For Directional traders

[palawan]

Quote from acronym:

...Basic buy, (call or put)plain directional strategies get a bum rap in my opinion, and i say this on the basis of outrageously complex option strategies here.
Not everyone is clever enough to identify a condor, a butterfly, or whatever ridiculous names these things have, and take advantage of these opportunities.
Diversify, off of signals provided by youre weekly futures chart, and ignore any options beyond basic buying puts or calls. Just my opinion.
Specialists, flame away!!!!!!!

I think we're in agreement and this thread hasn't dealt with any of the complex options strategies out there.

So, no flames from me...

 

[wOg]

Quote from acronym:

Option traders, aaaaarghhh!!
Its like the backtesting gamma/neutral bell curve optimisation bizarro world nightmare from hell, here.
Just throwing this out there, but with a halfways decent charting method, surely trading actual cme products, rather than the share (despite its performance) on a "directional" basis would have produced better results, throughout?
You were talking about basic, call or put ideas, overall, unless im mistaken, (option specialists, flame away, someone might learn something_hopefully me) .
Basic buy, (call or put)plain directional strategies get a bum rap in my opinion, and i say this on the basis of outrageously complex option strategies here.
Not everyone is clever enough to identify a condor, a butterfly, or whatever ridiculous names these things have, and take advantage of these opportunities.
Diversify, off of signals provided by youre weekly futures chart, and ignore any options beyond basic buying puts or calls. Just my opinion.
Specialists, flame away!!!!!!!

I don't want to take any of your fire. But I tend to agree with you.

I'm a strictly directional options buyer and proud of it. If the market is going up, then I want to be long. If it's going down, then I want to be short. If I don't have a bead on which way it's going, then all the fancy options strategies in the world aren't going to mean much to me. I'll wait. Or find something else.

Since a few book names have been tossed around, let me throw Price Headley's Big Trends in Trading out there. He makes some excellent points about directional options trading and volatility.

Good luck.

 

[palawan]

Quote from wOg:

I'm a strictly directional options buyer and proud of it.
Good luck.

Cool. Glad to know there's Chagi and WOg and others who see there's a place in the markets for being long options to leverage one's idea about a direction on the underlying.

I think you mentioned the best weapon that we can have to overcome the disadvantages inherent in being long options - "we have to be patient and selective or do nothing at all"

Good luck

 

[eagerbeaver]

Something I haven't seen mentioned in this thread -- buying options is now the contrarian play!!! Think about it -- everybody and his Great Aunt Mabel is learning "can't miss" options "secrets" based on premium selling from TOS, Optionetics, TradingMarkets (gag me), etc. The smart money, they're told, isn't buying options, but selling them. Partly as a result, options are as cheap as they've ever been (or cheaper) because everybody's so busy selling them, mostly to the mm's, thus driving down the premiums (yes, I know, there's more to it than that, but this is a big piece of the puzzle). As a result, these option seminar grads are getting very little return for the risk they're assuming.

Confession: I know, because I was one of them. Buying options was for suckers, this much I knew. Yessir, I was going to leap over the learning curve and join the "smart money" festival of backspreads, straddle-strangle swaps, dazziling double diagonals, and glorious spread-winged short iron condors.

Guess what? I consistently lost money, in part because today's low premiums offer almost zero margin for error (or amateurism, depending on your point of view).

Recently, I decided to stop paying off my broker's vacation home and start thinking for myself. The result? Directional plays, long puts or calls, on stocks. That's all I've been doing for the past six weeks.

Yes, this is a very "unhip" way to make money, as the "smart money" tells us that only ignorant rubes buy options. Oh, well. Call me "unhip." So unhip, I'm pretty sure I'm not fit to post in the company of "elite" traders.

By the way, did I mention that I've logged seven of these dum-dum trades in the past six weeks, and every one of them has been profitable?

 

[Chagi]

Quote from palawan:

Cool. Glad to know there's Chagi and WOg and others who see there's a place in the markets for being long options to leverage one's idea about a direction on the underlying.

I think you mentioned the best weapon that we can have to overcome the disadvantages inherent in being long options - "we have to be patient and selective or do nothing at all"

Good luck

One more point I would like to make is that options are generally touted academically as a risk management tool. I think the reason you see people talking about complex options strategies is that they are attempting to keep their risk as low as possible while simultaneously keeping their return potential as high as possible.

I'm starting a class on this in September, so I'll report more on this aspect of things as I wade through the material.

 

[Chagi]

Quote from eagerbeaver:

Something I haven't seen mentioned in this thread -- buying options is now the contrarian play!!! Think about it -- everybody and his Great Aunt Mabel is learning "can't miss" options "secrets" based on premium selling from TOS, Optionetics, TradingMarkets (gag me), etc. The smart money, they're told, isn't buying options, but selling them. Partly as a result, options are as cheap as they've ever been (or cheaper) because everybody's so busy selling them, mostly to the mm's, thus driving down the premiums (yes, I know, there's more to it than that, but this is a big piece of the puzzle). As a result, these option seminar grads are getting very little return for the risk they're assuming.

