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Stock Market Options Trading
103: Finding an Edge in Options Trading
Nov 30, 2023
Exploring the importance of having an edge in options trading beyond probabilities, using put credit spreads backtests and new research. Discussing strategies for high probability trades, advanced analytics, and maximizing trading success. Highlighting the significance of combining option probability with additional analysis for better results and enhancing win rates through filters and risk management.
22:21
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Quick takeaways
- Trading with directional call and put options may not fully leverage probabilities in the market.
- Effective trade management techniques like rolling and adjusting positions enhance options trading outcomes.
Deep dives
Finding an Edge in Options Trading through Strike Selection
Trading options based on directional movements using call and put options may not necessarily align with trading based on probabilities. By finding directional call and put options through technical analysis, traders adopt a stock replacement strategy, requiring accurate directionality to profit. While this method demands less capital than stock trading, it may not fully leverage the probabilities embedded in the options market due to fair pricing. Selling options, particularly out of the money options, harnesses inherent probabilities and time decay, offering higher probability trades.
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