Do Option Sellers Have a Trading Edge?

xelite777 said:
Slightly off topic but here it is : some option software can supposedly find (and profit from) "mispriced" (over valued, under valued) options in real time using their respective volatility skew graphs.

Can anyone comment on that?
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Trading "mispriced" options is not an edge. An "over valued" option can rise in value and an "under valued" option can fall in value.

:)
 
xelite777 said:
Drownpruf, your aggressive attitude towards board members is absolutely amazing, relax or you are going to have a heart attack one day.
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I do believe that Drownpruf's aggressive attitude is "roid rage". :(
 
FXforex said:
Trading "mispriced" options is not an edge. An "over valued" option can rise in value and an "under valued" option can fall in value.

:)
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Sure, but apparently some traders swear that it is possible to profit from mispriced options, here is one of them:

http://www.moneyshow.com/articles.asp?aid=OptionsIdea-19436

From the article:
"This likely sounds crazy in the day and age of computers, but up until about 2003, floor traders spent a majority of their floor time looking up at the option screens and converting calls into puts and vice versa. If the trader found a call or a put that was mispriced, the trader would then trade that option. The idea was the trader was trying to lock in "edge." "Edge" is a term professional traders use for the value the trader enters an option trade above or below its theoretical value. "
 
xelite777 said:
Typical Drownpruf's response.

This guy does not have a single clue on how I usually use the option skew and yet he is here lecturing us in every single thread.

Drownpruf, take five (or your pills), you are becoming EXTREMELY annoying.
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Do you trade the skew like you trade the Forex?
 
xelite777 said:
And yet you are commenting. :p

You are trading options Martin?
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I do trade options, among other things, yes...
xelite777 said:
Sure, but apparently some traders swear that it is possible to profit from mispriced options, here is one of them:

http://www.moneyshow.com/articles.asp?aid=OptionsIdea-19436

From the article:
"This likely sounds crazy in the day and age of computers, but up until about 2003, floor traders spent a majority of their floor time looking up at the option screens and converting calls into puts and vice versa. If the trader found a call or a put that was mispriced, the trader would then trade that option. The idea was the trader was trying to lock in "edge." "Edge" is a term professional traders use for the value the trader enters an option trade above or below its theoretical value. "
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Why don't you explore and try to exploit some of these put-call parity "mispricings"? It's the only way you'll be able to know for sure what's going on out there in this inefficient options mkt...
 
Of course if you're a good disciplined trader you can trade options and for example as Price Headley once suggested when selling strangles if premium trebles on one side,close out and have a rethink. Even a fund manager could cope with this, and yet they fail every year relying on the retail trader being scared about 'complex' products.
It all comes down to discipline-and despite knowing when and what to do, I have on several occasions failed to act correctly. I'm still here though
 
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