It's much better to buy slightly OTM options than ATM ones?

Well now that you changed the story it’s a different case in that particular instance. You omitted some pertinent information in your original story which you just added. Did you post your coat tail trade on in somewhat real time here on ET?


I said it before and I’ll say it again…. For regular retail investors reading these forums… Buying calls or puts just because you have heard of or saw a big print on the tape in a series is a very very poor strategy.
 
Quote from Martinghoul:

Are you Stefen Choy, then? There's a couple of other BBG articles quoting LiveVol. That's pretty good for you guys, credibility-wise...
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Stefan is a founder. I am Ophir. Yes, Stefan is a very well regarded pro trader on the floor. I have the fortune of trading directly next to him.
 
Quote from livevol_ophir:

Stefan is a founder. I am Ophir. Yes, Stefan is a very well regarded pro trader on the floor. I have the fortune of trading directly next to him.
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Off-topic, but Ophir is a fantastically cool name. Biblical, yet not obvious. Kudos!
 
Quote from psytrade:

Live Vol- they bought those to short that to nothing...
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Hey, anything is possible. Today someone bid .10 for 5562 combos (buy call/sell put) with stock offered @ 2.58 stock. Didn't trade, stock rose to 2.69.

Nickel options on offer, 600k long stock order through synthetic. Doesn't look like selling stock vs. calls to me. Looks like getting long and then some. But it's just conjecture. Could be the opposite.; or just people taking different sides.
 
Quote from xflat2186:

Well now that you changed the story it’s a different case in that particular instance. You omitted some pertinent information in your original story which you just added. Did you post your coat tail trade on in somewhat real time here on ET?


I said it before and I’ll say it again…. For regular retail investors reading these forums… Buying calls or puts just because you have heard of or saw a big print on the tape in a series is a very very poor strategy.
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Details in blog brother; didn't want to bore people - you forced it out of me :-)

I did not buy those for a nickel - but I wish I did.
 
Quote from crgarcia:

Your breakeven point increases with OTM options, but they cost much less so you can buy more options.

The Black Scholes model (from those morons who blewup LTCM) used in pricing most options doesn't adequately price OTM options, as the Bell curve pretends large movements from the average are extremely likely.

So slightly OTM options are the thing.
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I agree with this. I would even add that a wider spread is an even better characteristic. I usually use bear put spreads and bull call spreads as (insurance) hedges. I actually like my spreads to be further OTM and wider than "usual." The returns are extremely high if they end up ITM--which is great.
 
Quote from crgarcia:

Your breakeven point increases with OTM options, but they cost much less so you can buy more options.

The Black Scholes model (from those morons who blewup LTCM) used in pricing most options doesn't adequately price OTM options, as the Bell curve pretends large movements from the average are extremely likely.

So slightly OTM options are the thing.
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This is a silly statement for a whole variety of reasons...

So what if you can buy more options? If I have a 100 bucks, I can own a lot more pennies than quarters. The value of my 100 bucks doesn't change.

You don't get the right to call Black and Scholes morons until you invent an independent and more robust option pricing theory and receive a Nobel Prize for it. Moreover, they didn't blow up LTCM. Finally, Black Scholes is perfectly capable of pricing OTM options. If you don't know how to utilize and refine the theory properly, that's your own problem.

What you say regarding the normal distribution is complete nonsense. The problem is emphatically NOT that "large movements from the average are extremely likely".

And, finally, slightly OTM options are as much "the thing" as any other options. Generalization of this sort are utterly meaningless.
 
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