Buying calls for a living and arguing with derivman
- Thread starter Derivman
- Start date
Personally I think it's too rigid to say never. There is a best time and place for every strategy, including selling naked Puts.
The muppets (I'm being generous now) at T2W were selling cheap Vol, when Vol could realistickly only go one-way - UP. They had no concept of the risk(s) involved and so when Vol did spike their Vega risk (and with it margin) went ballistic.
Short naked Puts is a good strategy (IMHO) if one understands and quantifies the risk. Personally, I'm currently short May Footsie Puts (sold at 17.4% IV) but my VaR with 95% confidence is less than 10% of my trading capital, so it's an acceptable risk, for me.
For those who don't know, Derivman & friends margin mushroomed (as in nuclear) from around £20,000 to around £650,000 on a "making Live calls" thread on TW2 recently.
What was particularly sad was the easily disproved "we closed them out last night" claim.
Needless to say, they havn't been back.
Hehehe. Now you really are making me laugh.
There are only two things you can do with options. Buy them & sell them. Simple. You have to understand what you are actually doing when you do either or both at the same time - with respect to your risk (ie:greeks).
I have met hundreds of traders who have dedicated hours to learning 'strategies', rather than to trade options. With monotonous regularity either blow up or bleed to death. Why? because they do not understand the underlying premise of the instrument they are using, so they have no clue how to manage the risk. A la the little time bomb that went off at T2W.
ALL good traders trade POSITIONS, not STRATEGIES. The difference is the former comes from the perspective of a complete acceptance that ultimately we have no idea where the underlying will actually go, only an opinion, the latter usually a conviction that they do, based upon one thing or another.
It is only the knowledge of how options work that will allow you to assess whether or not to go ahead with a position & reliably be able to trade it to profitability as the market has it's way with the underlying. It is only through knowing how to respond to risk as it emerges once a position is on that gives a trader even a chance of consistent profitability.
WRT to your assertions about luck. Unless and until I can be convinced that I have absolute control over everything that happens to and around me, I will continue to side with Taleb, esp given his pedigree (intelligent & educated - aren't you the master of understatement?! LOL). I know many people who have followed the "success" teachings of people like Kyosaki etc etc who will be wildly financially successful the day hell freezes over. And I know others who literally stumbled on great success and wealth (by their own admission!). There just isn't a formula to assured success & as the old saying goes 'sometimes sh!t happens.' - good, bad & ugly. What Taleb is talking about more broadly is our lousy ability to attribute cause to effect. We point to attributes and actions as creating success that a proper statistical analysis of a random population will show simply are not defining factors. And I am not going to argue with Taleb on statistics!
Very well said. I particularly liked the paragraph below !
aye.
I say 'naye' because we'd lose aah's most excellent post below, so far the best bit in this topic:
db
db
Good morning all fellow traders, and all aspiring fellow Option traders. I hope you all had as much an enjoyable day yesterday as myself. I spent two full hours with my instructor, and although I find some of the concepts he mentioned in relation to Options daunting, they were never the less very interesting and my curiosity level has been raised dramatically. I will now answer any posts in relation to the topic of this thread, and I hope today we are not going to see a repeat of the silly and ridiculous antics that were carried out by some members yesterday. We are all here to learn about trading Options, and let that be the most important thing to remember. Cheers.
Derivman
Derivman