Theta Trend

Note:  The excerpt below is from a recent guest post on The Lazy Trader blog.  I’m not even totally sure how I came across the blog, but I was immediately excited because Henrik, the author, is into trading both options and forex.  Henrik is a super friendly guy who has a fully disclosed and successful track record with Iron Condors.  Make sure to check out his weekly portfolio analysis posts when you visit his blog.  They’re like getting to take a look inside someone’s trading journal.  Thanks for sharing my post Henrik!

The post starts below . . .

Trading options can seem exceedingly complex, but sometimes taking a step back and looking at the big picture puts things in perspective. When I first got involved in options trading, I wouldn’t look at risk graph that didn’t have an Iron Condor on it. Over time, I experimented with Trend Following systems and realized that it might make sense to combine Options and Trend Following. That realization led me cut my Iron Condors in half and focus on out of the money credit spreads.

While Trend Following systems have historically been successful, the large number of losing trades can make the rules hard to follow. The great thing about out of the money credit spreads is that they can make money in three ways: 1) if price moves in your favor, 2) if price doesn’t move (because the short option decays), or 3) price doesn’t go against the trade “too much.” While credit spreads might superficially seem simple, trading them well requires a plan. The five points below form the beginning of a good plan.

Click here to go to The Lazy Trader Blog for the checklist and the rest of the post.