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The Options Game: Formulas for Success

April 20, 2021

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The Options Game: Formulas for Success

Confusius said: “I hear and I forget. I see and I remember. I do and I understand.” Like the ancient philosopher realised centuries ago, there is no substitute for practice.

Confusius said: “I hear and I forget. I see and I remember. I do and I understand.” Like the ancient philosopher realised centuries ago, there is no substitute for practice. 

The first ASX Options Trading Game of 2021, which came to an end on 26th March, saw a record number of players with a record level of participation. The Game was founded to give Options Traders a way to practice paper trading in real live market conditions.

Reach Markets recently hosted a special webcast to reveal how the winner Cam Blakemore won the game, and to discuss some of the top trades to find out what we can learn from them.

In the space of four weeks, Options Game winner Mr Blakemore managed to turn his original $50,000 investment into an impressive $284,157.28 – a return of 468.31%.

Speaking to Reach Markets in a recent interview, Mr Blakemore said that his success in the game came from his ability to remain disciplined, while also embracing change and moving outside his usual comfort zone.

Mr Blakemore started the game on a strong note, trading a short dated long call on XJO which he closed two trading days later with a $58,500 profit. He then had some luck with a swing trade on APT, profiting $15,000 on the way up and $25,000 on the way down. He followed up with a range of positions across ten underlying stocks. His account balance then went mostly sideways for the second half of the game.

“Great performance throughout the game. In such a short period of time, it shows you the power of options,” Ivan Tchourilov said during the options game wrap up webcast, when discussing the leaderboard.

What if I’m wrong? Risk management in Options Trading

These are amazing results but it’s important to remember that these came from taking a few big risks. 

“What if I’m wrong? Any rational investment plan has to start with that question.” American economist and educator Peter Bernstein once said. 

Practice is great, but it’s important to also practice when there’s something to lose.

“The difference between playing the game and putting a real trade on can be compared to a flight simulator versus actually flying a plane, where there is something at stake,” Patrick Nelson said during the webcast.

Many players traded risky positions leading to some big returns. The winning trades were overwhelmingly single legged calls and puts with large risky positions.

One notable trade was executed by Corentin P. He bought a long call on AGL at the beginning of the game. Although he didn’t trade for the remainder of the game, his position gained over 100% profit. Nice call!

Tim Gilderdale executed some range trades on XJO, AWC and FMG. These were trading ideas he discussed in his weekly webcast The Next Big Trade.

Like many of the winning trades, these were very risky moves with all-in positions.

Although these risky trades may win the Options Game, they don’t reflect risk management strategies that should be used in the real market. In the live market, they can be a quick way to lose money. However, they are a useful way to understand and learn how to manage risk.

This article summarises some of the information Patrick Nelson and Ivan Tchourilov shared with us during the Options Game Wrap up edition of The Trading 360 Summit. You can watch a full recording below.

Keeping composure is about understanding markets, which includes the trading psychology, tools, rules and resources to help you succeed at making money in all market conditions. If you are interested in learning more, click here to receive a recording of a special bonus session of The Trading 360 Summit in which professional traders Patrick Nelson and Ivan Tchourilov discuss Trading Psychology.

We would like to thank all the Options Game players for their participation. If you would like to try trading for yourself you can do so by taking a trial to our Implied Volatility platform.

 

Past performance is not a reliable indicator of future performance.

The opinions expressed in this article are our personal views. 

Trading options is not suitable for everyone. There is a risk that you can lose more than the value of a trade or its underlying assets. You should only trade if you are confident that you fully understand what you are doing. If you are thinking about acquiring a financial product, you should consult our Financial Services Guide (FSG) at www.reachmarkets.com.au first. 

Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.

 


General Advice Warning

Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.

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