Bravo!
Keep up the good work.
Keep up the good work.
Article By Pabst
- Thread starter Pa(b)st Prime
- Start date
Quote from dandxg:
Pabst, that's an excellent article with a lot of great points. The only I disagree with is on specialization of markets vs. trading a vast array and here's why.
Each market has it's own personality. Going from say ZN to the DAX is comparing a snail to a race car. Now granted I am picking extremes but you get the point. In order to do what your suggesting you would have to, IMO, have sufficient experience trading all that would be your basket to switch mindsets otherwise a trader could easily misinterpret order flow going from a faster product to a slower product.
A very good article indeed.
Dan
Dan, here's a sub-point. If someone say's "I only want to trade indices" then I'd suggest that he monitor ALL index products. For example longs today in NQ have been far more forgiving than longs in ES. By the same token if the market flushes later I'd suspect NQ would be the worst short candidate.
Currencies, Treasuries, Grains also the same dynamic. If you've wanted to be long dollars then short the Pound has been fine. Short the Euro a disaster. Knowing spreads is of primo importance.
pabst
that's an excellent article, very well written and synthesizes the essence of trading. thanks.
however i have to disagree with how you have articulated the message of using options vs futures in the example cited above. you say that you have decided to enter a put spread with payoff of 8 to 1 which paid 80k profit, as an alternative to shorting the equivalent future. that's ok. but for the sake of transparency, you should have provided more info about that spread, especially the probability of success. for instance, a option spread that pays 8 to 1 only has approximately 12.5% probability of success. this can not be compared with shorting the equivalent future, which has a statistical probability of success of 50%. if one compares those two alternatives without mentioning the different probabilities they carry, the reader might be tempted to infer that options offer a better expectancy than futures or stocks, which is not the case. in fact, entering low probability spread trades, as the one you've mentioned, adds to the negative expectancy of your trading due to the burden of added slippage and commissions.
just my 2c
Good point and I realized after the fact that I should have addressed those realities. It's not like I've never had a long options trade wind up being a big fat zero....