I'm only refering to if/when more than 80% of the stocks are put to me.
It's unlikely, as i don't put them all in one month.
But it's certainly still a possibility if the downturn were prolonged.
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Delta neutral or directionality: which one do you pick?
- Thread starter ferrycorsten
- Start date
It's unlikely, as i don't put them all in one month.
But it's certainly still a possibility if the downturn were prolonged.
I think you certainly know what you are talking about.Quote from cdcaveman:
Just stop... put master you make even me sound like I know what I'm talking about..
But that does not neccessarily make one a succesful/profitable trader over time.
Theory does not always win, when it clashes with reality.
Reality has a history of ruining many theorists over the years.
Hence my focus on probability vs potential and recovery vs potential, and discipline vs potential, ect....
Quote from Put_Master:
My idea of hedging, is the fundamental and technical analysis I do BEFORE I consider initiating a trade.
By focusing on a trades "potential for recovery" BEFORE I initiate the trade, I'm less likely to have issues with it AFTER i intiate the trade.
As for my R/R, I don't consider R/R in a vacuum.
I consider it in the "context" of the PROBABILITY of the trade being successful.
For me it's R/R/P
wow. So you define a hedge as your trade selection. That's a first.
The point is that the risk is inversely proportional to the prob. If the strip of volatility is flat, i.e. there is no skew, then you're not trading at an edge on vol. You exchanging one risk (delta) for another (speed). You like these pennies simply because they're deep but not because there is any legitimate edge.
You had a trade go bad and you talk about technicals, price support, etc. What good are these awesome technicals when it goes tits-up for a 5x loss of the credit?
You would not be selling these pennies if you had anything approaching an edge on direction. You sell this stuff and convert to CCs to avoid taking a loss. It's an ego stroke, pure and simple.
Quote from atticus:
wow. So you define a hedge as your trade selection. That's a first.
The point is that the risk is inversely proportional to the prob. If the strip of volatility is flat, i.e. there is no skew, then you're not trading at an edge on vol. You exchanging one risk (delta) for another (speed). You like these pennies simply because they're deep but not because there is any legitimate edge.
You had a trade go bad and you talk about technicals, price support, etc. What good are these awesome technicals when it goes tits-up for a 5x loss of the credit?
No.
I don't define hedge as my trade selection.
I define it as the "process" that goes into the "totality" of the trade structure.
It's about the "process"
NTES is an example of what occured when i strayed from the process, substituting a hoped for temporary naked call.
(I picked up 4 points credit on NTES, between the put and calls. But I'm currently still in the hole.)
I'll discuss it later.
Really gotta go.
Quote from Put_Master:
No.
I don't define hedge as my trade selection.
I define it as the "process" that goes into the "totality" of the trade structure.
It's about the "process"
NTES is an example of what occured when i strayed from the process, substituting a hoped for temporary naked call.
(I picked up 4 points credit on NTES, between the put and calls. But I'm currently still in the hole.)
I'll discuss it later.
Really gotta go.
You're the master of semantics.
Quote from Put_Master:
My idea of hedging, is the fundamental and technical analysis I do BEFORE I consider initiating a trade.
Quote from atticus:
You like these pennies simply because they're deep but not because there is any legitimate edge.
Actually they may not be deep if one factors volty in, i.e. a 30% OTM may not be viewed as deep for a 90% volty stock (SPY has below 16% lately, so a ratio of more than 5 times). I asked in another thread how does the OTM safety cushion is measured in absolute terms-- the response was some unrelated youtube urls and some other stuff.
Quote from Put_Master:
I'm only refering to if/when more than 80% of the stocks are put to me.
It's unlikely, as i don't put them all in one month.
But it's certainly still a possibility if the downturn were prolonged.
I thought you sold puts unlevered? If 80% of your stocks are put to you then you have to pay margin interest? So you are running more than cash secured? How are you different than the spread traders you tirade against?
<<< The point is that the risk is inversely proportional to the prob. If the strip of volatility is flat, i.e. there is no skew, then you're not trading at an edge on vol. You exchanging one risk (delta) for another (speed). You like these pennies simply because they're deep but not because there is any legitimate edge. >>>
What you refer to as pennies are annualized % returns in the 14 - 16% area. My most recent trade of $10 ALLT was 16 - 17%.
It's just that I trade strikes closer to $30 than $300.
I don't like those trades because they are deep.
Some are deep and some are shallow.
I like them because they are "high probability" trades.... for various reasons.
My "edge".... is the high "probability" of the trade being successful.
The % otm is only one of many reasons for that highly probable outcome.
As I stated, it's about the "totality of the process". Not individual items that comprise the process.
