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I do indeed trade commodity futures so far only in a very narrow time frame, seldom more than a week, often only daytrading of narrow technical ranges with huge position sizes. I was very successful, but am fully aware that my success was bound to a very specific market situation and technical patterns. The huge position sizes also resulted in me closing winning trades far to early against my better judgement due to the enormous strain on my nerves.
On the other hand I'm often not able to cut my losses in time. Though the latter resulted so far only with stock trading in a desaster and again is related to my huge positions.
I have no doubt that my current trading style will result in net losses in the long term simply due to regular irrational mistakes as a result of the mental strain, no matter how good my analysis and the actual CRV are.
I would definitely confine myself to trading options on smaller micro futures for the time being. And I will have to analyse suitable commodities from a new perspective of a longer time frame.
My weaknesses, added to the above mentioned:
- no experiences with the complex options pricing (the greeks)
- no experience with the low liquidity of options
- restricted to only selling put/calls due to our tax regulations. No complex strategies including long trades possible (might change next year due to leaving germany)
My IB account size is currently about 60k $. 8k in stocks (not enough for covered calls), rest cash. I could extend it (reluctantly) to 100k as a maximum and do have portfolio margin. But with so much money being completely bound in cash I would hope for profits of about 1%/month after a few month of training, maybe somehow combined with T-Bills if they can be used to cover margin. Provided I completely confine myself to trading options on futures for the rest of the year. Don't know whether that's a realistic expectation in any way.
I need the training experience with real money right from the beginning (of course accompanied by paper trading as a lab to check out things, test effects) and small profits/successes to keep motivation up. Huge losses would be mentally devastating at the current point.
That being said, which commodities are the least difficult/dangerous to trade with options on futures for a beginner in options trading?
"relatively" high liquidity and rather low volatility (or let's say easy understandability of causes for mid term price movements in the respective market) would certainly be important for me.
I am unable to suggest a commodity suited for your trading, as my style of option trading is very different.
But if you intend to leave Germany next year and in this way solve your tax problem, I would not bother trading options. I do not think it is possible to learn successfully daytrading in options for a beginner.
Instead, I would prefer to spend some time improving your futures trading. And start next year again.
Unsolicited advice: join a trading combine (top step or similar) and engage in some meaningful strategy testing, while keeping your "losses" ($50 if you sign up with TST by end of day today I think) minimal.
Your whole ask seems to border a little on desperation. You seem to want to trade so much that you are willing to completely shift your focus to options to avoid tax repercussions, and you seem to be planning on losing (as you are at your $20k cap). Take a step back, reassess everything, and come back stronger.
Selling options can be incredibly dangerous if you don't know what you're doing, and I don't think you do. Take a little time off, gather yourself, and figure out what you really want to do, when your back is not up against the wall. If you need real money to motivate you, then a trading combine as mentioned should give you some real motivation. If it does not, consider whether you want to make money trading, or whether you simply are gambling and like the action more instead.
FYI, I got an email today that the price is extended due to demand, and it is tempting. 50 bucks/month. Better in terms of needing risk control than plain sim, not as risky as trading live. A tool to experiment with.
(#Not an ad. I don't get a thing for mentioning them. Make sure you read the terms, and all that. Do it with your eyes open, if you do it, as with anything.)
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
IB is THE worst place to trade options. They require far more than the minimum margin. They liquidate your positions if they think you are a risk. I would never attempt to trade options there.
I'll answer you, but want to answer all who reacted to my post hereby (and thanks for all answers!).
I'm unfortunately indeed a bit desperated. For one thing I live completely off trading since this year. I do not depend on it, as I have sufficient savings, but it's my only source of income currently. In addition I have to generate profit to increase my capital merely to compensate for our high inflation. My cost of living increased 20% within a year. So there are the thought in my head "oh my god, I lost 20% of my capital due to inflation in a year, more than 30% within the last 2 years!". I know that's of no use and self-destructing.
But then there are the educational/training aspects: as I made visible progress this year I want to keep up momentum to prevent getting out of training and especially loosing market knowledge. I also wanted to branch out to some new commodities to have a larger pool of possible trading opportunities. Getting to know new markets, their behaviour and all the events that influence their prices is extremely time consuming. But I'd never trade a commodity before having deep knowledge about the particularities of its market as my trading style relies heavily on fundamentals. So I need a certain financial motivation to invest many hours in constant fundamental analysis and research.
I do not intend to try daytrading options on futures by any means. I'm not a daytrader, don't even believe in it (long term). My daytrades were mostly intended as swing trades with defined exit points, closed prematurely to secure profits or when I feared the odds turned against me. This way I often got my profits up to 1-2k in a trade, but at the cost of screwing up carefully prepared swing trades on long expected favourable occasions with much greater profit potential.
In any case I need an alternative to daytrading and swing trading on very small time frame. Something with a time frame of at least a week up to several month.
I actually wanted to start options trading for exactly that reason and not only due to our predatory tax regulations. First only with stock options and confined to very defensive strategies with short puts and for hedging purposes. I need a less time consuming and less stressful trading style not as a replacement but as an addition to my futures trading. And then I thought why not combining learning to trade options with commodity futures, so trading options on commodity futures confined to short puts/calls. So while learning what I wanted to learn anyway I could evade the problem with our predatory tax regulations and still stay up to date with the future markets until 2024 and even start with new commodities.
