- To be successful you must enter into new trades frequently and consistently.
- You need to maintain healthy customer relationships!
- You need to decide your strategy and systematically follow your criteria to get the right trades through your doors.
If you're serious about options trading (or serious to get started), you’ve likely heard the advice "Treat your option trading like a business".
Well, you might be asking, what does that actually mean? I mean, how else would you treat options trading? Are you telling me to try harder? I’m already giving it my best!
So let’s take a fresh look at this old adage.
Imagine you opened a new local bakery. This will be our “Options Trading Business” and the analogy we’ll use throughout this post. You’ve put your savings and a lot of effort to open this new shop. But now what? What’s the key to your success? Of course, you need to learn how to bake. But after that, you must get customers in the door.
Getting Customers in the Door (Frequent New Trades)
Some of your customers will be profitable, others not. Some customers will just try a bunch of free samples, use your complimentary Wi-Fi and never buy anything - but they are still key to your bakery’s success. You wont know ahead of time if a new person in your shop will prove profitable or not. The best you can do is to target the best customers you can and welcome everyone into your new shop with a big smile.
Customers in this analogy are new options trades you need to consistently put on in your trading business. To be successful you must be entering new trades frequently and consistently.
If you’re hesitating to hit the ‘confirm and send’ button, then you have a bakery with too few potential customers.
All Customers Will Be Different But All Are Important
Some of your customers will be profitable, others will not. However, you still need to get customers through the door. In options trading we take our losses with our wins. Great traders take signals of "good customers" and add it to their evaluation for trade entry.
Spending Too Much Time Per Customer (Over-Analyzing)
If you are over-analyzing your options trades, then you are spending unrealistic amounts of time with each customer. Let’s say you work 40 hours a week at your shop and spend 4 hours with each person that walks through your door. You’ve effectively placed success of your business in the hands of only 10 people! And because you’re looking for a big return you’ve probably invested too much money into each one of these customers as well.
You need more than 10 customers and you need more than a few options trades in your account at any given time. This is what happens when you trade a few positions too large in order to get fully invested. Trading too large or putting on too few trades exposes you to much more risk and turns options trading from a game where you could have an edge with the right number of occurrences to a few hands of poker where you’re “all in”.
How Much Time Are You Spending With Your Customers? Too Much?
If you are over-analyzing your options trades, then you are spending unrealistic amounts of time with each customer.
Customer Service (Trade Management / Adjustments)
Imagine, again, your new bakery business. I mean seriously, close your eyes and smell the fresh bread!
You want your new business to be a success. So, then how important is customer relationship management? Well, it’s almost as important as finding new customers. Your first goal is to always keep a healthy funnel of trades, but you cannot ignore your trades once they are in your place of business.
Many customers (especially if you use high probability options strategies) will be easy to manage. Others will demand lots of extra attention to keep happy and eventual prove profitable. If you don’t manage them while they’re in your shop, they can have extreme negative impact on your business.
Trade Management = Relationship Management
Customer relationship management is almost as important as finding new customers! Trade management is just as important.
Target the Right Customers (Strategy Criteria)
Not all customers, or trades, are created equal. Each has a unique profile. For example, a future bride might spend big on a wedding cake (big margin!), but that same bride may go on a negative public relations rampage if the filling was too tart on her special day! High risk, high reward. Someone looking for a slice of cake and coffee (low risk) might be much easier to manage but their purchase has much lower margin (low reward).
This is where your strategy comes in; you need to decide your objective and systematically follow your criteria to get the right customers (trades) through your doors.
Working with Brutus
Brutus delivers to you personally curated list of the best potential new customers (trades) in a forced ranking (best trade, followed by 2nd, 3rd, and so on). These ranking are based on your criteria (think risk vs. reward tolerance and ‘customer profile’). Some pretty slick mathematics based in a science called “Multi-Criteria Decision Making” make this all happen – but we won’t get into that in this article. Use Brutus to ensure you keep this vital lifeblood of your business fresh and relevant.
To be fair, Brutus isn’t your only options to find new trades, but we’re convinced you’ll save time (think more customers with less effort) and achieve much more consistency against your target profile in order to keep you in business.
I hope you’ve enjoyed a fresh view on this overused phrase. Most of all, I hope you’ll now think of the customer analogy in your trading. I hope you also see the value of our Options Ranker technology. It’s free to use so long as you join before or during our beta.
OptionAutomator Trading Tip
Trading too large or putting on too few trades exposes you to much more risk and turns options trading.
Now it’s over to you - let us know what you have to say below.
Recap on Your New Bakery… umm, Options Trading Business:
- Key is to keep focus on consistent and relevant trade discovery (i.e., more of the customers you want through your door).
- Make sure to manage your time per trade. You need to trade a lot – I recommend having 20-60 trades open in your account at all times (depending on trading environment). Options have a limited time in your shop, just like customers, so it takes lots of trades to keep this going.
- You will need to learn to manage your trades to maximize profitability. Don’t worry about this one –yet– we’ll get you hooked up with the best resources. Concentrate on saving time on trade discovery and you'll have more time to focus on trade management.
- You need to determine your target audience (strategy or strategies) that fit your trading skills and objectives. Target the right customers and the right trades without as much effort.