Anybody trades options without any greek letter?
- Thread starter OddTrader
- Start date
you sport 4000+ posts and ask such question? Can I ask you another question before commenting: What do you actually intend to achieve with options? If you want to trade directionally then why dont you trade the underlying? The most often cited argument for options is that long positions limit your risk. At the same time its the fastest way to the poor house, given thats all you understand about options. Ironically those who cite such arguments are the ones you dont hear from anymore 6 months down the road, guess why...
The story is pretty simple: Options are a zero sum game. Be the guy who does not understand the underlying risks and you are the one who pays the bread and butter to those who know the ins and outs of their positions, the inderlying risk, their exposure, and have a thorough understanding of all possible scenarios and their implications. Do not believe anyone who tells you otherwise, I find it increadibly sad to see so many posts who claim you can trade options profitably without knowing a thing, on the other side it lets me sleep tight, knowing I am provided for on a daily basis by exactly the same above mentioned individuals ;-)
The story is pretty simple: Options are a zero sum game. Be the guy who does not understand the underlying risks and you are the one who pays the bread and butter to those who know the ins and outs of their positions, the inderlying risk, their exposure, and have a thorough understanding of all possible scenarios and their implications. Do not believe anyone who tells you otherwise, I find it increadibly sad to see so many posts who claim you can trade options profitably without knowing a thing, on the other side it lets me sleep tight, knowing I am provided for on a daily basis by exactly the same above mentioned individuals ;-)
On page 171 of his book, Gallacher consludes "My best advice to the aspiring option trader is to clear his or her thinking of all the superfluous complications which obfuscate this fascinating subject and to focus only on those things that are truly relevant to trading. Let's pack up all the betas, thetas, gammas, and deltas and send them back on a slow boat to Greece.
It's about time somebody called it."
It's about time somebody called it."
My best advice to the aspiring option trader is to disregard Mr. Gallacher's dumb advice. He's apparently catering to those who hope to make money trading options without really working at it. That's a smart way to sell books, but a terrible way to approach trading.
Just for laughs, take a look at ARNA April 2.50 puts on 3/27/09, when ARNA closed at 4.50. Those puts sported an IV of 443%, and closed at .60 bid.
Then the results of a clinical trial came out. They were disappointing, and the next trading day ARNA dropped 1.27, closing at 3.23.
And what happened to the lucky owners of those 2.50 puts? Well, despite the drop in ARNA of almost 30% in one day, those puts LOST most of their value - closing at .20. Why? Because IV dropped in that one day from 443% to 186%.
So you don't necessarily need to know the definition of vega. But if you don't understand the concept, you're cannon fodder.
You are not an options trader if you don't constantly look at your greeks.
You can trade the underlying directionally with options and just be trading delta. Options trading means almost always removing exposure to the underlying from the get go. Your position may gain deltas thereafter, but you are always aware of that risk. Therefore, you are always looking at gamma and vega and theta and others as well.
and Gallcher is...... who?
When all the most intelligent option traders utilize the information Greeks provide for better risk management and understanding, then I can ignore Gallacher's blanket ignorance that Greeks serve no useful purpose. Every single mistake beginner's make in trading options can always be easily explained with a 5 minute discussion of one of the Greeks. It is useful information... use it.
It does. And has even more in depth info in the 2d edition. The book is intended for the beginner to intermediate retail trader with a focus on risk/reward based trade adjustments but still discusses time to expiration and implied volatility and the pricing factors. It is very important to understand the Greeks to trade properly and any one who claims they are useless lacks a full udnerstanding of options.