futures. I don't find it very useful for screening. But the Trade, Monitor, Analyze and Chart pages I use all the time.


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## MrPCMan (May 3, 2012)

Thanks folks, I have looked at MW option screener, although they have great built in indicators, I am one who wants to combine the indicators and other indicators of my own that I have witnessed in the option markets, and find the best option based on several criteria. 

Rusty, I have never heard of Dough, I am researching it now...thanks for the info!


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## humble_pie (Jun 7, 2009)

i was lucky to be introduced to options at an early age by a mentor from an old european bank that had traded futures & options since the 17th century.

"you have to like your stock before you trade its options," he'd always say. "You have to know your stock first."

i've never deviated from this suggestion. I'd no more look for a spreadsheet of option candidates with high IVs or deviant skews than i'd fly to the moon. Once i've taken the trouble to ID a stock, one quick glance will reveal whether its options are going to be viable or not.

but it's the very last of my criteria, not the first.

i know there are countless who go at it the other way around. We had a member on here who'd do earnings flies without even knowing what was the underlying stock. The problem with that is the trader is not dealing *stock* options, he's only dealing interest rates & how the greeks are affecting his margin position.

i had a big eye-opener in the fall of 2008. I had a bunch of naked short puts that had fallen deep into the money. I sought suggestions from a friend who'd long held a senior management position at a major option trading house.

in the late fall of 2008, as the known financial planet was collapsing around us, my friend told me that many of their options clients were getting wiped out. They were the earnings flies & condor traders. They were the traders who worked option positions from the inside out, that is, without a care in the world for the underlying stock & whether they would like to own that stock or not.

in every case, in the late fall of 2008, their margin had been called, their accounts were goners, they had lost everything.

"We're even losing clients who've traded these (iron strategies) successfully for years & years," said my friend, explaining how iron strategies don't work out in extreme markets.

he gave me 2 suggestions for identifying ITM puts that are going wrong in bad markets. I've passed one of his tips out in this forum, it became a staple formula. It goes: (stock minus strike) < put option bid = risk of early assignment. The reverse is true for DITM calls.


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## lonewolf (Jun 12, 2012)

If price is swimming in the part of the river you are familiar with then just look through the options & see if its practical to place an option trade. I have no faith in any black box option screeners. Da chief Don Walanchuk never used a computer when everyone else were using them, he just used a giant chart of the DJI he charted tick for tick on his wall @ home.


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## humble_pie (Jun 7, 2009)

lonewolf said:


> If price is swimming in the part of the river you are familiar with then just look through the options & see if its practical to place an option trade. I have no faith in any black box option screeners.



there's an excellent illustration in the Money Diaries section right now. Nerd_Investor first worked up a short list of stocks he'd be happy to own at prices hovering around today's somewhat crashed levels.

only then did he begin searching for put strategies that would enhance, augment & sharpen his transactions in those stocks or their options. The point is, he didn't look for the option strategies first. He looked for them last.


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## Rusty O'Toole (Feb 1, 2012)

humble_pie said:


> i was lucky to be introduced to options at an early age by a mentor from an old european bank that had traded futures & options since the 17th century.
> 
> "you have to like your stock before you trade its options," he'd always say. "You have to know your stock first."
> 
> ...


What do you want to know about a stock before you consider trading its options? Is it basically the same as if you were trading the stock, if you like it you buy calls and if you don't you buy puts?


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## lonewolf (Jun 12, 2012)

Rusty O'Toole said:


> What do you want to know about a stock before you consider trading its options?


 Nothing, nothing, nothing

My primary focus is not on the stock. My primary focus is on price.


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## MrPCMan (May 3, 2012)

I only buy options for strong companies that have good fundamentals, so looking at the underlying is important, just as important is looking at the Greeks and other things related to Options (price,expiry date, ITM, OTM, etc) I have a large list of criteria I use to pick the right option/stock and have made some good money, but lost access to a tool a few years ago and just recently have decided to get back into options and need a way to do my analysis.

