Hello GQ community,
Today I would like to give you an insight into the extent to which I use derivatives for my strategy. What experiences I have had and what mistakes I have also made and will therefore no longer trade in the future.
Of course, the same applies to derivatives as to shares. You have to achieve the highest possible return. That's why I primarily use turbo call or put derivatives when I expect prices to rise or fall sharply.
This is usually the case if there has previously been a strong exaggeration in one direction or the other from my point of view. I then bet on a short-term counter-reaction and trade in exactly the opposite direction.
Strict risk limitation is important here. So if things don't go in the right direction as desired, I get out very quickly because I don't want to risk a knockout.
It is also an opportunity to enter at the top or bottom of sideways phases. Many shares move up or down within limits over a longer period of time. A good example, which I have traded positively 4 or 5 times during this period, is $UNH (+1,24%) . It always moved back and forth between $250 and $325 for months. So I always took a short position near the upper limit, and when it went down again, I took a long position.
I find this a very effective and simple option, as you can also define the stop prices clearly and simply. If the share breaks out of these limits in one direction, it is sold, as it is then likely to move quite a bit further in the wrong direction and a total loss is imminent.
In sideways phases, I prefer to use inline OS. These bring pretty good returns if the shares move within certain ranges until expiry. They usually yield at least 80-120% within 3-4 months. I have also achieved 300% with them, but then you have to enter close to one of the limits with more risk. I like to use currency pairs for these bills. Preferably € to Swiss francs. They actually always work.
So now briefly to what I will avoid in future. I also have 3 long-dated normal OS. These were out of the money when I bought them, which means that the current price of the underlying asset is significantly lower than the strike price of the bill.
This promises high potential returns. However, as the bill has no or only a very low actual value, the share price has to rise sharply for the bill to move in the right direction.
Due to the long term, I have not been so consistent in my risk management and have let the certificates go too far into the red, so that I am now sitting on high percentage book losses in both cases and have to hope that the shares will still move strongly.
As I said in my last post, stick to your mindset, but question your strategy if it doesn't work out as desired. For me, the logical consequence of this is that I will no longer use derivatives in this way, but if I want to accompany a share with a derivative in the long term, I will use a KO certificate with lower leverage.
So that's it for today. I wish you all a positive trading day.
