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Yeah, it's called an option pricing model. If you've been trading options for a long time now and still have no idea how to size your positions then you definitely should stop trading them. And what's with "I understand I should look at the greeks, but...."? :confused: If you trade options...

If you are assigned on a bull call spread then just exercise the long to cover the assignment. The only problem is when you are assigned due to the dividend, as by the time you realize you were assigned it's too late and no matter what you do you will still be responsible for the dividend.

Eliot, All Wed seminar transcripts are available on thinkorswim's website and there are quite a few on functionality, I suggest you check them out. Also drop by the chat rooms on TOS platform, there are people who would be happy to help you with features that you don't know how to use.

Thinkorswim is definitely the one to check out as it has no trading levels so once you're approved for options trading you can trade any strategy you want, provided you can meet the margin requirements.

coincidentally, the market has been rising for the past 5 months...hmm, makes one think...

That's what I'm doing!:cool:

Actually, if you are net short premium then technically you are all in cash (if you include margin) and the premium that you receive is also cash so you actually have more cash than you started with.

Hmm...interesting! Thanks for the idea, Cache!:)

Why don't we open it for discussion? I've been doing some extensive testing on a certain premium selling strategy and this is the "problem" I run into. Using more than about 20% of the capital creates huge drawdowns, when you hit a losing streak.

Do you have any links to that? I'd like take a closer look at that.

I couldn't care less as I don't have a position in them.:D

FXE (EUR/USD). That's the only one I know of. I don't think there are any others.

Well, it's a $2 stock, once it reverse splits it'll be a $20 stock so how can you reasonably expect the option price to remain constant!? It'll rise proportionately. The contract will become non-standard as it'll represent 10 shares than the usual 100. The strike price must rise as well...

If a stock splits 2:1 then it's price gets halved and the options are usually adjusted so that you have twice as many options at half the strike price. With that said, it is reasonable to expect that a 10:1 reverse split will create 10 times less stock at 10 times the price. So you should have...

Maybe my choice of word is not the best, but the point I was trying to make is that you need a trading approach that creates positive expectancy, you can't just blindly sell and expect to make money.

It's definitely the consequence of this journal! The big guys read it and then lean against you!:D

TS, As I said above, taken at face value, selling is no better than buying (i.e. blind selling or buying), but as you have mentioned you can create positive expectancy by closing out the "policy" when the conditions are not right (trade management) or not taking it out at all (entry strategy).

You sound surprised!? Selling options is no better nor worse than buying options, when taken at face value. The edge (postive expectancy) is created by the trader's strategy/approach, which includes money management, trade management and etc.

Nope! By the way, this is not an efficient market hypothesis discussion, it's an arbitrage discussion. Triangular arbitrage is a clearly defined relationship not some theoretical hypothesis. As Steve has pointed out above, the risk of different settlement dates is priced in.

Page 101...I'm up 4 pages :D