As I said in original post I am in talks with Investools, but having a hard time justifying $800 USD for data access, so looking for an equivalent tool, possibly Canadian.

Tks.


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> What do you want to know about a stock before you consider trading its options? Is it basically the same as if you were trading the stock, if you like it you buy calls and if you don't you buy puts?



no, not at all. The complex strategies are fine, provided the trader knows what kind of stock is underlying.

for example, suppose one is left with a long DITM call as it approaches expiration. The market will never pay fair value for that call, the bid price will be anything from 10 to 30 or even 50 pennies below intrinsic value. The way to backstep out of that somewhat raw deal at full value is to exercise the call & acquire the stock.

even at that, the trader still has a range of choices, but they all involve knowing something about the underlying stock. At one extreme, he can short the stock in advance & use the shares assigned to his exercise to cover. At the other extreme, he can keep the stock & commence selling calls against it.


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## Rusty O'Toole (Feb 1, 2012)

I'm still wondering what criteria you use to pick stocks, and what you need to know to feel confident trading the options. I my be dumb but am trying to learn.


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## humble_pie (Jun 7, 2009)

MrPCMan said:


> I only buy options for strong companies that have good fundamentals, so looking at the underlying is important, just as important is looking at the Greeks and other things related to Options (price,expiry date, ITM, OTM, etc) I have a large list of criteria I use to pick the right option/stock and have made some good money, but lost access to a tool a few years ago and just recently have decided to get back into options and need a way to do my analysis.
> 
> As I said in original post I am in talks with Investools, but having a hard time justifying $800 USD for data access, so looking for an equivalent tool, possibly Canadian.




PC man, here's an offer that an option trader who doesn't yet have a Think or Swim account could not resist!

my storybook options guru says you could get a free 2-year subscription to Bob The Trader (that's the tasty trade team) plus many other enticing benefits - check out the low commissions, low assignment fees, free cabinet trades - with a new TDDI Think or Swim account.

alas, the offer apparently doesn't apply to existing accounts.

guru - who gets up at 2:30 every morning to "check his beta-weighted deltas" before getting underway with futures trading in overseas markets - guru says that he considers Bob the Trader to be one of the best options data services.

here's the link to Bob. Evidently when funding & setting up a new Think or Swim TDDI account, the new client will have to phone the broker. At that point, client should inform TDDI that he arrived via the Tasty Trade offer.

https://www.tastytrade.com/tt/get-trading-canada?locale=en-US


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## Nerd Investor (Nov 3, 2015)

humble_pie said:


> there's an excellent illustration in the Money Diaries section right now. Nerd_Investor first worked up a short list of stocks he'd be happy to own at prices hovering around today's somewhat crashed levels.
> 
> only then did he begin searching for put strategies that would enhance, augment & sharpen his transactions in those stocks or their options. The point is, he didn't look for the option strategies first. He looked for them last.


Glad I read the replies for posting my own . As humble said, I start with the stocks that I feel are undervalued via the stock screener and approach from there. It's my built in safety net so to speak. Having said that, an option screener (or better yet option criteria built into my existing stock screener) could still be useful and save me a bit of time (ie: I could screen out stocks with poor option volume/liquidity, really low IV etc).


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## lonewolf (Jun 12, 2012)

Nerd Investor said:


> Glad I read the replies for posting my own . As humble said, I start with the stocks that I feel are undervalued via the stock screener and approach from there. It's my built in safety net so to speak. Having said that, an option screener (or better yet option criteria built into my existing stock screener) could still be useful and save me a bit of time (ie: I could screen out stocks with poor option volume/liquidity, really low IV etc).


 There are rare real big money making times when everyone is on the long side, the vix is low when the risk/reward ratio is so favorable from extreme low option premiums even though the confidence might not be real high of market moving in your direction although you still look to play the part of the cycle/price pattern with the highest confidence it is prudent to play long put options. This is often the set up before crashes. The liquidity & the best risk/reward ratio is not seen in individual stocks from my experience, It seams to always be in the stock indexes such as spy or spx.