Regardless of my intention to learn trading options, joining a trading combine would be surely a perfect solution. But frankly, I fear I'm not yet good enough a trader to do so. I'm very limited in my trading style which, as mentioned, relies heavily on fundamentals and waiting patiently for very favourable opportunities. I especially try to limit myself to trading only when conditions are favourable simultanously on two time frames so that I can switch to the longer time frame in case anything goes wrong in the short term. And I'm makinge far to less use of technical analysis so far. As a scientist I don't like TA and don't believe in most of it's aspects. Think of most of it as self-fullfilling prophecies but i realize, as long as many or even most traders believe in it it's useful nontheless. I should at least use it's mere statistical tools much more to clear out the noise in the chart.
One thing puts a heavy strain on me for sure: I have no contact whatsoever to other traders. I don't need constantly people around me, but while I made a living in trading over the last months I spent many hundreds of hours alone, had to cancel many appointments, didn't answer the phone for fear somebody wanted to meet me while I had to do market research or important news events where imminent and I had to monitor open positions. I'm sure it is possible to become much more time-efficient by changing my trading style to longer time frames. But the fact remains that having no social contacts at all during work is hard and especially working more or less full-time in something about which you can't talk to anyone because nobody understands what you are talking about.
Learning trading alone is incredibly slow and involves getting blinkered to one's mistakes. Can be extremely frustrating at times. Lone wolfs might like it this way, but I like efficiency, exchange of ideas and synergetic effects in exchange with other traders.
I fully agree. I reduced options trading significantly, when I had to leave my US Broker, as they were not able to provide reporting that is accepted by the Austrian tax authorities.
At IB margin for naked short options is incredibly high, I more or less avoid them. This makes it almost impossible to trade short options for you, because of German tax laws.
And forced liquidation instead of a margin call does not help.
There's a lot to unpack there and I won't attempt to do it all here. I'll just say this:
You mention that you may not be "good enough" for a combine. Well, if you require holding trades longer than a day, then don't do a combine. But it doesn't make much sense to avoid doing something which costs very little (a combine) because you're not "good enough," yet you feel good enough to put real capital at risk?
I do not pretend to be any kind of expert on anything. But in my years trading, I have seen fundamentals thrown out the window (along with technicals, to be fair) time and time again, in favor of the thing which really drives markets: liquidity. For very long time periods, fundamentals matter. But, all that really matters is the price of what you're trading. Classic example is that the Nasdaq, already clearly in a bubble, rallied 85% from over the course of 90 trading days from Nov 99 to March 00 before the bubble burst. I'm not trying to get you to change your trading style, but fundamental analysis, just like technical analysis, has serious limitations to be aware of, and every hour of the day spent analyzing them won't guarantee any kind of success, or even real edge. There are fundamental traders here who will have a more nuanced and informed perspective than me on this.
You are a scientist, presumably intelligent, and this can be a problem in trading. For me, being an engineer has been more of a liability over the years than a benefit when it comes to trading. We (science/engineering types) want to understand everything, we want observed patterns to be repeatable, we want things to make sense. Perhaps this is why you lean towards fundamental approaches. Well, no one understands markets. No one. There are too many interrelated flows across too many markets with too many variables for *anyone* to make sense of it. Anyone who tells you otherwise is full of shit, in a big way. You can absolutely be successful, but success comes from a willingness to put capital at risk based on probabilities and an acceptance of never being certain of what is going on. Maybe this doesn't apply to you; if so, that's a very good thing. But if you're like me in this respect, you have to constantly push back on the desire for rationality, and learn to be okay with chaos and the unknown.
Hi all, especially Eratostenes and Myrrdin ( and Ron99!!!!)
I`m trading a family account under German Tax Code, as well as my Swiss and Dutch accounts, although I`m and old white ... mean really old man. I hold accounts with Gain, TS, IB ToS (no trading -just analysis), TW and eOpt. For EU tax subjects IB is by far most preferrable as they give Portfolio Margin to every account - of any size, even if beyond 25k or 10k. And no PTD rule on equity.
There is a large community of option traders in Germany, despite the "Binding Steuer", the stupid 20k rule. If non-german readers request I might explain this separately. The largest part of this community trades concepts compatible with the tax requirements, a smaller part has formed Corporations to circumvent the tax, but at a cost. I quess there are about 2000 active options traders in Germany, I have met many at the former annual "Optionssymposium" multi day conferences.
German language youtube videos with weekly trade reports on options stategies have always 5-15k viewers. I personally know more than 50 traders who acquired and still do US courses from John L., SMx, Aeroxxx and others which cost 2k and more - per course. And even in Germany you will find many educational firms. If you search YT for free german videos on options (income strategies - Einkommensstrategien) you will find multiple groups offering such in weekly up to monthly editions.
There are Trading Clubs, one mainly non-profit in Hamburg to which I belong, HTTA.
There is a monthly magazine for traders (of that very name), where every edition carries a major article on options with practical options advice.
And in this month the article covers 0DTE with options in a way adopted to German taxation rules. The author also converted the ever popular "Parking Trade" to a tax compliant version. Either of those will earn you 4% p.m. on a 10k account (so 20k for both strategies).
And even Ron`s strategy is adaptable to German taxation: Short DTE 110 1xDelta6 Long DTE 30 2xDelta1,5 TP 50%, StopL 200% .
So the situation for German Traders is bad but survivable. Just living in a very socialist environment.
All this is NOT a recommendation but just reporting personal findings
I don't get a thing for mentioning them. Make sure you read the terms, and all that. Do it with your eyes open, if you do it, as with anything.)