Can A Beginner Make Money In Options? - ZeroDayMark

Summary

In this video, Mark Anderson introduces his friend Connor to options trading, documenting his journey from a complete beginner to a proficient trader. With a $50,000 account funded on ThinkorSwim, Connor will learn to trade SPX options, backtest strategies, and manage a portfolio over a three-week period. Mark's goal is to teach Connor how to develop institutional-scale trading strategies, while documenting the process and sharing it with viewers. The video focuses on understanding backtesting, using automation tools, and minimizing psychological barriers to trading success. Follow Connor’s progress as he learns the ropes of options trading from scratch.

Takeaways

• 😀 Mark Anderson, a former construction worker turned hedge fund manager, is mentoring his friend Connor to learn how to trade options with a goal to grow a $50,000 account to $100,000 in six months.
• 😀 Connor has no prior experience in trading options, with his background limited to playing with a Charles Schwab account for dividend stocks.
• 😀 The learning process for Connor involves around 100 hours of education in three weeks, covering backtesting, automation, and portfolio building.
• 😀 Mark has funded a real trading account for Connor on Thinkorswim, and they will document every step of the learning journey.
• 😀 The first major learning step is backtesting, which helps assess whether past data can predict future returns using strategies like the Iron Condor.
• 😀 They will focus on zero-DTE (days to expiration) options on the SPX ticker and trade using specific strategies, ensuring a thorough understanding of each trade.
• 😀 The backtesting approach includes understanding contract sizes, where one contract typically represents an $800 premium, adjusted based on the number of contracts traded.
• 😀 Mark emphasizes the importance of using realistic account sizes for backtesting and practicing with appropriate capital based on one's portfolio size.
• 😀 The duo aims to optimize their trading strategies by backtesting them and reviewing performance in real-time, with a focus on managing risk effectively.
• 😀 Connor’s success in trading is expected to come from adhering to rules and eliminating psychological barriers like greed and fear that often hinder trading success.
• 😀 The learning process will also include using trade automation tools like Trade Steward and learning how to monitor portfolios for ongoing optimization and improvement.

Q & A

What is the primary goal of Connor's training in options trading?

The primary goal of Connor's training is to help him become proficient in options trading and manage a portfolio to grow a $50,000 account to $100,000 by the end of the year. He will learn through backtesting, automation, and live trading with guidance from Mark.

Why is the backtesting process important in learning options trading?

Backtesting is essential because it helps evaluate whether past data can predict future performance, allowing traders to test strategies and refine their approaches before committing real capital.

What does the term 'contracts' mean in options trading, and how is it used in this script?

In options trading, a contract refers to an agreement to buy or sell an option at a set price. One contract represents 100 shares, and in this context, it means selling a spread of premium. Each contract generates a specific amount of premium, like $800 in the example.

How does Connor's prior experience affect his learning process in options trading?

Connor's prior experience is minimal, as he has only traded dividend stocks with a small account. This lack of experience makes him start from scratch, but he is excited to learn and improve, which will be facilitated by Mark's guidance and structured training.

What role does psychology play in trading, according to Mark?

Mark emphasizes that psychology, particularly fear and greed, often hinders trading success. By removing these emotional factors and following a structured process, like Connor does, traders can improve their performance.

Why is it important to use realistic account sizes when running backtests?

Using a realistic account size in backtests ensures that the results are applicable to a trader's actual situation. If you don't have a $100,000 account, testing with a $100,000 account could lead to misleading results. In this case, Connor uses a $50,000 account for backtesting.

What strategy is being used in Connor's backtesting?

The strategy involves trading zero DTE (days to expiration) options on the SPX index, with a focus on short put and call options, and constructing strategies like an iron condor with added legs to understand market dynamics.

What tools and platforms are being used in this options trading journey?

Connor is using ThinkorSwim for the real trading account, Options Omega for backtesting, and Trade Steward for automation. These tools will help him learn, backtest, and eventually manage real-time trades.

How does Mark plan to monitor Connor's progress in options trading?

Mark will closely monitor Connor's progress by reviewing his backtests, answering questions, and providing feedback. They will communicate daily through short chats and adjust strategies as necessary, ensuring Connor's learning stays on track.

What is the significance of setting a $50,000 account target for Connor's learning?

The $50,000 account target allows for a more realistic and manageable starting point. It also serves as a benchmark for Connor to aim for growth while learning, ensuring that his strategies are tested under practical conditions without taking excessive risk.