There are times such as the 1987 crash low when option premiums are so sky high particularly puts when the confidence might not be high the market will move in your direction that selling premium is the most practical trade. These are very rare occasions.


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## humble_pie (Jun 7, 2009)

Nerd Investor said:


> ... I start with the stocks that I feel are undervalued via the stock screener and approach from there. It's my built in safety net so to speak. Having said that, an option screener (or better yet option criteria built into my existing stock screener) could still be useful and save me a bit of time (ie: I could screen out stocks with poor option volume/liquidity, really low IV etc).



N Investor, did you check out the Tasty Trade link above? imho it's a great deal for Bob the Trader, unmatched in fact.

turning back now to folks who work options from the data screeners only (no clue about the underlying), me i have 2 concerns:

- numero uno, these folks are still not learning how to mend a position. IMHO options are all about mending, certainly if one intends to use them as a profitable tool for the rest of one's lifetime. I believe the pros call it *adjusting* a position, but i rather think of it as something like an invisibly-darned sweater sleeve, a stitch in time saves nine, etc. 

you adjusted successfully yourself when you tweaked your RIG puts, by rolling them forward & down a notch. Right now it looks like, oops, forward & down we have to go again. In cases like this, i usually tell myself that the only profit i'll get from those mothers, at least for a long time, is going to be the original profit from selling the first bunch of puts. After that it will be mostly a story of mending & darning as efficiently as possible, in order to avoid assignment ...

- numero due, guru tells me (with a bit of a laugh) that he will suddenly see 6 or 8 identical option spread orders all coming into the broker within the same hour. IE guru knows that all these clients are getting their identical ideas from the same option advisory, which transmitted that particular strategy selection that very same morning.

of the 6 or 8 identical orders, which one do you think will get the best fills on the exchanges? beyond a shadow of a doubt the pit traders, or whatever algo stands in for now-disappearing pit traders chez les market makers, are onto this . each:


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## Rusty O'Toole (Feb 1, 2012)

I'm surprised to see you recommend Tastytrade and Bob the Trader since they are strictly technical traders. All their research is aimed at finding a mathematical edge in price and timing of trades.


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## Nerd Investor (Nov 3, 2015)

lonewolf said:


> There are rare real big money making times when everyone is on the long side, the vix is low when the risk/reward ratio is so favorable from extreme low option premiums even though the confidence might not be real high of market moving in your direction although you still look to play the part of the cycle/price pattern with the highest confidence it is prudent to play long put options. This is often the set up before crashes. The liquidity & the best risk/reward ratio is not seen in individual stocks from my experience, It seams to always be in the stock indexes such as spy or spx.
> 
> There are times such as the 1987 crash low when option premiums are so sky high particularly puts when the confidence might not be high the market will move in your direction that selling premium is the most practical trade. These are very rare occasions.


Ah yes, Black Swan events. If you've never read any Nassim Taleb, he'd probably be right up your alley.


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## Nerd Investor (Nov 3, 2015)

humble_pie said:


> N Investor, did you check out the Tasty Trade link above? imho it's a great deal for Bob the Trader, unmatched in fact.
> 
> turning back now to folks who work options from the data screeners only (no clue about the underlying), me i have 2 concerns:
> 
> ...


Interesting stuff. And yes, I will be rolling out on RIG and on GME as well short of anything drastic happening over the next week or so.


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> I'm surprised to see you recommend Tastytrade and Bob the Trader since they are strictly technical traders. All their research is aimed at finding a mathematical edge in price and timing of trades.




actually i did not personally recommend anything.

all i did was pass along suggestions from 2 professional traders, each working at a different financial house, both of them successful at a very young age. I made crystal clear in my posts that those suggestions - which included Bob the Trader - came from those 2 traders.

as for myself, all i've said is same old same old. Stick to the knitting. Know the underlying stocks. Know how the derivative structures work, know where they are leading.

btw one of the above-mentioned traders knows how to read & interpret Dough, for free. He sees all the Dough data although he doesn't subscribe.


