How did you learn the intricate rules of trading Futs and Opts ?

[traderwald]

Hi guys,

How did you learn the intricate rules of trading Futs and Opts ? Please answer the poll as well as any detail you would have here.

 

[Scataphagos]

Nothing intricate about trading futures in the nearby contract.

In options, also nothing intricate in trading the nearby. Options are basically a bet from the seller that the price won't move "__________ amount" before expiration so that they can keep all of the premium. Buyers are betting the issue will move "more than that in the preferred direction + the cost of the premium". There is the consideration that some options are mispriced... over or under. It IS intricate to try to determine that. There are computer models which attempt to do that very thing.

Hedging trades may seem "intricate" but they're mostly just independent bets on each separate leg/date. Those types of plays are intended to capture a higher percentage of wins for the play, but for smaller money (sometimes so small, barely worth the effort). That said, some options players do well with having LOTS of positions much of the time playing for a large number of small wins. That's beyond beginners.

What you need to do as a trader is to learn "Price Technical Analysis". If you can get good at that, you can trade anything and everything.... stocks, bonds, commodities, currencies, options, mop squeezers.

KISS as always.

 

[Wheezooo]

Unfortunately, options are the king of all financial products for the "Ah-ha" moment. No matter how well you think you understand things, until you see it, you don't.

If I had to pick the one thing that advanced my understanding more than anything else... I would ask my mentor questions almost every day, and he would respond every time with "go home, figure it out, and tell me the answer tomorrow." Every question led to another question, and every time I was met with the same response.

A year or so later, he left for another firm and was now trading against me in the same pit, when he confided in me that he never knew the answers to most of my questions, and thanked me for how much I taught him about options.

No one's going to teach you what you need to know, you will learn a lot more punching your way through your questions, and even if I somehow melded every piece of knowledge I have about trading to you, there is no guarantee you will perform positively.

Futures... up, down, right, wrong... not much more to it than that, until you get into time spreads.

 

[tommcginnis]

Futures... up, down, right, wrong... not much more to it than that, until you get into time spreads.

So, from Wikipedia, look up:

Futures = f[basic math of equation(s); backwardation; contango]

...and you'll pretty much have it.

Options:
• profit graphs {"at expiry" and "as entered"}
• Black Scholes Merton and BSM "greeks" delta, theta, gamma, vega, and being able to graph each of them with respect to time and to market price of the underlying.

That's it!
Though, as a precursor, it's perhaps *most* important to leave *linear* thinking at the door, and be prepared for the radical acceleration/deceleration that comes from exponential growth/decay.

 

[nooby_mcnoob]

he confided in me that he never knew the answers to most of my questions

I do the same thing with my son!

 

[Baozi]

find out who are the smart guys on ET and pester them with questions.

 

[ironchef]

find out who are the smart guys on ET and pester them with questions.

And you know you are getting close to the correct answer when they stop responding.

 

[Baozi]

And you know you are getting close to the correct answer when they stop responding.

"Sorry I can't get into details.."

 

[murray t turtle]

Unfortunately, options are the king of all financial products for the "Ah-ha" moment. No matter how well you think you understand things, until you see it, you don't.

If I had to pick the one thing that advanced my understanding more than anything else... I would ask my mentor questions almost every day, and he would respond every time with "go home, figure it out, and tell me the answer tomorrow." Every question led to another question, and every time I was met with the same response.

A year or so later, he left for another firm and was now trading against me in the same pit, when he confided in me that he never knew the answers to most of my questions, and thanked me for how much I taught him about options.

No one's going to teach you what you need to know, you will learn a lot more punching your way through your questions, and even if I somehow melded every piece of knowledge I have about trading to you, there is no guarantee you will perform positively.

Futures... up, down, right, wrong... not much more to it than that, until you get into time spreads.

%%
Unusual teacher WheeZoo; he told you the truth @ last-
I checked the poll box ''text books''[33.3% ].........
But seldom believe polls; i learned much more thru IBD books, IBD newspaper+ P& L notebook.Sorry its a weekly neWspaper; not daily like it was. So '' books '' ;; if you enjoy reading.
What i leaned from my P& L books; like the old trader king said ''no such thing as a cheap option''; + stocks/ETFs are better trenders, for profits, for some.

I like what one female teacher said/snapped to answer questions + she repeated her pattern remark all the time ;; '' look it UP!!,!!!!!''
[ IF you dont know; you look it up],

 

[murray t turtle]

I do the same thing with my son!

%%
Kids or the younger have a big advantage in learning/wisdom;
not just easier to learn when young-most ask plenty of questions I pay attention to kids; a girl about 7, opened a door for me yesterday........................................