High volatility

trdrmac · Jun 23, 2003

Quote from ChrisM:

What`s new on board ? [/B]

Hey Chris, 7% sounds like a good solid month, congrats. I did just a little selling last week of some long postilions. Seems like things started to break down on a couple fronts. However, there is still a lot of put buying and short interest which could add some fuel for a while.

Never did purchase the puts on the Homebuilders, you reminded me of a broken trade I had on a TYC put some time back. After it went against me of course. I still consider the trade compelling on a longer term basis, maybe by selling some calls.

The other trade I am sloshing around is the Rydex Juno Fund which goes inverse to the bond market. After the next rate meeting wednesday, this again seems like a decent trade. Albeit one that might not pay off until rates really start to rise.

Regards,

Mac

ChrisM · Jun 24, 2003

Quote from trdrmac:

Hey Chris, 7% sounds like a good solid month, congrats.

Mac

Mac,

thx so much. Still believe that could make another 2-3%, but I was all over Europe, and before I left I had closed most positions but few of them were still open, while I wanted to test idea of trading and travelling... so I placed orders from Brittanny, Paris and London. And this worked well though.
In recent "Future" edition I have found interesting article regarding hedging options. One of them was calendar spread, selling near ATM versus far ATM, same strike price.
Although the idea is not new, and the concept was not really well analyzed I have found this issue quite interesting. As far as I remember you have been doing this, so maybe I can ask you for some opinion ?

Also, once I`ve been back home, I have checked the news and I`ve found this:

http://www.elitetrader.com/vb/showthread.php?threadid=18246

Interesting. What do you think ?

ChrisM · Jul 2, 2003

Did not want to touch it, while it is a crazy one, but you just can`t find better deal for shorts. Smaller position seems to be happy medium though.

trdrmac · Jul 2, 2003

Hey Chris welcome back from your travels. That would make many Americans envious. One of my business associates is going to France next week. I told him he needed to go to the Crazy Horse and get his wife a lap dance, but we'll see if that happens. I have also talked with two people, one working in and one back from Italy. They tell me the buildings are incredible.

But for a home body like me, the travel channel is sufficient.

I have not put on any new shorts, people just seem to want to buy right now. My suspicion is that they will be sorry. In the mean time I have been selling some out of the money puts on the index etfs. Right now I am not going out any further than August.

ChrisM · Jul 3, 2003

Quote from trdrmac:

Hey Chris welcome back from your travels. That would make many Americans envious. One of my business associates is going to France next week. I told him he needed to go to the Crazy Horse and get his wife a lap dance, but we'll see if that happens. I have also talked with two people, one working in and one back from Italy. They tell me the buildings are incredible.

But for a home body like me, the travel channel is sufficient.

I have not put on any new shorts, people just seem to want to buy right now. My suspicion is that they will be sorry. In the mean time I have been selling some out of the money puts on the index etfs. Right now I am not going out any further than August.

Hi Mac, good to read you back. But I actually feel like being back home in US, not Europe

)))
I like this Crazy Horse idea and if you don`t mind, I would like to pass this offer to my wife, she has a great sense of humor so who knows what happens on the next visit ? She is now back in US with my son, coming here soon.
I just have been invited to Forex seminar, presented few of our trading ideas , and there were some questions about forex options. Frankly I know nothing about.
So far I do my trading routine - opening new ones towards expiration. I agree that this month is different than the last one - but each one is unique

ChrisM · Jul 24, 2003

July was not as good as June, relatively flat for me.
I am starting to open calendar spreads to get some experience with them.
I know that you guys traded them. What do you think ?

trdrmac · Jul 26, 2003

Chris,

I took off the last of my speculative longs and replaced them with some calls this month. Personally, I know very little about selling calendar or credit spreads. Usually I sell puts against cash which seems to work consistently. Since I sell though at levels where I would consider buying the returns of late have been miniscule.

Would be curious if you see an advantage of selling a spread on an index product vs selling outright at a lower level. For instance on the q's if I sell 1/2 as many puts hedged against cash is this much different than a full position set up as a credit spread?

Mac

ChrisM · Jul 27, 2003

Quote from trdrmac:

Chris,

I took off the last of my speculative longs and replaced them with some calls this month. Personally, I know very little about selling calendar or credit spreads. Usually I sell puts against cash which seems to work consistently. Since I sell though at levels where I would consider buying the returns of late have been miniscule.

Would be curious if you see an advantage of selling a spread on an index product vs selling outright at a lower level. For instance on the q's if I sell 1/2 as many puts hedged against cash is this much different than a full position set up as a credit spread?

Mac

Mac,

I understand that you sell puts against long cash position ? This works well in neutral and bullish market, but what about bearish ?

The ratio (cash position/option position) gives you different range of profitability. If it is lower, the position is more agressive and vice versa. I use myself lower ones vs full for highly volatile stocks to stay in position in larger trading range. Doing opposite gives you higher returns but downside movements would be more painful.

Hoping I understood you well, if not, do not hesitate to correct me.

Chris

trdrmac · Jul 27, 2003

Quote from ChrisM:

Mac,

I understand that you sell puts against long cash position ? This works well in neutral and bullish market, but what about bearish ?

Well, last year was quite an experience in how not to mange risk. LOL It was also got me thinking a lot about ways to hedge the risk, such as marrying the put.

I think when I get through a few of the books that I am working on I may pick up Options as a strategic investment. It almost seems that I could synthetically do a lot of stuff, with a lot less stress, using options.

Good trading this week.

ChrisM · Jul 28, 2003

Quote from trdrmac:

Quote from ChrisM:

I think when I get through a few of the books that I am working on I may pick up Options as a strategic investment. It almost seems that I could synthetically do a lot of stuff, with a lot less stress, using options.

Good trading this week.

More...

Some time ago I ordered free Option Investigator/Simulator from OIC. Although it is not good for strategy analysis, gives you very nice outlook how 4-dimensional instrument changes during its lifetime. I don`t know whether they still have such materials, but there is no better way than "visualizing" options. Since then you may make all strategies projected by yourself and this is what I would strongly recommend.
Options may be profitable in flat and moving sideways markets but nothing for free, it is the same "trade off" like any other trading.

Thank you and good trading to you too.

Chris