Interview With Pro Options Trader Dan Darrow

In our latest trader interview, we sat down with professional options trader Dan Darrow of Options in Play for a discussion on his unique options trading style.

Tell us about yourself!

I'm a professional options and equity trader based in California. I have been trading for a living since 2006, when I graduated from Fordman University.

I use a “hybrid approach” and focus heavily on stocks with major news catalysts. I also use technical analysis and swing trading techniques for my options positions.

I especially like to capitalize on earnings season, when we get volatile price swings.

How did you first get involved with the markets?

I first became interested in the markets (trading specifically) in college. Studying Finance put me on a head long path into trading.

Trading fits my personality well. The markets are constantly evolving, and I love the excitement.

How has your approach to options trading changed over time?

When I first started trading back in 2006, I was equity only.

I was focused on short-term momentum scalping, And I would get frustrated because I missed out on bigger multi-day/week moves.

I began trading options a few years later to compensate for this.

I focused on managing risk over longer time periods, and my strategy grew from there.

And I've always been focused on catalyst-driven trades. When I moved to options, I adopted and improved the process

How do you get over a big loss?

I focus on the long-term picture. When I hit a bad stretch, I remind myself that it's not permanent. I have 5 days a week, 20 days a month, and 12 months a year to make money.

And if I come off a bad day, it's only 17.5 hours to a potentially good day.

A positive attitude goes a long way in this business.

What is the one thing you wish you knew when you started as a trader?

The importance of trade and money management. It's one of the hardest things to learn, and it is critical to your success.

Every trader should set parameters for their daily/monthly profit targets, trade and account stop losses, and risk-reward.

Do you believe in setting specific stop loss and target prices?Do you have a certain risk management strategy for cutting losses?

I absolutely believe in stop losses and targets.

Like I said before, trade and money management is probably the biggest differentiating factor between a struggling trader and a successful one.

When it comes to trading long options,  I love the fact that your risk is the price paid. It's almost like having risk management built into each trade. I still use stop losses, but it's always good to know what your risk is.

Are you concerned about high-frequency and algorithmic trading?

They don't concern me much when it comes to options. However, we do have to adjust our time frames a bit. Instead of only focusing on intraday and daily action, we need to look at extended rallies/drops over multiple days or weeks.

What do you think about Bitcoin and other cryptocurrencies?

Crypto currencies are interesting but I’m waiting for mass market applications.

I’m waiting for the Microsoft (MSFT) or Apple (AAPL) of cryptos to bring them mainstream.

What do you do in your free time away from trading?

I love biking, music, and traveling, especially when I can do all three at once!

It's important to get away from the screens every so often to relax and recharge.

If you weren't a trader, what would you be doing with your life?

Trading is all I ever wanted to do. I really haven't thought about doing anything else since I graduated from college.

I would like to open a coffee shop in a beach-side town at some point though.

Many traders complain that there is too much information to deal with. How do you filter out the noise and figure out what's important?

To a certain extent, it helps to have tunnel vision.

The constant headlines can make for some wild intraday moves, but since so much of my strategy revolves around earnings and events, I can really tune out the noise and just focus on the setups.

What is one thing traders can do today to start getting better results?

Come up with a game plan for the day and week. Not just for trade ideas, but also for P&L, targets, and stops.

Think about it like a business.

What do you want to accomplish today and this week? And how will you go about doing that?

These are tough questions — but you have to answer them if you want to succeed.

Are there any traders you look up to?

I’m a sucker for the Market Wizards books by Jack Schwager, especially the original one. I read it when I first became interested in trading, and the lessons have stuck with me throughout my career. The insights from top guys like Paul Tudor Jones are amazing, and they're as useful today as they were 30 years ago.

What are your most successful “go-to” strategies?

I love strangles on earnings and other events.

I’m always on the hunt for “Earnings Combo trades”, which are trades that give you 2 moves for the price of 1.

An earnings combo is when an event-driven move triggers a technical move.

These can be real monsters and I typically use strangles on these setups.

What are you most confident about in your trading?

The process. I’ve done this for years and I know what works.

It’s about staying disciplined, being selective, and having proper trade/money management techniques.

Finally, Who Is Options in Play For?

Options In Play is tailored to options traders looking for outside the box ideas. trader who is looking for outside the box ideas.

As I said, I focus heavily on catalyst trades (earnings, major events). But I also like swing trades with a multi-week to multi-month time frame.

Options in Play offers 2 new trade ideas per night, plus intraday updates when it's time to switch up a trade.

Click here to sign up!