Learning to Trade Options on Tastyworks

I recently opened a TastyWorks account in an attempt to learn to trade options the TastyTrade way.  I keep my IRA’s in Interactive Brokers, but think that TastyWorks is better place for trading options.

To start my trading adventures, I funded my trading account with about $3,500 that I wouldn’t miss if I lost it; because I’ve learned that sometimes you lose money while you’re learning to trade.

My History Trading Options

I started trading options in my IRA using covered calls and was able to very-slightly outperform the S&P 500.  Trading covered calls, especially weekly covered calls, helped me learn about things like Theta Decay and Implied Volatility long before I knew what the Greeks were and how they affected things.

I would sell the weekly call options of the stocks with the highest priced weekly’s and did pretty well unless the underlying took a big dip – which they often did at earnings.  But after a period of trading covered calls, I realized there was some profit potential in options and I was hooked.

Options as Proxies For Stocks

One of Jim Cramer’s books opened my eyes to using options as proxies for stocks.  It’s really a great method, especially in a raging bull market like we’ve been in for the past 5 or more years.

This method requires you to buy call options a couple months out that are deep in the money and have a Delta that is close to 1.00, so option acts very much like the long stock.  This means that for 10 to 15 percent of the cost of the underlying, you can control 100 shares.  Talk about leverage!  And I was off to the races.

I did great with this method until the mini-crash in February 2018, when I found out that being highly leveraged on the way up, also meant that I was highly leveraged on the way down.

Not good in this highly volatile market.

Calendar Spreads that act like Weekly Covered Calls

These are fun.  I bought a call option as far in the future as possible, for instance at an expiration 9 months in the future and allowed this to function like long stock.  Then I sell weekly ATM call options against the long call and it worked much like selling a weekly option against long stock.

I was highly leveraged and happy as a clam.  Happy until the market dropped and the price of my long calls began to erode.  Once again being leveraged to the upside left me vulnerable to downturns in the market, which there have been a lot recently.

Enter TastyTrade

TastyTrade seems to pride itself on being different.  I’ve listened to hours and hours of Youtube videos from TastyTrade.  My commute is 2 to 3 hours roundtrip and it’s easy to plug the IPad into the car stereo and listen to Tom, Bat and the group explain their methods.

Here are some things that I’ve heard:

  • Sell Premium
  • Trade Non-Directionally (when you can).  It’s impossible to guess which way the market will move.
  • Trade when volatility is high
  • Trade often
  • Trade small
  • Close Trades at 50% max profit (some trades close earlier than that, and some close later)
  • Manage your winners

So I’m off to learn the TastyTrade way to trade.  I thought I’d use this blog to help me chronicle my progress.

Peace and Happy Trading!

John