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## Rusty O'Toole (Feb 1, 2012)

Anyone can get Dough for free. Unfortunately you can only trade it from the US but you can get the data in Canada.

If you open a TOS account from Tastytrade or mention Tastytrade they will give you a better deal on commissions.


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## MrPCMan (May 3, 2012)

humble_pie said:


> PC man, here's an offer that an option trader who doesn't yet have a Think or Swim account could not resist!
> 
> my storybook options guru says you could get a free 2-year subscription to Bob The Trader (that's the tasty trade team) plus many other enticing benefits - check out the low commissions, low assignment fees, free cabinet trades - with a new TDDI Think or Swim account.
> 
> ...


Humble_pie, 

Firstly, I have an issue in dealing with TD from a bad personal experience with them after dealing with them on a relatives estate, after their passing. They wouldn't let the executor do their job with the financial assets, they had to "approve" all transactions and basically locked the executor out of any access to the relatives accounts. Never would deal with them again after that experience, so opening a TDDI account probably would be my last choice. I am happy with my current broker.

Secondly, no one planning on having any returns from options investing would discount the underlying!! I hope I didn't give you that impression in my post. I am just a long time data analyst who values the importance of being able to mine the data from both the options and the underlying stock. There are plentiful data sources for the underlying, but not many Option data sources that I can mine. 

PS. I actually have access to the free Think or Swim application and I am not convinced its options scanner is what I need. I would need more info on the "Bob the Trader" options data to evaluate its benefits and ignore my past dealing with the TD bank. I also saw alot of IRA references on the Bob the Trader website, are they the American arm of TD? Then I would wonder if any Canadian Options are actually in their data.

Thanks for your input, humble_pie...much appreciated.


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## MrPCMan (May 3, 2012)

Rusty O'Toole said:


> I'm still wondering what criteria you use to pick stocks, and what you need to know to feel confident trading the options. I my be dumb but am trying to learn.


Rusty, I would suggest you do alot of research and reading on Options before jumping on the bandwagon, also a paper trading account helps. I have been playing with options for over 7 years, after taking a weekend long introductory course on options trading in 2008. I have analysed options data, made trades both successful and unsuccessful, all helping me learn. I have been away from it for a few years, but now starting to get back into it. 

I use all criteria related to options/underlying that I can get at. My last options trade netted me a 300% return, but I have lost 100% on options too. I am one who looks at both fundamentals and technical indicators/data to find my trades, also I build my own ratios and calculations from the data that I use to earmark those special trades!  I have both a financial and computer data background which helps me immensely, I think those skills are essential for trading. I don't know what your skills are...I also use pivot tables and excel datasheets to analyze my data, and write queries on data.

Good luck and enjoy.


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## humble_pie (Jun 7, 2009)

MrPCMan said:


> I actually have access to the free Think or Swim application and I am not convinced its options scanner is what I need. I would need more info on the "Bob the Trader" options data to evaluate its benefits and ignore my past dealing with the TD bank. I also saw alot of IRA references on the Bob the Trader website, are they the American arm of TD? Then I would wonder if any Canadian Options are actually in their data.



TD's american arm is TD Ameritrade, majority owned by the TD bank group.

a number of years ago, TD bought Think or Swim, a US broker with a highly advanced platform. I've always personally imagined that the big green had originally intended for the TOS mainframe system to replace the DOS based ISM system which most canadian brokers lease from IBM; but then the TD discovered, after much trial & error, that TOS could not be adapted to a canadian regulatory environment, especially not for canadian registered investment plans.

this is all just my own conjecture. Mais par la suite, the consequence was that TD now offers TOS as a separate US-only system & it is enormously prized by options traders. It's clear that TD relations with TOS original developers such as Tony Battista of tasty trade remain close.

what i'd like to do is line up someone with hands-on experience with all these softwares - plus he also has an IB account - to consult with you. If this works out, i could send you a pmm with his name & phone number, would that be alright.

salut.


