Introduction and backround. I think I have a good backround to have success

El OchoCinco said:
Holy crap, award for dumbest post claiming to know something and then citing it completely bass ackwards. Put call parity is....buying the call and selling the put???
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On the contrary, I have traded complex option strategies for years and have never heard of "Put/Call Parity" until sel took my selling iron condor strategy that I recomended to to the PM to task, exalting Put/Call parity and making no sense at all. So I looked it up and here is what Wikipedia says:

From Wikipedia, the free encyclopedia

In financial mathematics, put–call parity defines a relationship between the price of a European call option and European put option, both with the identical strike price and expiry, namely that a portfolio of a long call option and a short put option is equivalent to (and hence has the same value as) a single forward contract at this strike price and expiry. This is because if the price at expiry is above the strike price, the call will be exercised, while if it is below, the put will be exercised, and thus in either case one unit of the asset will be purchased for the strike price, exactly as in a forward contract.

In any regard it is all academic nonsense to me.

So, since I have the honor of winning the dumbest post award, Please, explain to me what it is and why any option trader should care because all of these years I do not seem to have needed to know this.
 
dholliday said:
Hi smallcapgrowth,

First of all, greetings and all of the best to you.

You already have shown traits that (I believe) are necessary for success in trading. The understanding that you need to put in the hours studying. You need to practice and know what you are going to do in all scenarios in advance. You need to follow your rules.

Books that I would put at the top of your list, all by Howard B. Bandy:

Foundations of Trading.

Quantitative Technical Analysis. This is the most important book.

Mean Reversion Trading Systems

These books are most useful for people who are willing to put in the work to learn some programming and testing skills. These book give you access to AmiBroker and Python code.

Subscribe to Stocks and Commodities mag. http://traders.com/. I use it to learn new techniques and get ideas.

Join Meetups in your area. Where I am, Boston has lots of useful meetups. Meet successful and unsuccessful traders. Learn and discuss ideas and sources of useful information.

Look at the Hall of Fame threads in Elite Trader. (people like NoDoji, hint)

Get a platform to test and practice with. There are many that are probably good enough. For testing I like AmiBroker (inexpensive and maybe the best). Free to use Ninja Trader. Others with lots of support; TradeStation, Think or Swim.

Open a brokerage account with a good paper trading system. I use Interactive Brokers as do the majority of experienced traders. The paper trading is really good in my experience. I have often run the same (automated) strategies on both real and paper trading accounts with very similar results. The results pretty much average out for me. I have even had short entries take minutes to hours to execute, the same as my real trading account.

Don't trade with real money until you prove to yourself that your system(s) work. When you start trading with real money, remember you don't have to buy 100 shares. You can buy one or ten, whatever makes sense.

As someone already pointed out, although there are similarities to gambling (by that I mean your style of gambling, which I don't consider "gambling"), there are major differences. Kelly is, in my opinion, not appropriate for position sizing. You will learn a (IMO) much better way in Dr. Bandys books.

There are many way to make money in trading. I am convinced that most can be made to work. Keep in mind that having a diverse group of methods can smooth your equity curve greatly. Also, as you progress, think Market Neutral. I think Wykoff and its derivatives are useful to study.

Online courses. (Lots of programming, statistics, R, etc.)

https://www.coursera.org/

https://www.udacity.com/

https://www.edx.org/

https://www.udemy.com/courses/ (cheap if you wait for email specials. $10 - $15)


Podcasts and Videos

https://www.youtube.com/channel/UCXtFh3dcGQ1wfORL1tZxKrQ

https://www.youtube.com/channel/UCoY3-SzCItjOB9_6JINRXOQ

https://www.youtube.com/channel/UCQH3d17HKuhp-bg_z8ourNQ


For you musical enjoyment

https://www.youtube.com/channel/UCORIeT1hk6tYBuntEXsguLg

https://www.youtube.com/channel/UCbK6S8jFtYZ3UnPhWRIJ0bA

https://www.youtube.com/channel/UCqatJlFAhRboXrFNAG0rsDA I love ELP


Other unrelated stuff I like

https://www.youtube.com/channel/UC7DdEm33SyaTDtWYGO2CwdA

https://www.youtube.com/channel/UC7_gcs09iThXybpVgjHZ_7g


There are some people that contribute useful information on these forums, I use the ignore feature a lot.