<<< You had a trade go bad and you talk about technicals, price support, etc. What good are these awesome technicals when it goes tits-up for a 5x loss of the credit? >>>
The issue is not the dollar loss compared to the credit.
The issue is the dollar loss compared to the cash at risk.
Comparing loss to credit lacks context.
It makes a difference whether that 5 times credit loss represents 40% of my investment risk,... or closer to 4%.
Investing is about being disciplined when managing "probability and risk".
We do that via the "process and criteria" we use, to enhance the probability of the outcome we desire.
It's just that we all take different paths to get there.
Some seem to think if a small % of trades goes bad, there is a problem with the strategy.
Meanwhile, I don't see a lot of others sharing their trades.
What you refer to as pennies are annualized % returns in the 14 - 16% area. My most recent trade of $10 ALLT was 16 - 17%.
It's just that I trade strikes closer to $30 than $300.
I don't like those trades because they are deep.
Some are deep and some are shallow.
I like them because they are "high probability" trades.... for various reasons.
My "edge".... is the high "probability" of the trade being successful.
The % otm is only one of many reasons for that highly probable outcome.
As I stated, it's about the "totality of the process". Not individual items that comprise the process.
<<< You had a trade go bad and you talk about technicals, price support, etc. What good are these awesome technicals when it goes tits-up for a 5x loss of the credit? >>>
The issue is not the dollar loss compared to the credit.
The issue is the dollar loss compared to the cash at risk.
Comparing loss to credit lacks context.
It makes a difference whether that 5 times credit loss represents 40% of my investment risk,... or closer to 4%.
Investing is about being disciplined when managing "probability and risk".
We do that via the "process and criteria" we use, to enhance the probability of the outcome we desire.
It's just that we all take different paths to get there.
Some seem to think if a small % of trades goes bad, there is a problem with the strategy.
Meanwhile, I don't see a lot of others sharing their trades.
I always trade directional options (I must have a direction judgement to trade). at the money rarely or out of money options most time, just buy calls or puts.
neutral is the sure one to lose. at any moment, market has direction. even in a dead no-where market. if you zoom in a little bit, how about 10' second chart, there is always trend there. of course technically speaking, hard to catch this kind of 10seconds of trend. but to me, at any moment, market has direction.
in option, if volume is too light, hard to spot trend. I trade SPY, AAPL, FB, and many other others with nice daiy trending chaerestics plus good enough option volume.
my timeframe is 48hours to 2weeks. intervals is 3 to 15minutes.
I am very successful in option trading.
if you do not have a direction, then that means you have no idea what you are doing.
directions are the drive behind any move. since diirection just last several minutes within is hard to catch, you should never try to do that. the easiest ones are those which last hours or days, weeks or days. so all focus should be on the bigger direction the better. big direction means it lasts longer.
need to add, in option, you may try to catch a five minute direction, particularly toward expiration, very good directional move there, worth try, particularly last 30minutes of friday market closing.
neutral is the sure one to lose. at any moment, market has direction. even in a dead no-where market. if you zoom in a little bit, how about 10' second chart, there is always trend there. of course technically speaking, hard to catch this kind of 10seconds of trend. but to me, at any moment, market has direction.
in option, if volume is too light, hard to spot trend. I trade SPY, AAPL, FB, and many other others with nice daiy trending chaerestics plus good enough option volume.
my timeframe is 48hours to 2weeks. intervals is 3 to 15minutes.
I am very successful in option trading.
if you do not have a direction, then that means you have no idea what you are doing.
directions are the drive behind any move. since diirection just last several minutes within is hard to catch, you should never try to do that. the easiest ones are those which last hours or days, weeks or days. so all focus should be on the bigger direction the better. big direction means it lasts longer.
need to add, in option, you may try to catch a five minute direction, particularly toward expiration, very good directional move there, worth try, particularly last 30minutes of friday market closing.
Generally speaking, if more than 80% of my stocks are put to me, I'll be on margin.Quote from newwurldmn:
I thought you sold puts unlevered? If 80% of your stocks are put to you then you have to pay margin interest? So you are running more than cash secured? How are you different than the spread traders you tirade against?
But it depends on WHEN during the investment cycle that occurs.
If it occurs early or mid point in a monthly cycle, when I'm not yet fully invested, then I can own 100% and not be on margin.
If it occurs late, when I'm more than fully invested, then I'll be on margin.
I'm different than the spread trader who only uses spreads, because I can buy 100% of my deteriorating stocks, even if fully invested on margin.
Assume 10 - 20% ITM.
The average spread trader who uses average strikes of $40 - $60, and is fully invested, can only buy about 5 - 10% of his deteriorating ITM stocks.
Even less if his strikes are higher.
The rest of his trades and cash are gone. Wiped out.