Sounds logical to me.
Buying/Selling Options
- Thread starter pcgeek86
- Start date
I see this debate is still going strong. LOL. BTW, for those of you optionetics people who are still wandering over here, I have a favor to ask you. This will put this subject to rest once and for all. Go forth into the new year and ask your beloved Alex Mendoza or your charmed Scott Kramer to provide you with one actual trade, just one, out of the thousands I'm sure they have made, that demonstrate the collar outperforming it's synthetic counterpart. Just one trade. I'm sure these guys have thousands of trades they could show, but I just want to see one. I have 6 years of historical options data. I will pull up the quotes and will run them side by side.
Alex continues to use the phrase put/call parity breaking down incorrectly. Kind of scary that this guy is actually giving seminars. Put/call parity cannot break down after the fact. In fact, here is a little litmus test for you to see if put/call parity is actually breaking down. At the time of this so called breakdown, you should be able to go into the market at that precise time and put on a trade and lock in an arb for a risk free profit. That is how you know put/call parity is breaking down. If you cannot execute the arb, then it didn't breakdown. That's about as simple as I can make it for you.
Of course I know Alex Mendoza and Scott Kramer don't actually trade so my challenge for any of you Optionetics people to have them provide you with a trade was merely a slap in the face. Oh yeah, Happy New Year!!!!
Alex continues to use the phrase put/call parity breaking down incorrectly. Kind of scary that this guy is actually giving seminars. Put/call parity cannot break down after the fact. In fact, here is a little litmus test for you to see if put/call parity is actually breaking down. At the time of this so called breakdown, you should be able to go into the market at that precise time and put on a trade and lock in an arb for a risk free profit. That is how you know put/call parity is breaking down. If you cannot execute the arb, then it didn't breakdown. That's about as simple as I can make it for you.
Of course I know Alex Mendoza and Scott Kramer don't actually trade so my challenge for any of you Optionetics people to have them provide you with a trade was merely a slap in the face. Oh yeah, Happy New Year!!!!
for an "anti ad hominem"....Chinese whispers? seems rather insulting to the Chinese? :eek:
There is nothing wrong with trading ratio spreads or BWB. I use to trade them a lot myself. My beef with JL Lord in his book was how he was selling them. And probably how Optionetics sells them as well. This guy wrote a book telling newbies about how little risk it is to trade naked index options. Of course that in it's own right is laughable.
He further went on about how easy it would be to hedge such a position if the market were to drop suddenly. He would say things like, " don't worry, your short strikes are so far out of the money, they are plenty safe, you will have plenty of time to hedge them". LOL. I'm dead serious, the guy said that.
Now this may or may not be true, depending on the situation, but what about the cost of that hedge? LOL. Yeah, I'm sure those puts are going to be reaaaaaally cheap during a market crash. LOL.
See, there is a similarity here with JL Lord and with optionetics. It's not so much what they say, but how they say it. I have no issues with ratio spreads, you just need to understand they are one of the riskiest strategies you can put on. I have no issues with collar trades except they seriously underperform their synthetic counterpart. If people would just be honest and state these facts instead of preying on newbies that they have discovered something totally new.
This JL Lord guy actually described this ratio spread as a floor trader secret!!!!! What is he smoking? Ratio spreads are discussed in every single options book out there from Natenburg to Macmillan. There is nothing new there. He uses language like, "floor traders don't want you to know this or know that" or "I'm finally breaking the silence as a former floor trader to reveal this strategy to you". I mean, come on guys, this is a joke.
And Optionetics pulls this same crap because truth be told, it's a very effective sales technique. It gets everyone excited. When people are losing money, they don't want you to teach them strategies they have already used in the past, that won't sell. You have to go to them and tell them you have something new, something different. That is how you get their credit card out of their wallet.
Hey Steve, chill out man. We have this guy Steve that is bashing ET over on the optionetics board. Steve, relax man. You are going to blow a gasket. And here's a little hint for you Steve on that graph you posted. Check your prices again, your synthetic is off. LOL.
According to your prices you don't even need to put the collar on, you can execute a risk free arb on the Dec 90 call. Man, and I thought the days were over where a retail guy can hit bids and lift offers and execute a risk free trade. LOL. Free money, Ka-chingo!!!!!
According to your prices you don't even need to put the collar on, you can execute a risk free arb on the Dec 90 call. Man, and I thought the days were over where a retail guy can hit bids and lift offers and execute a risk free trade. LOL. Free money, Ka-chingo!!!!!
Hi everyone. In the interest of full and honest disclosure, let me say that I post on the Optionetics Board using the handle, âBorankinâ. It is my posting on the Optionetics Board which tc99m extracted and placed here. I have no problem with that. However, in view of the conclusion he expressed immediately under that quote, I feel that compelled to state certain things for the record.
