There is no free lunch. There's no simple mechanical strategy in options that has decent long-term risk/reward characteristics. That's not to say that there aren't times when you can buy cheap options and/or sell expensive ones, but those aren't gonna be no-brainer trades.
Global Macro Trading Journal
- Thread starter Daal
- Start date
Options are equivalent to positions in the underlying paired with certain mechanical stop/entry/re-entry and re-balancing rules.
For those who believe that options are a superior means to establishing long-term positions with a defined max loss because you won't get blown out of a position in the underlying as your stops get hit again and again: that's what you pay the premium for if you go for the option alternative. Don't forget you can always re-enter the underlying at an adverse price once a stop gets hit, although this is mentally hard for most traders as they mourn over the whip-saw loss.
IMO neither strategy is better or worse than the other. Just a matter of style and personal preference.
For those who believe that options are a superior means to establishing long-term positions with a defined max loss because you won't get blown out of a position in the underlying as your stops get hit again and again: that's what you pay the premium for if you go for the option alternative. Don't forget you can always re-enter the underlying at an adverse price once a stop gets hit, although this is mentally hard for most traders as they mourn over the whip-saw loss.
IMO neither strategy is better or worse than the other. Just a matter of style and personal preference.
That's actually emphatically untrue... Or rather it's only true in a stylized Black-Scholes framework where one assumes mkt completeness (for tractability). In fact, mkts are nowhere near that, which means that there's all sorts of not easily quantifiable liquidity juice in options that the underlying doesn't have.
Again, I don't know enough to be assured of this, but with a stock like BAC essentially in free fall, wouldn't put options be relatively more expensive than the calls.
I'm not sure how my strategy of betting on a major bounce in U.S. financial shares got turned into getting on board with the panic monkeys out there and making an expensive bet on further collapse.
Again, just like negative carry shouldn't be enough to turn anyone away from a good trade, high vols alone are not enough reason not to buy options.
Plan for today is to hope for a big NFP number and the unload most of what I have that is positioned for a move higher into a strong open. Will also use the opportunity to reload my shorts on the AUD. That's the plan.
Quote from ralph00:
Again, I don't know enough to be assured of this, but with a stock like BAC essentially in free fall, wouldn't put options be relatively more expensive than the calls.
I'm not sure how my strategy of betting on a major bounce in U.S. financial shares got turned into getting on board with the panic monkeys out there and making an expensive bet on further collapse.
Again, just like negative carry shouldn't be enough to turn anyone away from a good trade, high vols alone are not enough reason not to buy options.
Plan for today is to hope for a big NFP number and the unload most of what I have that is positioned for a move higher into a strong open. Will also use the opportunity to reload my shorts on the AUD. That's the plan.
Its been months you have been using options to be on pretty much anything even though you said you don't know much about them, as if they had some kind of innate advantage
I'm trying to be a bit modest. I know plenty about them. I'm using them not because they have some innate advantage but because I can take a larger position and not worry so much about the swings in prices.
Maybe it's beginners luck, but the results speak for themselves (I would also note the whopper of a winner on those Euro$ calls, that trade started in 2009, so it's been 2 really good years of adding options to my trading mix).
What do you peeps think about yen here? Is there an expectation of some sort of intervention sooner rather than later? I confess to getting a bit excited and getting long a wee bit of NOKJPY.