What "Models" Do You Guys Follow When Trading Options?

Hi Everyone,

As title suggests, I am curious as to what strategies you option traders out there follow. I have been trading options for nearly a year now (started paper trading and just understanding the basics - did that for 2 years). I always do relatively small trades since I'm a broke college kid. I'd like to understand why my calculations are a bit off when I do profit/loss calculations as compared to what my computer engine spits out (my guess is because it follows a more complex algorithm such as Black Scholes in valuing the strategy).

Is Black-Scholes generally a good model to follow? My current strategy/strategies are as follows:

1) Log onto Interactive Brokers
2) Follow markets and see what overall sentiment is.
3) Depending on market sentiment, choose what asset class to dive into (mostly stocks, but also have done some commodities. Lately have been sticking to stocks).
4) Based on asset class that I want to go into, I look at what sectors are performing well or bad, and based on performance and what sectors are doing, I'll scan prices and strikes on interactive brokers.
5) I will then form a thesis for what I thing is going to happen to X asset based on market / economic sentiment, and then I will select a strategy that best suits.

For example, lately I have been practising Call Bulls and Put Bulls (not an overly complex strategy).
I have been reading a bunch of books on pricing, valuation, how to best approach a trade etc. Following one decently renowned book, the strategy for Call Bull states to BUY a call with a lower strike and SELL a call with higher strike (typically a bullish strategy).

Let's use an example:

Stock ABC is currently quoted at $51

I buy a September Call $55 AB @ 3,50
I sell a September Call $50 AB @ 1,50

My Max Risk = (3.5-1.5)100 = $200
My Max Profit = ((55-50)-2)
100 = $300

Break-even = 2 + 50 = 52
Therefore, I profit between $52 and $55 at expiration, and anything $55 and above I achieve my max profit.

My question: interactive brokers spits out different numbers when I test this strategy. Am I missing something? Am I omitting other variables from the equation?

Any help would be greatly appreciated, newbie here asking for help.

Thanks!

 

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