I agree with that. protective puts, protective calls (for short sales), and covered calls - all good hedge positions. Or even better hedge after a runup... bear spread (sell covered call, buy put).
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My Conclusions
- Thread starter luh3417
- Start date
I agree with that. protective puts, protective calls (for short sales), and covered calls - all good hedge positions. Or even better hedge after a runup... bear spread (sell covered call, buy put).
Quote from luh3417:
I did find another source which states "Since put and call options have been trading, eighty percent (80%) of all options expire unexercised". Maybe this is not that important, since its an efficient market and you can play either side.
Didn't McMillan address the "X% of all options expire worthless" myth? I think it might be that [80,85,90] percent of options are not exercised. IIRC most of them are closed on expiration day, but something less than 50% actually expire worthless and unexercised.
Also, 80% can't expire unexercised since (I assume) about half of them will be ITM and will be exercised automatically.
This sounds like a rationalization put forward by the market makers. Are we then to conclude that straight equities would become more liquid if they were quantized to nickel/dime increments? Or they were, back in the day when they were in sixteenths? Having my order sit on the book all day is not my definition of liquidity. I mean, if the spread were in pennies, the buyers and sellers would be closer together, and orders would execute much faster. However, the market makers and specialists would have much less of an edge. IMHO whenever anyone proposes penny increments for options, the exchanges all trot out a bunch of horseshit about how it has to be studied closely, how we need to form committees, etc. At the same time, the people on the outside, are all just people with inside information (or the odd newbie) and are willing to play the game even with the current arrangement. And there it stands.Quote from segv:
The wider bid-ask spread decreases the frequency of quotes. This enhances liquidity since limit order traders are encouraged to leave their order in the book until their quote approaches fair value.
-segv
Quote from luh3417:
Or they were, back in the day when they were in sixteenths?
Some of us actually remember back when stocks traded in 1/8 minimum increments!
BTW, does the old 'decimalization killed daytrading' spurious-correlation myth still have any believers left? I bet it does.
Remember back in the champagne, blow and caviar days when CMGI, YHOO, SDLI, QCOM and friends moved 30, 40 points a day?
Those stocks traded in 64ths, not nickels.
64ths, pennies... it makes no difference. Penny spreads isn't what killed that party. In 2001, the massive inflows of dumb money dried up. There were more daytrader/hedge fund/smart money dollars trying to grab a shrinking supply of retail investor/mutual fund/long term money/dumb money dollars.
Penny spreads had nothing to do with it.
I mean no disrespect to sgv or ReardenMetal, but let me ask a question. How about if we quintuple the quantization of options prices, so instead of trading in 5 and 10 cent increments, they trade in 25 and 50 cent increments. What does an option specialist think about this idea, and what do the traders on this board think? We need to define liquidity, but specifically, would you feel like, oh boy, options sure are liquid now! The spread is always 25 or 50 cents or more, but dang whenever I put in a market order, it gets filled fast! Good thing those specialists are my friend, thanks to this new increment, theres always plenty of inventory on the books! Of course, if I place a limit order, I might have to wait several weeks... and gee I seem to be losing even more money now when I try to sell off my position... But the commissions are really low... they seem to be even more generous with their "payment for order flow" kickbacks to the brokerages somehow...
Quote from luh3417:
I mean no disrespect to sgv or ReardenMetal, but let me ask a question. How about if we quintuple the quantization of options prices, so instead of trading in 5 and 10 cent increments, they trade in 25 and 50 cent increments. What does an option specialist think about this idea, and what do the traders on this board think? We need to define liquidity, but specifically, would you feel like, oh boy, options sure are liquid now! The spread is always 25 or 50 cents or more, but dang whenever I put in a market order, it gets filled fast! Good thing those specialists are my friend, thanks to this new increment, theres always plenty of inventory on the books! Of course, if I place a limit order, I might have to wait several weeks... and gee I seem to be losing even more money now when I try to sell off my position... But the commissions are really low... they seem to be even more generous with their "payment for order flow" kickbacks to the brokerages somehow...
You're right as well. If you read my post about losing my ass recently in options, it makes a good point. Somehow in the options books and tutorials I've read, there was never a rule like this:
1. NEVER put market orders in for option buy and sells, unless of course you are willing to lose your ass. Especially on further out of the money options.
Well.. the McMillan bible is on the way.
Penny increments would result in a fairer market for the sellers and buyers, and more risk for the market makers. The market is liquid right now, just to the advantage of the market maker. Thats why our limit orders sit on for hours or days resisting being picked up.
Not until I traded options have I realized that trading is all out war.
Quote from lundy:
Unfortunately I dont make a living at it. Not even close. I am still struggling. Selling premium doesnt suit my risk tolerance, so I am trying my hand at buying premium.
I cull through about 500 liquid stocks with options. I look at daily charts, hold from 1 -3 weeks. Mostly playing flags that seem to be a reversal rather than consolidation continuation. Like right now I got puts in OMX.
Best way for options is to buy them after big big moves, I mean big moves and buy to fade the move. Buy otm and buy time.
Go for 2, 4, 8 times what you paid for them.
CCL was a recent example of a good stock to do it with although, who knows how ccl will finally resolve. I didn't get any ccl because it didn't get low enough fast enough on that last down day. Find stuff really really beat down for no "real" reason and buy on a big day down. Bid for them at the expected price anticipated when the stocks hits the target. It doesn't matter how you come up with the target, just make sure it is low enough to panic some people.
