I'm glad to see the Options Trading 2.0 system will be laid out this way. I've been a fan since forever, and these videos will accelerate my ramp-up substantially.
Hi Jack. Great video, thank you. I don't think we can set a take profit on these trades. The brief was to have a 55% chance of max profit and a risk to reward of 150%. Taking profit early at 40% now means we have a 55% chance of max profit but a much higher risk to reward... Surely flipping the coin now would mean we lose the edge?
Hi Arthur, Overall the position has a 55% chance of max profit if held until expiration. This is the basis for opening the position and worst case scenario, I'll hold it until expiration to let probabilities play out. However the chance that 40% of the premium evaporates at some point before expiration (17 days) is much higher than 55% percent. I chose 40% because the reward/risk ratio for the position is high. With a lower reward/risk ratio I'd use a higher % or not close early at all. My logic for closing early in this scenario, which I didn't explain very well, is the reward/risk for the position has reversed and I'd be risking a large amount to win a small amount and I have less time for probabilities to work out if the underlying moves against me. For example, if 7 days into the trade I have hit that 40% number, I would then be risking $775 to win $424 and only 10 days for probabilities to work out if the position reverses. I don't like those numbers anymore. I'd rather take profits, close that position and put the capital back to work in a new position with a better reward to risk ratio and more time until expiration so probabilities are more accurate. This is only my personal opinion/preference though, long-term the best option may indeed be to hold all positions until expiration.
"risking $775 to win $424" is how the reward/risk will look if the position is winning 40% of the initial credit. $708 credit x 40% = $283.20. So at the point of winning 40%, my potential reward is $708 - $283.20 = $424.80 and my risk is $492 + $283.20 = $775.20.
@OptionAlpha or Anyone. Since option2.0 is out for few months, what does the performance looks like? Can anyone please share their experience with these bots?
Doesn’t taking profit at 40% mess up the math? You’re taking away the 150% risk/reward if you do that. You are also increasing the win rate, but there’s no way to know if the increase in the win rate is enough to offset the loss in the r/r.
Thank you for the video and explanation. Please explain how the $2500 relates to the 12 contracts that you secured in this position. What did this position actually cost you?
The $2,500 is the bot's capital allocation. The allocation is a safeguard that prevents new positions with a max loss that can cause the total P/L for the bot to surpass -$2,500. I only want to risk a total of $2,500 of the $10K for manual trading, so the allocation will ensure I don't go past that. For a bot that is trading automatically, it will prevent the bot from opening new positions that could result in the bot losing more than $2,500.
Amen in the name of God. I don't have any knowledge, I follow Sigma and I see that they have a Society. I would like to know if with a capital of 2.5k it can be profitable?
I'm glad to see the Options Trading 2.0 system will be laid out this way. I've been a fan since forever, and these videos will accelerate my ramp-up substantially.
Hi Jack. Great video, thank you. I don't think we can set a take profit on these trades. The brief was to have a 55% chance of max profit and a risk to reward of 150%. Taking profit early at 40% now means we have a 55% chance of max profit but a much higher risk to reward... Surely flipping the coin now would mean we lose the edge?
Hi Arthur,
Overall the position has a 55% chance of max profit if held until expiration. This is the basis for opening the position and worst case scenario, I'll hold it until expiration to let probabilities play out. However the chance that 40% of the premium evaporates at some point before expiration (17 days) is much higher than 55% percent. I chose 40% because the reward/risk ratio for the position is high. With a lower reward/risk ratio I'd use a higher % or not close early at all.
My logic for closing early in this scenario, which I didn't explain very well, is the reward/risk for the position has reversed and I'd be risking a large amount to win a small amount and I have less time for probabilities to work out if the underlying moves against me. For example, if 7 days into the trade I have hit that 40% number, I would then be risking $775 to win $424 and only 10 days for probabilities to work out if the position reverses. I don't like those numbers anymore. I'd rather take profits, close that position and put the capital back to work in a new position with a better reward to risk ratio and more time until expiration so probabilities are more accurate. This is only my personal opinion/preference though, long-term the best option may indeed be to hold all positions until expiration.
@@OptionAlpha can you please explain the math behind " risking $775 to win $424 "? Thank you.
"risking $775 to win $424" is how the reward/risk will look if the position is winning 40% of the initial credit. $708 credit x 40% = $283.20. So at the point of winning 40%, my potential reward is $708 - $283.20 = $424.80 and my risk is $492 + $283.20 = $775.20.
Great video, thank you.
@OptionAlpha or Anyone.
Since option2.0 is out for few months, what does the performance looks like? Can anyone please share their experience with these bots?
Doesn’t taking profit at 40% mess up the math? You’re taking away the 150% risk/reward if you do that. You are also increasing the win rate, but there’s no way to know if the increase in the win rate is enough to offset the loss in the r/r.
is this working with any brokers ? i am from Saudi Arabia i have an account in deraya platform
Thank you for the video and explanation. Please explain how the $2500 relates to the 12 contracts that you secured in this position. What did this position actually cost you?
The $2,500 is the bot's capital allocation. The allocation is a safeguard that prevents new positions with a max loss that can cause the total P/L for the bot to surpass -$2,500. I only want to risk a total of $2,500 of the $10K for manual trading, so the allocation will ensure I don't go past that. For a bot that is trading automatically, it will prevent the bot from opening new positions that could result in the bot losing more than $2,500.
Amen in the name of God. I don't have any knowledge, I follow Sigma and I see that they have a Society. I would like to know if with a capital of 2.5k it can be profitable?
Can you use TOS for the trades?