Confession: I know, because I was one of them. Buying options was for suckers, this much I knew. Yessir, I was going to leap over the learning curve and join the "smart money" festival of backspreads, straddle-strangle swaps, dazziling double diagonals, and glorious spread-winged short iron condors.

Guess what? I consistently lost money, in part because today's low premiums offer almost zero margin for error (or amateurism, depending on your point of view).

Recently, I decided to stop paying off my broker's vacation home and start thinking for myself. The result? Directional plays, long puts or calls, on stocks. That's all I've been doing for the past six weeks.

Yes, this is a very "unhip" way to make money, as the "smart money" tells us that only ignorant rubes buy options. Oh, well. Call me "unhip." So unhip, I'm pretty sure I'm not fit to post in the company of "elite" traders.

By the way, did I mention that I've logged seven of these dum-dum trades in the past six weeks, and every one of them has been profitable?

That is actually a very interesting theory that you have. I'm actually somewhat suprised to hear that the "dumb money" is involved in selling options vs. buying, partially because I would think that the strategies involved would be more complex than simply buying puts and calls.

Something that I find interesting about the options market is that there doesn't seem to be a great deal of attention paid to these derivatives compared to the underlying stocks. It's almost as if many traders aren't aware that options even exist, or at least aren't familiar with how they work?

 

[palawan]

Quote from eagerbeaver:

Something I haven't seen mentioned in this thread -- buying options is now the contrarian play!!! Think about it -- everybody and his Great Aunt Mabel is learning "can't miss" options "secrets" based on premium selling from TOS, Optionetics, TradingMarkets (gag me), etc. The smart money, they're told, isn't buying options, but selling them. Partly as a result, options are as cheap as they've ever been (or cheaper) because everybody's so busy selling them, mostly to the mm's, thus driving down the premiums (yes, I know, there's more to it than that, but this is a big piece of the puzzle). As a result, these option seminar grads are getting very little return for the risk they're assuming.

Confession: I know, because I was one of them. Buying options was for suckers, this much I knew. Yessir, I was going to leap over the learning curve and join the "smart money" festival of backspreads, straddle-strangle swaps, dazziling double diagonals, and glorious spread-winged short iron condors.

Guess what? I consistently lost money, in part because today's low premiums offer almost zero margin for error (or amateurism, depending on your point of view).

Recently, I decided to stop paying off my broker's vacation home and start thinking for myself. The result? Directional plays, long puts or calls, on stocks. That's all I've been doing for the past six weeks.

Yes, this is a very "unhip" way to make money, as the "smart money" tells us that only ignorant rubes buy options. Oh, well. Call me "unhip." So unhip, I'm pretty sure I'm not fit to post in the company of "elite" traders.

By the way, did I mention that I've logged seven of these dum-dum trades in the past six weeks, and every one of them has been profitable?

Way to go! Speaking from experience (and not necessarily something I follow as shown by my recent goog gamble play), when running good, you don't want to start becoming complacent. You have to be just as vigilant about being selective about each and every potential option trade... Beginner's luck for traders is partly because there's so much more effort put in to the first trades

That's pretty good info what you're saying there... If the people on the other side of the trades are "ordinary" guys who just graduated from seminars and not the usual MM's/specialists, that's gonna be good news for people who are buying calls/puts. The VIX and VXN are extremely low, though, so it's just the whole market that's been behaving so "orderly" and the premiums are low as well for most of the individual stocks.

Good luck.

 

[eagerbeaver]

oh lord, given the amount of money i've lost (i'm sorry, i mean spent in "tuition") compacency is not an option (pun intended). and my recent streak is just that, a streak. but it's interesting to note that i never, ever had such streaks when i was trading spreads.

now, don't get me wrong, i'm not saying that the only people who sell premium are ma and pa kettle, but think about it...all those seminars, all those thousands and thousands and thousands of folks piling in, hearing the same thing, being told that they can sell premium to the chuckleheads who don't know any better -- well, hell, if THEY know about it, who do they think these no-nuthins' could possibly be?!

No question, the premium-selling game was the smart end-run as recently as a year to 18 months ago. But the retail boom in options trading has changed the landscape, and I'm a-changin' with it.

 

[Chagi]

Going back to GOOG, I was just taking a look at their chart, and I think it's primed for a downwards correction.

 

[palawan]

Quote from Chagi:

Going back to GOOG, I was just taking a look at their chart, and I think it's primed for a downwards correction.

that would be cool... there's lots of money to be made as goog has a long way to go. i don't see the beginning of a crash on goog, yet, but i'm ready to put a long-term put position on them when i do. Good Luck.