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## Rusty O'Toole (Feb 1, 2012)

I have never looked at Bob the Trader because I thought it was just Tom Sosnoff's trades that he does in his Tastytrade account. Am I missing something?


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## Rusty O'Toole (Feb 1, 2012)

Mr PCMan thanks for your response. Maybe I should tell you I have been reading books about the stock market since the late sixties and first traded options in 1997. have had a TOS account and have been trading regularly since 2013. Last Friday I closed 5 positions for a profit of $1100.

My most common trade is to

Find a stock or ETF that is liquid and has tight option prices, with an IV rank of 50% or higher

Sell an out of the money put spread or a call spread 1 standard deviation or a little farther out

If I can capture 50% or more of max profit, close the position. If the underlying is trending in my direction I may wait for 75% of max profit but I don't wait for them to expire worthless unless it is a lead pipe cinch.

This works pretty well, although sometimes I have to roll or adjust a position or even take a loss. The positions I closed last week, were put on 3 weeks ago and had another week to go. They were call spreads as i was bearish on the market. This time I was wrong, the positions went against me, until last week when the market sold off and on Friday I decided to get out while the getting was good even though I had to take a $235 loss on one position.

As you can see I am depending on the market's tendency to correct, for overpriced options to come back into line and for the underlying to stay within bounds. This works more often than not and even when it doesn't the losses are manageable because I never sell naked options.

I am not recommending this to anyone, just explaining what I am up to. I wish I was smart enough to predict market direction, or to figure out in advance which stocks are going up and which are going down next week. But I have never had much luck listening to the news and trying to outguess the market.


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## SumoJax (Apr 10, 2016)

*Option Trading*

I must concur with Rusty on this. Option trading is the way to go as far as I'm concerned. I've been trading for over 15 years and I've gone through many systems over the years and none have provided any consistent returns including penny stock new letters, technical analysis triggers, software buy/sell triggers, dividend stocks, Business News Networks such as CNBC and BNN, Mad Money, Jim Cramer news letters...............on and on.........then I discovered options. 
For many people options can be very confusing and intimidating, brokerages put big restrictions on options too. Selling a naked put is no more risky than being long stock. I too have used TOS for many years and use nothing else. Once you learn the platform it is like riding a bike. In terms of education on options I have also been a Tasty Trade follower for many years and can recommend them for both beginners to options as well as veteran traders. Live internet broadcast 5 days a week and all episodes and topics are archived and easily searchable. I too use the Dough platform for searching and filtering option trades as the trading platform is not available to Canadians but I'm so used to TOS I don't think I would use Dough to trade. It was designed to provide a more visual element to new option traders. To quote one of the traders from Tasty Trade (Tony from Mexico) my trading fundamentals are as follows:

TWENTY TASTYTRADE TRADING COMMANDMENTS

1. Place trades that limit your upside in return for a higher probability of success.
Some examples could be selling a call against an existing long stock position, selling a put to establish a new long position, or selling a put against a short position.

2. Define your portfolio not by asset class diversification, but by strategy diversification and its overall probability of success.
The old way of diversification was based on asset class. Examples of this would be stocks and bonds. The new tastytrade way of diversification is based on strategy, using different strategies with different probabilities of success and different return on capital, both long and short deltas strategies to create an overall portfolio that matches your assumptions.

3. Overall portfolio probability of success should be between 65% and 75%.
Trading stocks only will produce a 50% probability of success portfolio; trading strategically will increase the probability of your portfolio significantly.

4. Trade only in liquid products.
I like products that trade at least 2,000,000 shares a day. Also, look at the bid / ask spreads on the options. One cent is very liquid, but beware of bid/ask spreads that are more than 10 cents.

5. Theta or time decay should generate at least 1/10 of 1% per day.
Theta is what we get paid for taking risk. When volatility is low, we will collect a lower theta. When IV rank is high, we will be able to get ½ a % theta a day and in some cases even 1% a day.

