Is there some kind of a core philosophy or set of principles that can make a person successful when trading?

We spend a tremendous amount of time discussing numbers at tastytrade. Whether we are talking about volatility, standard deviations or how much weight the Bat has lost, numbers are what we do. Still, there are other keys to success that cannot be so easily quantified.

If you haven’t caught on just yet, we are risk takers. Taking risk is not the same as being reckless. Our mechanical approach to trading is what allows us to capitalize on risk better than most.

There’s a quantitative side to taking risk. We know when to, “hit it and quit it.” That is why we select liquid underlyings with high implied volatility and close trades at 50% max profit. We know to open trades 45 days prior to expiration because that is when theta decay accelerates. Still, mechanics are not just numbers.

Call it stubborn or patient; when a trade goes against us, we wait. Not giving into emotion can be the most difficult part of trading. However, that is what allows us to remain mechanical. Why do you think Tom is so good at trading? He’s stubborn and void of emotion. When trades do not work out right away, we do not panic. We know oil isn’t going to zero anytime soon. We know stocks aren’t going to infinity. Patience and probabilities pay.

Taking risk is not easy; however, risk is where the rewards are. Risk for risk’s sake is foolish. Risk combined with mechanics where “pot odds” are favorable does work. We’ve built careers on it.


Josh Fabian has been trading futures and derivatives for more than 25 years.

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Confirm and Send: April 11, 2016