Analyzing the underlying vs just options

[trader56]

Just wondering if people analyze the underlying to make decisions or just the options?

When I traded futures awhile back, we'd look at order flow, resting orders, who was bidding/offering (locals vs commercials), whether the front month on the calendar spread was net bid or offered, try to assess the position of the locals, other markets, etc.

So my question is: Do most of you analyze the underlying stock, future, or whatever you're trading, then use options to trade it?
OR, do you mostly look at the way the options themselves are trading, without much regard for the underlying?
OR do you try to incorproate as much analysis or BOTH as you're able?

It would seem, at least to this very beginning options student, that viable trades could be contructed in any of these ways, but I'd very much like to hear form those with more experience!

THanks for your patience and replies!

 

[momoneythansens]

There is a large contingent who maintain that you need to be able to trade the underlying successfully in order to consider trading options.

Hope you got your flame-retardant gear on.

MoMoney.

 

[RichardRimes]

such a cynic you are MO
Very fair question. I believe it is more of your background and bias. Some trade only from a Greek perspective and only indicies/etfs with large liquidity. Probably most beginners including myself come from a stock picking background thus we trade a basket of stocks using both the bias on the underlying and the Greeks to trade the options.

 

[trader56]

Thanks Mo and Rich!

Mo, I wasn't suggesting that there's a best approach, but rather inerested in various views on this - and I hope I won't need flame-retardant gear LOL!

Thanks to you both for your thoughts!

 

[rallymode]

Of course there is also those of us who follow the WTF chart study which doesnt require familiarity with the underlying or any greeks and simply follows statistics.

 

[RichardRimes]

:eek:

 

[youngtradersla]

I would be curious to know how and why anyone would trade options without knowing anything about the underlying.

Sounds like silly risk to me.

 

[momoneythansens]

Quote from rallymode:

Of course there is also those of us who follow the WTF chart study which doesnt require familiarity with the underlying or any greeks and simply follows statistics.

Exclusively for ET members I am able to finally reveal that I am putting the finishing touches to a new system that removes the need for even the slightest bit of knowledge (including statistics) and also incorporates the OMG indicator which is now believed by many top experts to outperform WTF study under most market conditions!

I will be touring and giving free seminars on this new and exciting system. If people are interested there will be follow-up training sessions and the chance to use the specially developed software which makes trading the system even easier!

Yes, there is a small fee for the software but it is merely to cover the cost of development and I derive no profit from this. Furthermore, I guarantee you will be able to earn back the cost of the software in only 2 trades!

The best bit is that the software is not required to trade the system but extensive demonstrations of it will be given throughout the free seminars and subsequent training sessions. So to really get the most out of these events, the software is invaluable.

 

[Bben1006]

Mo,
You forgot to mention that "you get it all, the seminar, the training and the specially developed software for ONLY $3,995..."

~B

Quote from momoneythansens:

Exclusively for ET members I am able to finally reveal that I am putting the finishing touches to a new system that removes the need for even the slightest bit of knowledge (including statistics) and also incorporates the OMG indicator which is now believed by many top experts to outperform WTF study under most market conditions!

I will be touring and giving free seminars on this new and exciting system. If people are interested there will be follow-up training sessions and the chance to use the specially developed software which makes trading the system even easier!

Yes, there is a small fee for the software but it is merely to cover the cost of development and I derive no profit from this. Furthermore, I guarantee you will be able to earn back the cost of the software in only 2 trades!

The best bit is that the software is not required to trade the system but extensive demonstrations of it will be given throughout the free seminars and subsequent training sessions. So to really get the most out of these events, the software is invaluable.

 

[stock777]

You also forgot to mention the underused GFY hedge, rarely applied, but devistatingly powerful in the right circumstances.