I was bidding the option if ccl had hit 36.00 on 6.12. I forgot which one. Probably Oct or so and probably the 40 strike. I much rather miss stuff then not get the price I want. Market can kiss my ass.
John
Someone on this board turned me on to Options Market Making by Allen Jan Baird, which tells you a bit about how the market makers operate.Quote from scriabinop23:
Well.. the McMillan bible is on the way.
Would you rather own the casino or gamble in it? And as long as people keep showing up in the casino, there's no reason to change the rules right?
The "big boys" that you refer to Luh3417 is a myth.
The so called "big boy network" is often alluded to by traders that are usually either struggling, experiencing poor returns, reaching for that something extra that appears to be within reach.... but remains elusive, etc.. Think rationally for a moment, these so called "big boy networks" are also humans, have access to the same education, software, they experience the same problems we do, etc.. Oh, let me guess, here is what some traders might suggest to you, they belong to covert societies, with advanced academic degress & thus they're more capable than 'us' the retail trader, hogwash!!
A competent retail trader will never bow down to a so called "dynamic force" that supposedly rules with an iron fist while the retail trader must suffer, because it does not exist, a competent trader accepts responsibility & blames no one. While a struggling trader inevitably arrives @ these far flung theories as the reason for falling short, not achieving a desired expectation. In adhering to these theories, a trader is providing a form of consolation that appeases his own incompetence. In reading your commets near the bottom, ahh, just as I thought, your post is a well crafted cry for help.
Well, you have taken an admirable step by posting your comments in this forum & seeking help. It's really a simple matter, either you need to educate yourself more, hook up with a mentor that knows his craft well perhaps. Remember, profitability for many is earned with experience & experience cannot be wished for, it must be earned. You may have to work at it a little more.
One more thing, don't believe those traders that tell you that the odds are stacked against you, that is a myth as well, if you develop a winning strategy, the odds are never against you, struggling traders always find excuses on why the markets are bigger & stronger than me or you. The world is filled with those that say "it can't be done," or "only the big boys win in the end." These people are usually miserable & cannot stand to be wrong, always with an agenda up their sleeve, always having to prove something to someone. Only to tell you later: "I told you so." Do not waste your precious time with these individuals.
The so called "big boy network" is often alluded to by traders that are usually either struggling, experiencing poor returns, reaching for that something extra that appears to be within reach.... but remains elusive, etc.. Think rationally for a moment, these so called "big boy networks" are also humans, have access to the same education, software, they experience the same problems we do, etc.. Oh, let me guess, here is what some traders might suggest to you, they belong to covert societies, with advanced academic degress & thus they're more capable than 'us' the retail trader, hogwash!!
A competent retail trader will never bow down to a so called "dynamic force" that supposedly rules with an iron fist while the retail trader must suffer, because it does not exist, a competent trader accepts responsibility & blames no one. While a struggling trader inevitably arrives @ these far flung theories as the reason for falling short, not achieving a desired expectation. In adhering to these theories, a trader is providing a form of consolation that appeases his own incompetence. In reading your commets near the bottom, ahh, just as I thought, your post is a well crafted cry for help.
Well, you have taken an admirable step by posting your comments in this forum & seeking help. It's really a simple matter, either you need to educate yourself more, hook up with a mentor that knows his craft well perhaps. Remember, profitability for many is earned with experience & experience cannot be wished for, it must be earned. You may have to work at it a little more.
One more thing, don't believe those traders that tell you that the odds are stacked against you, that is a myth as well, if you develop a winning strategy, the odds are never against you, struggling traders always find excuses on why the markets are bigger & stronger than me or you. The world is filled with those that say "it can't be done," or "only the big boys win in the end." These people are usually miserable & cannot stand to be wrong, always with an agenda up their sleeve, always having to prove something to someone. Only to tell you later: "I told you so." Do not waste your precious time with these individuals.
Quote from mayo367:
The "big boys" that you refer to Luh3417 is a myth.
The so called "big boy network" is often alluded to by traders that are usually either struggling, experiencing poor returns, reaching for that something extra that appears to be within reach.... but remains elusive, etc.. Think rationally for a moment, these so called "big boy networks" are also humans, have access to the same education, software, they experience the same problems we do, etc.. Oh, let me guess, here is what some traders might suggest to you, they belong to covert societies, with advanced academic degress & thus they're more capable than 'us' the retail trader, hogwash!!
A competent retail trader will never bow down to a so called "dynamic force" that supposedly rules with an iron fist while the retail trader must suffer, because it does not exist, a competent trader accepts responsibility & blames no one. While a struggling trader inevitably arrives @ these far flung theories as the reason for falling short, not achieving a desired expectation. In adhering to these theories, a trader is providing a form of consolation that appeases his own incompetence. In reading your commets near the bottom, ahh, just as I thought, your post is a well crafted cry for help.
Well, you have taken an admirable step by posting your comments in this forum & seeking help. It's really a simple matter, either you need to educate yourself more, hook up with a mentor that knows his craft well perhaps. Remember, profitability for many is earned with experience & experience cannot be wished for, it must be earned. You may have to work at it a little more.
One more thing, don't believe those traders that tell you that the odds are stacked against you, that is a myth as well, if you develop a winning strategy, the odds are never against you, struggling traders always find excuses on why the markets are bigger & stronger than me or you. The world is filled with those that say "it can't be done," or "only the big boys win in the end." These people are usually miserable & cannot stand to be wrong, always with an agenda up their sleeve, always having to prove something to someone. Only to tell you later: "I told you so." Do not waste your precious time with these individuals.
good post