What is preferred by professionals? High POP or Better Risk-Reward

F&O
1

Question for those folk here who trade for a living or at least make a major portion of their income from trading

  1. Trades like the Iron Condor or Vertical spreads… basically risk defined trades if one chooses strikes that are far OTM like say a 16 delta have very high probability of profit. 80% upward, but have a poor RR ratio like 1:0.31 etc.

  2. Other strategies like a broken wing butterfly or modified butterfly or calendar spreads have superb RR ratios but poor POP like 30-40%

So if you choose option 1 you make money say 80% of the times, but that one loss may wipe out all your past gains as you are risking a lot for a small but relatively sure gain ( I know someone here is going to say “what about adjustments” :wink:)

Alternatively if you go for option 2, you only win say 30% of the times so that i guess doesn’t amount to much.

So what do you guys prefer? 1,2 or something else? perhaps some hybrid strategy?

New to options… I’ve learnt most of the theory and seen different approaches by different trainers, having a hard time deciding the actual way forward.

2

Irrespective of any strategy, professionals have good money management. This is what separates the men from the boys. Everyone teaches some strategy to define their edge, but very few focus on money management which is the most important aspect. Retailers need to learn this. It requires some preparation and discipline. Professionals don’t mind having loss as long as the loss is within their defined limits. They will target for higher profit. So even if the win/loss ratio is not in their favor, the quantum of profit/loss per trade creates the edge.

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