Conservative options trading strategies
By DAN COLARUSSO MARCH 10, EVEN at the height of the bull market, Lowell Koppel did not fit the mold of the hyperactive day trader who jumped strategies and out of technology stocks dozens of times a day. Instead, he relied on evenhanded options strategies to generate consistent returns that had little to do with the Internet stock bubble. Maybe that is why, after two years of stock market declines, Mr. Koppel, 66, a former software executive, is still trading times a month. Last year, he said, his trading returned The rest is in bonds. Day trading became a prominent options of the market landscape in the late 's as individual investors using online trading technology left their day jobs and leveraged their nest eggs to trade stocks, often jumping in and out of positions within minutes. The market downturn that began in early thinned these ranks by the strategies and forced out of business many firms that had provided traders with training, trading privileges and technology. Many of the individual traders who remain have adopted relatively conservative approaches. They say they are holding positions longer, using less aggressive strategies, diversifying their holdings and relying more on short-selling, the practice of borrowing shares to sell in the hope of buying them back later at a lower price. Michael Parness, 38, who runs TrendFund. Parness's new book, ''Rule the Freakin' Markets'' St. Martin's Pressshows that his confidence has not waned. Koppel, who has been conservative for three years, said he had never been comfortable with pure stock trading. Trained as a chemical engineer, he gravitated to the complex math of options and spends days analyzing them for potential mispricings. Koppel said, adding that he gets most of his income from writing covered calls, a conservative strategy that involves buying stock and selling call options. The strategy sacrifices potential appreciation in the shares for guaranteed income from the sale of the options. The confidence was tested when the market was near its peaks, Mr. Now, though, I just try to consistently make money and not worry about the indices. Teresa Appleton-Lutz, 37, began trading five years ago after leaving a job at Hewlett-Packard to care for her two children. She has moved from trading initial offerings and technology stocks that were so fashionable in to trading futures contracts. For seven months, she said, she traded only three stocks, Ciena, Exxon Mobil and Mercury Interactive, a strategy that was successful until the market changed. You want to live to trade another day. View all New York Times newsletters. While their numbers have dwindled, active traders are prized by securities firms, which cater to their needs. Electronic trading systems -- often called direct-access trading -- have become widely available to those who want to trade often, but not necessarily at the pace of the day traders of the Internet boom. In earlySchwab acquired CyberCorp, a direct-access trading firm, and renamed it CyberTrader. Since the takeover, the firm's active-trader roll has swelled to 10, from 2, Schwab executives say. That has helped the company weather a slump in the broader online trading business. Schwab added just 47, accounts in the fourth quarter ofdown from its peak ofconservative the first quarter of ; new accounts at Ameritrade dropped to 35, fromover the same period, according to a report from Putnam Lovell, an investment bank in San Francisco. Watley, a day-trading firm, and Ameritrade uses direct-access software developed by TradeCast, another firm with day-trading roots. Repetto said CyberTrader clients account for 13, of thetrades done ''on an average day'' through Charles Schwab. Considering that the firm has 7. Watley and former head of OnSite Trading, a day-trading shop. BETH STELLUTO, a senior vice president for active-trader sales and marketing at Schwab, said company studies showed that active traders use just 37 percent of their investable assets for trading. A few years ago, it was not uncommon for day traders to mortgage their homes to raise trading capital. The strategies regards the shift as positive, because it indicates that traders will withstand future market shocks better than they did the bursting of the Internet bubble. Bright, whose firm trades 20 million to 30 million shares a day, said re-educating traders as the market fell had rated a trading out of 10 on a scale of difficulty. There were people just holding stock and praying it would go up. Tell us what you think. Please upgrade your browser. Sections Home Search Skip to content Skip to navigation View mobile version. The New York Times window. Business Day Investing; Day Trading Takes a Conservative Turn. Subscribe Now Log In 0 Settings. 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