4 Considerations When Designing a System

Note:  This is an excerpt from a recent guest post on the Options Trading IQ blog.  Gavin focuses more on trading non-directional spreads than I do and has a ton of good information on his blog.  Make sure to check out his Trader Interviews while you’re there.


marketsWhen I first started trading options, I was afraid to trade directionally.  I heard that most options expire worthless and I definitely didn’t think I could consistently be one of the lucky people holding options with value at expiration.  As a result, I spent my time learning to trade non-directional spreads like Iron Condors and Butterflys because they focused on selling options that expire worthless.

Around the same time, I began experimenting with Trend Following trading systems.  I really liked that I could backtest a system and prove to myself that the rules were valid.  Additionally, I didn’t need to attempt to predict what the market would do and I could just follow signals.  After trading Trend Following systems for a while, I realized that there might be some benefits to combining an options selling strategy with Trend Following.  Because I was already used to trading Iron Condors, I focused on out of the money credit spreads.

Check out the full post, including the 4 considerations at Options Trading IQ . . .