1. Actually it has been more than 5 years. I have posting there since about 1998.
2. I first took the Optionetics course in November 1997, and have taken many free repeats since that time.
3. Other than the courses referred to in #2 above, I have not taken any other Optionetics courses.
4. I am NOT an Optionetics person. I PROUDLY LOOK UPON MYSELF AS MY OWN PERSON.
5. Tc99m is somehow attempting to make a point out of the fact that I have been posting on the Optionetics boards for so many years and have made an inordinate number of postings. Iâm not exactly sure what the gentlemanâs point is. One thing for sure is that I hope that he is not implying that my asking questions and indicating a willingness to learn in that extracted posting, is an indication of a lack of knowledge.
6. Finally, the other night, just before the plug was pulled on Chicago Trader, he and I were engaged in a pleasant conversation involving shorting stock and purchasing callsâ¦one of my very favorite strategies.
7. The only thing I care to add here regarding the Optionetics decision to take the action regarding Chicago Trader, is to say that I think it was inevitable and would have happened real soon anyway. Personally, I was disappointed because I really enjoy a spirited debate, especially among two people who know what they are talking about.
The beauty of options is that we all have so much to learn. It is a never ending academic subject. Kind of reminds me of a statement made by future Hall of Fame pitcher, Greg Maddux, when asked if he knew all there was to know about pitching. He responded by saying that every time he felt he had pitching figured out, someone parks one about 20 rows up in the left field stands.
Best wishes to all.
1. Actually it has been more than 5 years. I have posting there since about 1998.
2. I first took the Optionetics course in November 1997, and have taken many free repeats since that time.
3. Other than the courses referred to in #2 above, I have not taken any other Optionetics courses.
4. I am NOT an Optionetics person. I PROUDLY LOOK UPON MYSELF AS MY OWN PERSON.
5. Tc99m is somehow attempting to make a point out of the fact that I have been posting on the Optionetics boards for so many years and have made an inordinate number of postings. Iâm not exactly sure what the gentlemanâs point is. One thing for sure is that I hope that he is not implying that my asking questions and indicating a willingness to learn in that extracted posting, is an indication of a lack of knowledge.
6. Finally, the other night, just before the plug was pulled on Chicago Trader, he and I were engaged in a pleasant conversation involving shorting stock and purchasing callsâ¦one of my very favorite strategies.
7. The only thing I care to add here regarding the Optionetics decision to take the action regarding Chicago Trader, is to say that I think it was inevitable and would have happened real soon anyway. Personally, I was disappointed because I really enjoy a spirited debate, especially among two people who know what they are talking about.
The beauty of options is that we all have so much to learn. It is a never ending academic subject. Kind of reminds me of a statement made by future Hall of Fame pitcher, Greg Maddux, when asked if he knew all there was to know about pitching. He responded by saying that every time he felt he had pitching figured out, someone parks one about 20 rows up in the left field stands.
Best wishes to all.
Mav - I think he believes the process in selecting the ratio spread or BWB is a trade secret as opposed to the strategy itself.
I have read the book also and was wondering what your thoughts were on this selection process.
It looks like the great collar debate is continuing on optionetics.
G'Day Borankin!
OTM
I have read the book also and was wondering what your thoughts were on this selection process.
It looks like the great collar debate is continuing on optionetics.
G'Day Borankin!
OTM
Mav, I've got the book in question and it NEVER advocates a ratio spread for the simple reasons of margin and theoretical unlimited risk. It advocates a bwb, iow a ratio spread hedged with a further otm long option.
daddy's boy
Happy New Year Borankin! And no, I don't mean that in the same way as Scott Kramer. LOL.
The selection process in the book was pretty simple. He would go down as far as he could to still get a credit. That was his magic level. This is usually how most guys trade the ratio spread. I really opened up a can of worms over there on the Optionetics boards. I've never seen so much action on a discussion of collars. LOL.
Actually, he does recommend the ratio spread for the more risky traders. The BWB was for the more conservative traders. He does mention the margin is high for the ratio spread but also said it was only for the more capitalized and more experienced traders.
The problem of course is his BWB trades are in theory just as risky as the guy is leaving a huge gap between the ratio spread and the extra wing that locks up the risk. Only under an Armageddon scenario does the BWB really outperform the ratio spread.
Again, i'm not trying to knock the strategy as it is neither a good nor a bad strategy, my beef with him is how he sells it. BWB trades as well as ratio spreads are not low risk trades and they certainly can lose you a lot of money. And the upside most of the time is little to nothing. As long as the trader is aware of this, there are no issues.