6. Your deltas should match your assumptions, but also should be small enough to feel comfortable.
If you are bullish, you should have a long delta portfolio. If you are bearish, a short delta portfolio.

7. Beta weight your portfolio (to $SPY) so you “know” what you have on.
By beta weighting your overall deltas to SPY to see the size of your portfolio and compare it with your comfort zone. Remember: size can kill, so trade small.

8. Manage winning trades, not losing trades.
We like to manage trades at a 50% profit. We tend to roll losing undefined risk trades to extend duration, and on defined risk trades, we suck it up and take our loss.

9. Risk is defined at order entry. Size matters. Use 1-2% buying power reduction per trade.
Once again size kills. Trade small. I like my trades to be 0.25% to ½ of 1% of my overall portfolio. Smaller accounts will have to use 1 or 2% per trade. Remember to keep at least 50% of your portfolio in cash.

10. Biggest trading mistakes are: trading too big, and using the wrong strategies.
At tastytrade, we rarely buy volatility. By that I mean we tend not to place negative theta trades, because they often have a low probability of success.

11. Exit trades using time and price.
Take winners off at 50% of maximum profit and take losses off at 2X the value of the original credit. (Original credit $1, take off when value of trade is $3). Be mechanical here and don’t be greedy.

12. Stop orders are generally not a good idea.
Stops are resting orders that will close you out when the market moves against you... tastytraders like to be active and reactive in your portfolio.

13. Extend duration to give yourself time to be right.
By rolling down and out and up and out, you will extend duration hoping that the market will give you a chance to get out and make a profit.

14. Trade often in order to help probabilities work in your favor.
The more you trade, the better the chances of the math working in your favor. Doing only a few trades may not yield the expected result. Remember that even when flipping coins at 50%, you might get 15 tails in a row, but that won’t happen when you flip 500 times.

15. Use volatility to identify opportunities and to determine the correct “strategy”, and “size” for the current situation.
Best to place short premium trades with IV Rank above 50. IV rank is your main focus. Place trades when IV rank is above 50% to increase your chances of making money.

16. Understand all products, and their theoretical equivalents, including stocks, options futures and forex. Play with a full set of clubs.
Play with all the clubs in your bag. Learn the relationships between products and learn to use them all in your portfolio. That will help you become a better and more sophisticated trader.

17. Use leverage to maximize capital use, and to increase your probability of success.
Margin is the only way to make good money in life. Portfolio margin (if you can get it) will even provide you with more leverage to trade. But again remember: size kills, which is why we say generally to trade small and trade often.

18. Create assumptions by any method that you like: technical analysis, fundamental analysis, tape reading, etc, but remember at best, your assumptions will be a 50/50 proposition. 
Since we cannot make money with our assumptions, we trade strategically, but we need those assumptions to motivate us to press click and place the trade.

19. Markets are random and cyclical, use the odds as another tool that help create assumptions.
IV rank above 50% is your best bet. The only cyclical product and mean reverting product is volatility. Sell it when it’s high and harvests profits when it gets back down.

20. LAST BUT NOT LEAST --- Stay engaged by watching tastytrade.

tastytrade is a gift from the Gods, and it's free. Use it to your advantage to learn, stay engaged, have fun and become a better investor.


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## mordko (Jan 23, 2016)

This sounds too good to be true. Item 3 is a good example. Therefore it must be true. :stupid:


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## humble_pie (Jun 7, 2009)

do you suppose the above was an ad from the sumo warrior

as tastes go, there's nothing subtle or delicate about this one. It's a sauce piquante with a habanero rating of 10.

tasty's rules 1, 9, 10 & 13 are good. Can't agree with 4 because it can be profitable to forage for rare fruits & vegetables in illiquid markets. Some of the other rules make me think he must be a molecular chef. The kind that foams dishes, then finishes them for presentation with a blow torch.

me i have no blow torch in the kitchen. I like options bonne bouffe, fresh local-grown, laced with butter & crème fraiche. Somewhat undercooked. Get out early, tasty is right about that. He's also correct when he recommends tiny frequent dishes.

.


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