Ignore the Fancy Math and You Can Be Successful Trading Options

“People vastly overestimate what they can do in a month, and vastly underestimate what can be done in a year.” ~ @StevenPlace

Few things in retail trading can be more intimidating than options trading jargon and staring at options chains when deciding which contracts to trade.

The good news is, you don’t have to be an Engineering major to consistently pull profits away from the market machines. And to immediately contradict what I just said, I had a wonderful opportunity to have a chat with my friend Steven Place, he with an Engineering degree! ;)

I have followed Steven for a long time on twitter and StockTwits, and have had the privilege of getting to know him a little bit personally over the years. He has always struck me as one of the smartest and most common-sensed retail options traders I’ve ever come across.

As many people know, in addition to trading, Steven is also an educator and offers several services to help struggling traders get to his level — and beyond. And recently, he began singing the praises of one of the most basic options strategies available — short vertical spreads. I am someone who champions the K.I.S.S. construct of keeping things as simple as possible in options trading, so naturally Steven’s recent endeavors piqued my interest.

“Trade like a market maker. Use the wide spreads of the options market and natural volatility to work in your favor. Scale in, scale out aggressively. You don’t want to go all in on a spread. If you do, the market gods will descend upon you.”

Steven somewhat scoffs at the “premium collectors” and the church of “delta neutral.” He is much more interested in picking a direction and expressing his opinion using vertical spreads. And he likes to break his orders up into three or more tranches to benefit from natural market volatility to trade around the position, improving his cost (credit) basis and strengthening his odds of success.

In this interview with Steven, we go in depth into how he targets stocks to enter vertical spread positions in, how to manage entry and exit orders to maximize his order executions, and how to conceptualize a portfolio of multiple such positions.

And for a bonus, we also get into an interesting trading strategy utilizing put calendar spreads (another simple strategy) that makes a lot of sense in today’s low volatility environment.

Please enjoy this delightful and enlightening chat with my friend Steven Place:

The Gimme Some Options podcast recently launched! It’s a mostly daily broadcast which dives into the options trades I made each day and why, as well as occasional interviews with other options traders. I seek to learn from everyone and share stories that will educate, enlighten, entertain, or scare you right out of your pants.

Archives are available on Soundcloud and you can subscribe on iTunes.