A gift. Thank me after you get rich.

Quote from QQQShort:

And, if the market goes up ...
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brandnewtrader impression:

Drat I never thought of that!

Geez , do they give refunds at Wharton?
 
Quote from BrandNewTrader:

Why will my OTM puts expire worthless? If the market goes down, don't they increase in value? Can't I then sell them at that market value? I don't plan on holding them to expiration, which is why I am buying Jun 07 or Dec 07 puts. Options are securities just like equity shares - and they don't have to be in-the-money for you to make money, I'm not sure I understand where you're coming from here... Do you?


I don't have to get price and timing correct. Just direction and general time frame. I'm talking about buying Jun/Dec 07 puts on indices at an 80-85% strike. That's the strategy in a nutshell. Obviously I will be using "trading tactics" to time my entry points etc. When the market tanks in Q406/Q107 these puts will increase in value significantly and I will have the option of selling them, or riding the contracts out depending on the behavior of the market.

I worked on an equity derivatives desk and am familiar with options - but thanks for looking out...
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Be careful with those LEAP puts. ie SPX DEC 06 versus DEC 07. Remember you are fighting time and VERY LOW delta. .40 delta ATM compared to .30 delta ATM when comparing 3 month puts to 15 month puts. And 30 points in the money, its even more pronounced a difference: .50 delta compared to .35 delta. This difference will kill you even more if you're buying debit spreads, since bid/ask spreads are large and your sold premium will become more expensive to rebuy (just as your bought premium will raise in value). Also, LEAP premiums are high. you'll put a lot of money down to make relatively little over a long period of time.

Furthermore, lets say you're right, the market tanks from an oil shock -- if you want to profit take too far before expiration, your delta won't be large enough to truly profit how you'd like.

So you hold because you're waiting for your deltas to strengthen, then the political situation resolves, long term peace treaties are made (in months maybe), hybrid car initiatives pass to reduce demand, and no oil worries hang over the market, and its back to $35 by next september. The market rallies, and your 150 point drop in the SPX is now a 50 point gain (far from a super bull market, but not doom and gloom).

I'd wait for some bad news, then jump on board. Sure you won't get every penny, but your odds of real profits will increase.

I think you'd be better off shorting the QQQQ and protecting yourself with stops - that way you can react, or doing the same thing selling ES or NQ futures. That way you won't fight time.
 
I have nothing to add.

To the original poster. Do what you want to do. Just make sure you journal it each day, with a table showing gamma delta theta etc as the market progresses. Write down the daily events as they happened and see how your position parameters changed with those events.

You are going to learn the lesson of a lifetime. One that only the market and experience can give you. Even if you lose, you will win because of it.

nitro
Quote from scriabinop23:

Be careful with those LEAP puts. ie SPX DEC 06 versus DEC 07. Remember you are fighting time and VERY LOW delta. .40 delta ATM compared to .30 delta ATM when comparing 3 month puts to 15 month puts. And 30 points in the money, its even more pronounced a difference: .50 delta compared to .35 delta. This difference will kill you even more if you're buying debit spreads, since bid/ask spreads are large and your sold premium will become more expensive to rebuy (just as your bought premium will raise in value). Also, LEAP premiums are high. you'll put a lot of money down to make relatively little over a long period of time.

Furthermore, lets say you're right, the market tanks from an oil shock -- if you want to profit take too far before expiration, your delta won't be large enough to truly profit how you'd like.

So you hold because you're waiting for your deltas to strengthen, then the political situation resolves, long term peace treaties are made (in months maybe), hybrid car initiatives pass to reduce demand, and no oil worries hang over the market, and its back to $35 by next september. The market rallies, and your 150 point drop in the SPX is now a 50 point gain (far from a super bull market, but not doom and gloom).

I'd wait for some bad news, then jump on board. Sure you won't get every penny, but your odds of real profits will increase.

I think you'd be better off shorting the QQQQ and protecting yourself with stops - that way you can react, or doing the same thing selling ES or NQ futures. That way you won't fight time.
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by the way, roubini's interview is on front page of bloomberg.com. This guy is as sharp as a tack. He's on point - no hesitation with every question. His comparisons to the 2000 recession are insightful.
 