Take care,

-David
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thanks dude this list is amazing. If u ever need anything Let me know. Thanks so much for ur help.
 
Illini Trader said:
On the contrary, I have traded complex option strategies for years and have never heard of "Put/Call Parity" until sel took my selling iron condor strategy that I recomended to to the PM to task, exalting Put/Call parity and making no sense at all. So I looked it up and here is what Wikipedia says:

From Wikipedia, the free encyclopedia

In financial mathematics, put–call parity defines a relationship between the price of a European call option and European put option, both with the identical strike price and expiry, namely that a portfolio of a long call option and a short put option is equivalent to (and hence has the same value as) a single forward contract at this strike price and expiry. This is because if the price at expiry is above the strike price, the call will be exercised, while if it is below, the put will be exercised, and thus in either case one unit of the asset will be purchased for the strike price, exactly as in a forward contract.

In any regard it is all academic nonsense to me.

So, since I have the honor of winning the dumbest post award, Please, explain to me what it is and why any option trader should care because all of these years I do not seem to have needed to know this.
More...

Its ok, you can quote from google so you got it mastered.
 
O(1) said:
Naked put vs. covered call: What's riskier?
http://www.futuresmag.com/2010/04/30/naked-put-vs-covered-call-whats-riskier
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There both the same ?? 1 is shorting the Put's value and the other the Call's Value.

Ofcourse the Put has a limited upside, $20 stock the max option value is $20 only if they go bankrupts, so the risk is atleast capped.

The Call on the other hand, has no theoretical upside, it could go to $100 therefore a value of $80.

But lets face it, stocks are way more likely to lose money fast than go upwards fast, therefore the Short Put is still likely riskier.

* I used to trade options many many years ago, but never had the option to short options, IF you very careful and well studied than I can see the OTM Short's expiring worthless 99% of the time, so next day after they expire put 25% of your account at risk and odds are 9/10 months you'll grow the account 25%.

** you need to be way OTM, stay away from earning.

p.s. I blew my 6K account pretty much over night on a market gap and reverse :( IF I'd of went Calls and held for a week or 2 that 6K would of been worth 100K area :(
 
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Turveyd said:
p.s. I blew my 6K account pretty much over night on a market gap and reverse :( IF I'd of went Calls and held for a week or 2 that 6K would of been worth 100K area :(
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had I started with options.. probably would have happened to me too! My first big losses were with the lovely ES.. over-trading like a mad man playing a video game.. :D
 
Illini Trader said:
That said, you guys just show your lack of knowledge when it comes to option selling.
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I think you started off with the Mr. Know it All approach and then threw some garbage about Put Call parity without understanding what it is. I do not think I need to come in and educate you when you seem to have all the answers.
 
El OchoCinco said:
I think you started off with the Mr. Know it All approach and then threw some garbage about Put Call parity without understanding what it is. I do not think I need to come in and educate you when you seem to have all the answers.
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OK lets just clear the air and part friends till we meet on another thread. The PUT/CALL Parity thing was initially sprung on me by someone who either misused it or did not understand it and I was ridiculed because I asked for an explanation.

As far as my quote above, yeah I do own that one. With a 1.2M bank roll and proper money management, option selling (not naked) but done in the form of a vertical call spread and a vertical put spread placed beyond the Market Maker expected move to the option expiration, is a reliable income stream.
 
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Illini Trader said:
The PUT/CALL Parity thing was initially sprung on me by someone who either misused it or did not understand it and I was ridiculed because I asked for an explanation.
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That would be me, I assume? :)

Put/Call parity is important because it shows you an equivalence of different option positions - for example, it allows you to construct the same payoffs based on different building blocks. For example, the fact that covered call is equivalent to a short put would be obvious to anyone who understands it.

I said that every out-of-the money option has an in-the-money equivalent via put/call parity. For example, if you sold a 95% put and it expired worthless simply means that a 95% call expired in the money. At the inception of the trade you could have sold stock and converted your short put into a short call, but it would not be reflected in the expiration statistics.
 
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