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TechieInvestor Options Trading strategy with Risk Management: how to get started?

Updated: Dec 28, 2021

If you are new to TechieInvestor subscription service, we would highly recommend you to go through this page to understand what it takes to trade the picks suggested.

TechieInvestor is all about trading technically leveraging the power of options. If you are new to trading stocks, I would highly recommend you to do paper trading until you are comfortable with buying and selling the picks suggested in your trading platform. If you have traded stocks before but are not familiar with options, I would highly recommend you to follow these webinars and blog posts to get familiar with options trading strategy.

Trading Platforms

Most of the major trading platforms out there are quite good for trading stocks and options. Robinhood seems to be very popular and heard that interface is easier to use. I personally use Etrade and am very comfortable with it. The most popular option trading platform is ThinkorSwim and is avaialble through Ameritrade. Finally but not the least, I heard that TastyWorks is darn good for trading with options

Trading Strategies

At TechieInvestor, we primarily focus on trading with the trend. How do we trade with the trend. Every day, we provide a glance of the markets in our twitter handle and also provide daily options trading ideas with in depth technical analysis in our youtube channel. I would highly recommend you to follow us in twitter and subscribe to our channel to get an overview of the markets and to learn technical analysis behind our strategies and markets overview.

We recommend idea that are intended to move in the same direction as the market. Usually the ideas recommended are of relatively low implied volatility. ATM (at the money) calls/puts are usually recommended for the picks with two weeks time frame unless we expect an explosive move and either ATM options are expensive (Out of money calls) or need more time for the options to work ( around the earnings calendar).

We also use mostly vertical spreads either for income or for trades with high premium for calls/puts (TSLA, AMZN). Some of the most popular strategies that we use are credit and debit (both call and put) spreads.

Sometimes, the options trades suggested either need more time to reach the targets or they have reached the targets and have more room to run. We use rolling option trades in this scenario. Rolling an option trade is an other option available that enables to buy more time for the trade to work other than closing the trade and allowing the options to expire.

Technical Analysis behind trading strategies

As mentioned earlier, TechieInvestor is all about trading and investing with technical analysis. If you are not interested in learning the technical analysis behind each trade, you can skip this section. At TechieInvestor, we primarily use Ichimoku as our trading system backed up by fibonacci retracements, Gann Square of Nine, trend lines and flat lines trading strategies. For more in depth technical trading strategies, check out our trainings page

Position Sizing

Even successful traders have at most 70 % success ratio and it is very important to manage risk in your portfolio. It is very easy to lose money but very challenging to regain the money lost. Below is the table that shows the correlation of the percentages between the money lost and money need to be regained. If you lose 80% of your portfolio, It takes 400% to get back your portfolio with 20% of the money left. That is scary. Isn't it. So, be nimble and actively manage your hard earned portfolio.

If you are a new trader, I would recommend to have at least 25K-30K in your account and start with allocation of 2% for each trade and not have more than 10-12 trades open at any point of time. So, for a portfolio of 25K, you would allocate $500 per each trade and would have around $6000 invested. As you become more comfortable with trading, you can increase your allocation to a maximum of 5%. With higher allocation, lot more money is invested and there is a risk of bigger drawdowns in your portfolio. For example, if your position sizing is 5% for a portfolio of 25k, you would allocate $1250 per trade and you would have 15000 invested at a given time. I would highly recommend not to allocate more than 5% in any given trade and not to exceed 12 trades in your portfolio.

I would also recommend adjusting your allocation for the trades around events such as earnings. The option premiums will be high because of high implied volatility and would recommend using half of the normal allocation. for example, if you are allocating 2% of your portfolio for any given trade, I would recommend using only 1% for these high implied volatility trades.

Risk Management

Let's keep it simple. Since we trade options more frequently, there is possibility of losing the options premium completely because of some news or events. Since, we have already taken care of our allocation for each trade as mentioned in position sizing, we would risk 100% in each trade. When we mention the trade, you are provided with reasons for entry and exit criteria. However, when we see the trade not developing as it is intended, we would provide notification to exit out of the trade and we may not lose 100%. However, be mentally prepared to lose 100% of each trade.

As the saying goes, following a set of consistent actions leads to consistent results. Following the position sizing and risk management strategies, we have been able to develop an edge in the markets and have a winning percentage of 64% sampled over 140 trades so far. You can check our tracker for more information.

Entry and Exit Strategies

We love the leverage provided by options and recommend options trading strategies for the ideas recommended in our services. Along with the entry price of the option trade, we also provide the entry stock price and target stock price as part of our recommendation. This information can be used to trade stocks. Target stock price can be used as an exit criteria for an option trade using conditional orders. check out what are conditional orders and how they can be executed.

We mostly enter options trades that could double in 3-5 days time frame. I would highly recommend to enter the options trade within 10-15% of the price suggested and also set up an automated order to close at least 50% of the trade when you open the trade. Why? Once you sell 50% of the trade at double, there is no way you can lose money in that trade and can be extremely profitable if the options trade inches higher. Also, as needed, we would provide notifications if trade needs to be closed before reaching double.

Notifications Format

We typically do long calls/puts or spreads. Below is an explanation of the order followed by the examples

Example of a long call notification

I bought Jan 15 SPCE 25 calls for 2.45

Risk Level: Medium

Type : swing

Target option price: 10 and more

Target Stock Price: 38

Reason for entry : SPCE gave up the 135 degree angle that it went up from a low of 26.29 and it went up to 35.82. Now it has gone to a low of 23.78 and is rising. We expect this to go to 38 to complete the 180 degrees

Exit criteria: closes below MA 50 23.39 2 days in a row

Example of a long put Notification

I bought Nov 18 SPY 350 puts at 5.25.

Risk Level:Medium

Target Option price:7.50

Target stock price: 344 - 342

Reason for entry: SPY is falling down and the closest support is at conversion 343.49 followed by the flat line support at 342.

Exit criteria: greater than 364.38

Example of Closing trades Notifications

Closing trades will be specified in same thread as opening trades. The format will be as shown in the example below


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