Quote from BrandNewTrader:

Right, his resume isn't magical - he's human not a wizard. I'm not sure what you were expecting?

.. I was expecting a Nobel Prize, as you initially claimed.

The guy's worked at the IMF and was the Senior Economist on the White House Economic Council... doesn't that distinguish him from any other rank and file econ prof at least somewhat?

Again, I believe you are overstating his credentials w.r.t IMF and especially White House Economic Council. Read his resume.

How about the fact that he runs a Global Geopolitical and Economic Risk consultancy that lists some of the biggest financial institutions all over the world as his clients?

... well, I am glad you brought this up. If you had a client list like his. And they all paid you dearly for your insight and advice. At what point would your clients permit you to go "public" with the same insight and advice they are paying dearly for to get first?

... perhaps after they have all taken their positions?

He's not just a talking head. A talking head is someone on CNBC who feeds soundbites to the public and uses buzz words. Roubini is a highly pedigreed and internationally recognized economist who is on BLOOMBERG saying the recession is a 100% certainty.

... anyone who is 100% certain of events in the future, is a fool.

Obviously you're free to disagree, but you don't grasp the fact that I'M not the one making the assertion, Roubini is. If you think his claims are false or flawed, refute them!


... so far, I only have disagreed with several things you have claimed, not Roubini.

And what's this about surprise? There's no surprise. He was waiting to see the recent GDP report before making a hard call - but he's been making the calls since 2005 (as I've repeated). Last week he put the probability of a recession at 50%. After seeing the report he said it is now a certainty. Why don't you go and read why? I posted the link - you wouldn't be writing all this sht if you had read the report. You don't have to read his sht, but don't NOT read it and then ask me questions etc etc.

As far as China goes - Roubini thinks China will react to the US slowdown rather than vice versa due to the nature of trade relationships between the two countries. It's basically that US imports lots of China goods, China exports lots of goods to US, gets lots and lots of dollars and puts those dollars in its reserves. China's reserves are approaching $1trillion (their us dollar reserves only) So, you cna imagine what happens when the US consumer finally passes out from a) housing decline b)rising interest rates c) high energy costs and stops spending their money - China's exports less, and add to the the declining dollar will hit the value of their reserves extra hard given their reserve size. On and on - but he addresses the China issue specifically and maintains that the us recession will be the catalyst for a global slowdown and not vice versa.

Read his writings if you're interested
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Quote from BrandNewTrader:

I've though about the debit spread may put that trade on, however I am actually growing more and more bearish as time goes on and I think I'd be elaving money on the table below the strike of my short put if I put on a spread. I may just stay long puts and POSSIBLY wait until the market begins to turn south and THEN sell my lower strike puts at a higher market value.

Market be lose a quarter of its current value - I think 80-85% strikes are relatively safe. The sht starts hitting the fan by Q1 07 at the absolute latest - with that type of timeline I should be ok with jun/dec puts.

Thanks for the advice. I do understand your messge about greed, etc. However - I'm a young guy and not very risk averse. I think this is a major event and I plan to capitalize on it. Besides, my risk is fairly limited given I am going long puts and I don't see any possibilities of a protracted market rally through 2007. This is why I'm comfortable making a big bet.

My worst case scenario exit from trading is going back to grad school or getting another job and being middle class/upper middle class the rest of my life, working as a corporate slave. That's not a bad safety net, which is why I comfortable with risking the farm to make the type of money I would only see if I a) won a lottery, b) got signed by the yankees, or c) was a celebrity.

This is a speculators dream come true. I think it's almost imperceptive NOT to put on a short play given the lack of steam in the economy or market for a lasting rally.
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No need to be so dramatic. If you're right about this, you'll have a hard time likely getting a job as a corporate slave, though. :)

With this attitude, be careful. Its harder to do well if you expect to fail. This may belong in the psychology area. :)

Why don't you just daytrade it with future contracts instead of having to fight with the difficulty of options ? That way you can take many bites out of this thing when it actually does pop.
 
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