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Derivatives strategy

Good morning community,

the reaction to my last posts on traded derivatives over the last 2 days has surprised me somewhat. I have received a lot of follower requests. I therefore assume that there are more users here than I thought who are at least interested in derivatives trading.

While there are really great contributions from the community here for buy&hold, ETFs, dividends and charting, the area of derivatives trading is rather neglected.

If there is interest, I would like to put a little more meat on the bone.

I would take a few trades from my current portfolio to explain the different types of derivatives, as I have many in my portfolio, and also explain my strategy behind them.

However, I would like to say straight away that this strategy sometimes involves a high level of risk and is not suitable for everyone. You sometimes need good nerves and you have to be able to withstand losses. Not every trade runs like the last ones on $UNH (+2.76%) straight in the right direction.

So don't be fooled by trades with 300% + in one or two days and think carefully about whether you want to follow one or the other idea.

17 Comments

Basti92@BavarianLion

I would really like to know more about short/long, KO, warrants! Never really looked into it and never really dared 😅

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Moritz@leveragegrinding

@BavarianLion have a look at my profile -> attached post -> link to my derivatives post

it's been a long time ago, but as basic knowledge quite good

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COLAZERO@NOSUGAR_

@BavarianLion it's best not to

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Chris@Multibagger

@NOSUGAR_ you can still be interested in it, I think. More knowledge has never done anyone any harm. You can still decide whether you want to use this knowledge.

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Basti92@BavarianLion

@Multibagger That's exactly what I meant! First read a bit about it, get informed, weigh up the risks and then I can decide later whether to give it a try or not 🙂

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COLAZERO@NOSUGAR_

This quickly leads to gambling and you shouldn't gamble in the long term. It's just addictive. The bank always wins.

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Chris@Multibagger

@NOSUGAR_ I naturally see things differently. But my intention here is not to convert others to derivatives trading. Everyone has to decide for themselves according to their risk profile. Incidentally, the bank wins with
every trade, whether share or derivative. I feel very comfortable with derivatives. Gambling is what I did on Friday. I bought shares in $3350. You can calculate the risk with derivatives, but not with this share.
You always have a certain amount of risk on the stock market, regardless of the class.

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WhenLambo@SoonLambo

It should also be mentioned that the world of derivatives is darker than you might think. Most people lose money, but very few admit it. I've made good money with it and also burned a lot. Very stressful. The bottom line is that I would advise against it, especially for those new to the stock market.

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Chris@Multibagger

@SoonLambo Yes, there are also dark sides. The important thing is to end up with more sunny days on the balance sheet. And I think that's possible with consistent management and relatively little stress. But I also trade for fun and, at the age of 60, I'm not planning to build up a large pension. I think that's also very important. The products I trade and the stakes must match my investment goal and horizon.

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TomTurboInvest@TomTurboInvest

I used to trade derivatives from time to time, made good money, but also burned good money. I haven't really found a set-up for me to be sustainably profitable. Leveraged products are not very forgiving - our Adyen trade would be a good example anyway. The -5% on the earning day meant the end for a leveraged product, while the share withstood this well and in the Adyen case then developed as we both assumed for our trade. Conclusion: you can make good returns with derivatives with less capital, but they are not very forgiving when it comes to timing.
But I'm really looking forward to learning more about your strategies. Trading is generally rather underrepresented here.

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Invest25@Invest25

I also trade a little with KO and have had good experiences so far, but only leverage between 3-4 so that you don't reach the threshold straight away and it has worked well so far. I also always sell again at +10%. Would therefore also like to know more about how you trade

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Freezy86@Freezy86

@Finanzblick I do the same. Maximum leverage 7, usually only 3-4.

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Chris@Multibagger

@Finanzblick I usually trade higher leverage. With KO's always short-term, usually only 1-3 days. Mostly on counter-movements, or upper/lower limits between which the share moves. However, I limit potential losses rather than profits. Most recently 2 x in $UNH. You can still find them in my last posts.
The most important thing in my strategy is patience. I wait for the entry point I have determined. No matter what happens here until then, for example, or what is done by others. I always aim for at least 40% with my KO trades. Once this is reached, I continue to add an SL. At the beginning I limit the losses with SL to 20-30%. And I normally only use a maximum of 2% of the portfolio value per trade for KO trades.

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