It’s not everyday that you get to sit down with two options trading legends and ask them whatever you want. Luckily for our webinar attendees, that’s exactly what happened.
On November 26th, Chaikin Analytics founder, Marc Chaikin, and tastytrade founder, Tom Sosnoff, joined forces for a live webinar called “The Past, Present, and Future of Options Trading.” You can watch the entire video replay here.
However, if you don’t have time for the entire replay we are sharing five of the most interesting takeaways from the event.
1. What’s the best way to get started?
Looking to get started in options trading (or simply start fresh)? Both of our experts had great advice on the best way to start trading.
“I think to get started with options, you really need to have a plan,” said Marc. “If it’s scattershot and you’re taking hits here and hits there, it’s not going to work . . . the one trade that goes against your discipline is the one that hurts you.”
Tom agreed, adding one piece of advice, “Stay small. If you stay small you can’t get in that much trouble. Secondly, just get started and try something. The best way to learn something is to actually do it.”
2. How do you pick a direction?
Here’s a topic where our experts couldn’t be more opposite: how to pick a direction.
“For me, direction is everything,” said Marc. “That’s why these webinars with Tom are so interesting and why we get such a big turnout, because people want to hear different points of view. I start with the market.”
Then, he broke down his process. “I look at the SPY ETF,” Marc explains. “I look for higher highs and higher lows. That tells me we’re in an uptrend . . then, I’m looking for stocks to trade in the direction of the market. I want the current flowing with me, I want the wind at my back.”
Tom Sosnoff’s approach, on the other hand, is entirely different. “I think market direction is very hard for me, still. It’s the most complex part of the business . . . I am a pure contraction. I do the opposite of what everyone else wants to do.”
3. What is the #1 tip for options traders just starting out?
Our experts covered a ton of great trading information during the event, but we wanted to ask their number one tip for traders who are just starting out.
Marc’s advice? “That options are a wasting asset and the expiration date matters, and it has to mesh with your timeframe and your plan.” The big problem, Marc says, is that, “too many people have a plan based on one ‘timeframework’ and then implement it with an option in a different framework, usually a shorter one. So they’re not there if what they’re expecting to happen does happen.”
Tom Sosnoff took a slightly different approach. “The number one tip for somebody starting out, and this is something that I’ve had to re-teach myself over the last decade or so, is stay still and not be afraid.”
4. Biggest mistakes options traders make?
As many traders already know, it’s not difficult to lose money trading options. That’s why, after covering what traders should do, we wanted to pivot to what traders shouldn’t do. What would Marc Chaikin and Tom Sosnoff say is the biggest mistake that traders make?
According to Tom Sosnoff, “Absolutely, hands-down, nothing even comes close to it, it’s size. People trade too big. Sometimes we say that our eyes are bigger than our stomach when ordering [food], but in the trading world it’s not recognizing the size of the trade and the risk that you’re taking.”
Marc Chaikin didn’t disagree. “I think that is a very big mistake,” he said.
5. Biggest mistake YOU’VE ever made?
Do experts like Marc Chaikin and Tom Sosnoff ever make mistakes? Apparently so. Here’s what they had to say when asked about the biggest trading mistake they’ve ever made.
“I wish you hadn’t brought this up but you did,” Marc joked. “I was trading options at a company called Digital Equipment, it was a big computer manufacturer in the 70s, and I put on a very sizable position. Too much of my net worth involved in it . . . I was trading super large. I had a nice profit on the trade and tried to exit it with a limit order. The specialist at Digital Equipment ran ahead of my limit order but I was stubborn and didn’t change it. It cost me that whole trade. It went to zero and I couldn’t pull the trigger at a lower price.”
His takeaway from this experience? “What I learned was don’t be stubborn . . . be flexible. When you want to exit the trade, exit the trade.”
As for Tom Sosnoff, he shared, “I’ve made about a million mistakes in my career, so it’s hard to pick one . . . [traders] have a tendency to add to positions, especially to positions that aren’t winning . . . every single losing trade that I’ve made is because I think something is going to happen, and I’m sure of it, and it doesn’t happen.”
Thoughts on this event? Any questions you hope they cover next time? Leave a comment below.