Buying calls for a living and arguing with derivman

[Derivman]

Quote from McCaleb:

thanks for the post

You are very welcome McCaleb. Please feel free to join in any discussions and do not be afraid to ask any questions that come to mind. It is said by many that trading, as a business, is very hard, but I believe that it is only as hard as you make it yourself. Many will tend to speak from their own experiences, but their experiences may, or may not, be of any relevance to what you are trying to accomplish. I think that is why trading is called "a very personal thing". But, we must never underestimate the experience of those that have been trading for a very long time, for like all walks on life, those that have more years under their belt will have the greater practical experience, and practical experience is what matters most. Just some of my thoughts. Cheers.
Derivman

 

[Derivman]

Quote from anti ad hominem:

The same skill that a trader of ANY financial instrument needs to learn - risk management. Without an understanding of where the risk lurks in any position (real & theoretical) you are dead in the water.

Thanks for the reply anti ad hominem. Many will say that risk management is an integral part of the business and is not,

"the number one skill that new traders need to learn for trading Options"

Think about it. The best risk management in the world will be of no use to you if you place losing trades all the time. Cheers.
Derivman

 

[Derivman]

Quote from cohenmichaela:

1. How not to lose money.

After you learn number 1 then you can concentrate on number 2.

2. How to make money.

Thanks for the reply cohenmichaela. It should be very obvious to all traders that losing money is the one thing that will stop you trading. Whilst this is very important, many also say that losses are an integral part of trading. So, we can't say that learning "How not to lose money" is the most important, when we also know that " Learning how to lose money" is also very important. Making money is the outcome of placing high probability trades in the market on a continual basis. As such, it is an outcome, or result, it is not a skill. Interesting thoughts but not the correct answer in my opinion. Cheers.
Derivman

 

[Derivman]

Quote from spreadn00b:

Off topic a bit, but I'd disagree a bit Taleb's assessment on the millionaires. Yes, there are folks that take calculated risks and it doesn't go their way and they end up worse off than if they just stuck with a steady job and invested in T-Bills. But by and large, the bankrupt broke people that I know are not that way because they took a calculated risk, managed that risk and still had it blow up in their face, it's because they were stupid. They took unnecessary dumb risks (i.e. bought new cars they couldn't afford, bought worthless crap they couldn't afford and moved into that house that was 4-6x their annual income on an adjustable rate).

But this does tie back a bit in to everything, as was pointed out. Educating yourself on the vehicle, learning to manage risk is key. This puts the probability of success a bit more in your favor as opposed to the guy that's buying or selling blindly with no concept of the risks in the vehicle and as a result, no concept of managing the risk.

Just my 2 cents.

Thanks for the reply spreadn00b. You were going off topic but returned so that is acceptable. You said,

"Educating yourself on the vehicle, learning to manage risk is key. This puts the probability of success a bit more in your favor as opposed to the guy that's buying or selling blindly with no concept of the risks in the vehicle and as a result, no concept of managing the risk."

I am wondering about what you said, and what would happen, if for instance, a newbie trader like me went off on a tangent and spent many weeks learning about strategies that might be really of no benefit to the market that he was going to trade. Is this "Educating yourself in the vehicle", or is it just wasting your time. And then, the risk management part. I have already mentioned, and I think that most will agree with me, that risk management is of no use to anyone if they are only able to place losing trades in the market. So, if you combine the above two items, then I would imagine that, in this instance, it is a recipe for disaster, and not,

"the number one skill that new traders need to learn for trading Options"

Cheers,
Derivman

 

[Derivman]

Quote from Derivman:

I will post a general question in relation to "Buying calls for a living". Please note that this question is applicable to traders in general, and as such is relative to our discussion. Cheers.
Derivman

What is the number one skill that new traders need to learn for trading Options.

I would like to thank all for the replies to date. I have posted the original question so that all may review it. What is the general consensus so far. Have me touched on the correct answer, are we nearly there, or are we a million miles away. Cheers.
Derivman

 

[FullyArticulate]

The number one skill for "learning to trade options" is indeed knowing in great depth how options work.

Risk Management, knowing how to lose, and luck are all factors of learning to trade, which should be step 1 before jumping into options.

Options are a complex means of creating exotic payoff schemes. The benefit of options is that you can make money under many more scenarios than simple direction. The cost of this benefit is a need to have an opinion and be correct on volatility, direction, and time.

In any case, you're commingling two separate issues: Learning how to trade, and learning how to trade options.

 

[atticus]

Quote from Derivman:

I would like to thank all for the replies to date. I have posted the original question so that all may review it. What is the general consensus so far. Have me touched on the correct answer, are we nearly there, or are we a million miles away. Cheers.
Derivman

I would say the answer is NOT to sell footsie puts naked. After-all, you blew-up selling puts on your T2W journal.

BTW, there is no such animal as "unlimited risk, unlimited gains", as you suggest in your fxstreet thread.

 

[Derivman]

Quote from FullyArticulate:

The number one skill for "learning to trade options" is indeed knowing in great depth how options work.

Risk Management, knowing how to lose, and luck are all factors of learning to trade, which should be step 1 before jumping into options.

Options are a complex means of creating exotic payoff schemes. The benefit of options is that you can make money under many more scenarios than simple direction. The cost of this benefit is a need to have an opinion and be correct on volatility, direction, and time.

In any case, you're commingling two separate issues: Learning how to trade, and learning how to trade options.

Thank you Fully Articulate for the guidance. We will now separate the commingling in case any more newbies get confused, for I am starting to get a little confused with the replies to the question I posted. You have said,

"The number one skill for "learning to trade options" is indeed knowing in great depth how options work."

Let us compare this to my original question.

"What is the number one skill that new traders need to learn for trading Options."

Surely it is a pre-requisite to trading Options that one must be familiar with the various strategies and the best time to use same. Let me put this to you. If I spent 6 months "learning in great depth" how Options work, will that provide me with the "number one skill" that I need to learn for trading Options. I am not certain that it will. What happens if the moment I decide to place my trade their is a sudden change in market direction and my chosen market becomes volatile for a period of time. Do I continue to place my trade as per my understanding of how Options work, or do I just say this is too hard and I can't place the trade with all of this up and down movements in the market. I am now thinking that it is not as easy as that. If it was, then everybody would be doing it, and everybody would be making good money, but according to my instructor, only a very small few make good money trading Options. It can't be that easy, is it. Cheers
Derivman

 

[Derivman]

Quote from atticus:

I would say the answer is NOT to sell footsie puts naked. After-all, you blew-up selling puts on your T2W journal.

BTW, there is no such animal as "unlimited risk, unlimited gains", as you suggest in your fxstreet thread.

My Dear atticus. I have told the moderator of this thread that I will stay on topic. Why are you trying to drag me off topic again. What is with you and this cyof / athet / soc-rates and citybulls stuff. Why do you persist. I looked up the links as I said I would, and then posted you a question, as I said I would. It now appears, that in your inability to answer my question to you, you have to resort to the same old tactics to distract from giving an answer. Please answer the question that was put to you, and please stay on topic, as I am doing as per request from the moderator. Cheers.
Derivman

 

[A Dashing Blade]

Confusion raging in ADB Mansions at the moment, thought the subject of this thread was the coffee market?

(btw, has Derivman answered a direct question yet?)