The difference between a simple trade and an advanced trade

Andrew Giovinazzi

BY ANDREW GIOVINAZZI

November 24, 2023

Yo Pit Crazies,

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It is half a trading day today so most of you are out having fun. Another little story for you…

When starting to trade options the task is daunting. Especially when social media is abound with wild claims and feats of daring done by 22 year olds.

Anyone who can add or subtract can learn to trade options if they want to.

I started as a Market Quote Terminal Operator (MQTO) in San Francisco on the P-coast. I was plopped in the middle of a trading crowd putting up quotes on a goofy old quotron terminal. One quote at a time. After 3 months I knew what the market maker was going to say once the stock started moving and could change the quotes while they were shouting them out. My first introduction to the Greek delta. When the markets were flying it was impossible to follow my hands on the old quotron keyboard flipping through screens. I was tagged for promotion to Book Clerk!

By then I was starting to figure out this option game and I wanted to learn more. So I started talking with traders in the crowd when there was downtime. After my 6 month tenure was done at the PSE, I promised the exchange 6 months, and got scooped up by Group One Ltd, my option education went into overtime. 14 months later I was on a seat next to the crowd I used to put up quotes in.

What does this have to do with Simple and Advanced Trades? Well 34 years later I am still trading options and teaching retail for the last 10. I have learned a lot the last 10.

The difference between the two is quite easy.

I will reveal the #1 secret to success over the years.

The difference between simple and advanced is how much direction to own at entry

If I want to be all in on direction, buy a call or a put. That is a simple trade and the problem is when the direction is wrong. What do people do? There are 3 choices:

Close at a loss- this means running an early exit

Hedge the direction- this means a contra side early on

Size out to $- this means the trade size is the exit, so it can burn to 0

An advanced trade is not direction oriented. Wow, how do you do that? Since time and volatility are two other factors in option pricing, a trader can trade those as well. If the stocks move up or down in either direction it does not matter as much. The trade is only advanced because to the beginner it is not obvious how the option position will make money. But it can be taught, at least by me.

That was an early lightbulb 30+ years ago as MQTO. I could trade options as a market maker but not have to be 100% dependent on direction.

The biggest error I have seen is that most retail traders let losses run that are way too big. Mentoring 100’s of individuals over the years that was the #1 issue. 20% down early, kill it and move on. It is much harder to do than it sounds because it is not human nature.

My most accessible Advanced Technique is the Easy Trade Button. All the entries and exits are pre-primed, sent out via the Option Pit App. That is the easy part. I cover each trade in detail in every class. A $5000 account would be up more than 100% this year with no market direction risk.

You just have to want to learn.

To Your Trading Success,