My Nerves Are Shot

[Martinghoul]

Quote from HowardCohodas:
You have considerably more experience than I with options and I do take your cautions seriously. You state your premises with categorical certainty. Your arguments have been unpersuasive to me and to others to that level of certainty. But I have used your cautions to arrange my trading such that I am better protected and I thank you for that.

My pleasure...

My arguments are not meant to dissuade you from doing whatever you want to do in your trading, as I have mentioned to you repeatedly in the other forum. My comments, categorical though they might be, are made in order to counteract you spreading your erroneous (IMO) views (which you persist in, to my great dismay) and potentially leading others astray. You will obviously find my arguments unpersuasive, but that's not exactly surprising. At any rate, there's no need for us to go through this yet again.

 

[HowardCohodas]

Quote from Martinghoul:

My pleasure...

My arguments are not meant to dissuade you from doing whatever you want to do in your trading, as I have mentioned to you repeatedly in the other forum. My comments, categorical though they might be, are made in order to counteract you spreading your erroneous (IMO) views (which you persist in, to my great dismay) and potentially leading others astray. You will obviously find my arguments unpersuasive, but that's not exactly surprising. At any rate, there's no need for us to go through this yet again.

Quote from HowardCohodas:

So that you don't get confused by what others imply and what my experience has led me to conclude:

• There is inherant danger in any high probability low return trade. OTM vertical spreads are no exception. If a trader chooses to trade such strategies, he should have lots of tools in his kit.
• I have found attempting to define a trading edge to be elusive. I stay away from such claims. My only claim is describing what I do and my reasons for it.
• PoT is one of many tools one could use is selecting the short strike. It fits my personality so I use it. Is it better than any other? Not my call? A hammer is a great tool but used improperly, the result is crap. I see no difference in my use of PoT.
• Keeping alert for market changes is critical to any trade. The only difference is that the OTM vertical spread r/r ratio makes prompt action critical. It also makes other risk mitigation measures important.

Which of these views from a few posts back in this thread are, in your opinion, erroneous.

 

[atticus]

Quote from HowardCohodas:

Which of these views from a few posts back in this thread are, in your opinion, erroneous.

Didn't you mommy tell you not to play in traffic and lie about it?

 

[newwurldmn]

Thanks Martingoul. I found the paper. It's a bit over my head but it confirmed what I thought Howard is doing. He's taking a number based on some formula whose inputs (current volatility) are the same as the output (option price) of another formula who is using the same inputs (implied volatility which is pretty good forecast of future volatility).

So he is basing his decisions to sell either by being "smarter than the market" in pricing these probabilities through some model or fundamental work or by just guessing and gut feel.

 

[Arnie Guitar]

My nerves may be shot, but looking at my account and seeing those fresh available funds...damn, it's like a drug, ain't it? You have some success and you want more...I think I could generate the same returns and wait til mid week to take some positions...OK,OK Arnie, stay calm...take a deep breath, repeat your mantra and achieve inner peace...ahhhmmm, ahhmmm....

I really think we're all gamblers to different degrees. Some here wax poetically on their long, elaborate methods of research, but they're still gambling.

I guess I'm, and always will be, the roulette wheel type of option player...it's more chance with me. Yes, I look at charts, but it's still a gut feeling type thing. I tip my hat to those who quote the greeks to explain this and that...but they're still gambling.

I look at my 30% gain, and think...Arnie, if you do nothing more this year, you've beaten any CD, and any of those stinking mutual funds in your retirement account...maybe it's OK to "punt" once and a while, take a week or two off...or if nothing else, take fewer/smaller positions, you'll have less grey hair.

Nah, I've got me a fresh pile of available funds...

 

[HowardCohodas]

Quote from newwurldmn:

Thanks Martingoul. I found the paper. It's a bit over my head but it confirmed what I thought Howard is doing. He's taking a number based on some formula whose inputs (current volatility) are the same as the output (option price) of another formula who is using the same inputs (implied volatility which is pretty good forecast of future volatility).

Sadly, it's unavailable to the general public. Would be fascinating to read.

 

[Dolemite]

I noticed someone in this thread mentioned using their TOS platform to model probability of touching. Although I use TOS and it is a great tool, it has a real problem calculating volatility correctly for OTM options. If the main input of prob of touching is so off, how do you compensate when you put on trades?

 

[HowardCohodas]

Quote from Dolemite:

I noticed someone in this thread mentioned using their TOS platform to model probability of touching. Although I use TOS and it is a great tool, it has a real problem calculating volatility correctly for OTM options. If the main input of prob of touching is so off, how do you compensate when you put on trades?

I've been using ToS PoT for over a year. The volatility strategy (model) is user selectable. I chose "Fixed volatility per expiration date" as that best matched the values I was getting with my own methods. The other two user choices are "Volatility smile approximation" and "Individual implied volatility."

Which strategy are you using and how did you determine that ToS does not compute volatility correctly?

 

[opt789]

Quote from Arnie Guitar:

My nerves may be shot, but looking at my account and seeing those fresh available funds...damn, it's like a drug, ain't it? You have some success and you want more...I think I could generate the same returns and wait til mid week to take some positions...OK,OK Arnie, stay calm...take a deep breath, repeat your mantra and achieve inner peace...ahhhmmm, ahhmmm....

I really think we're all gamblers to different degrees. Some here wax poetically on their long, elaborate methods of research, but they're still gambling.

I guess I'm, and always will be, the roulette wheel type of option player...it's more chance with me. Yes, I look at charts, but it's still a gut feeling type thing. I tip my hat to those who quote the greeks to explain this and that...but they're still gambling.

I look at my 30% gain, and think...Arnie, if you do nothing more this year, you've beaten any CD, and any of those stinking mutual funds in your retirement account...maybe it's OK to "punt" once and a while, take a week or two off...or if nothing else, take fewer/smaller positions, you'll have less grey hair.

Nah, I've got me a fresh pile of available funds...

It is too bad you were not being sarcastic, then your post would have been quite funny as it does an excellent job of satirizing a neophyte trader.

Trading vs. gambling is a mater of semantics since any venture with any level of stochastic outcome can be defined as gambling by someone.

Of those who seek to be successful traders, only a fraction of those who dedicate years of hard work will succeed and you are unwilling to even bother learning the very basics. Therefore your only logical conclusion is Joshua’s cliché: the only winning move is not to play. I actually mean no offense by this; I have first hand knowledge of hundreds of traders losing everything. They would have been infinitely better off never playing the trading game.

 

[JohnGreen]

Howard,

As I understand it, the reason atticus keeps chasing you from thread to thread is that he thinks that you are being dishonest. Frankly, I have to agree with him! How your report your returns makes a big difference and the only truly honest way is to report losses and gains using the same methodology (which, again, is what he is trying to say). Not only that, but the methodology must be a sensible and credible one like return on the entire account or loss on the entire account. After all, in your credit spread journal, you clearly reported opening spreads that must have gotten into serious trouble and generated significant losses. When that started to happen, the "dashboard" suddenly disappeared from your posts. In fact, you disappeared from your own forum for awhile. If you expect to be credible, you must tell the truth.

If everyone were totally honest on this forum, we'd all have to admit to having losses at some stage. I have had some, too, but overall, I'm doing pretty well. I'm sure Martinghoul, MTE, and atticus have had losses at one time or another, too, but they are not pretending to be something they are not. I think also, that if they were pressed, they would also admit this honestly. They are warning that risky strategies can cause serious damages to any one's account, and they can. My guess is that they probably learned from experience just like I did. In my early days, I took a nasty one on the chin, but I learned from my foolishness and took much better risk control measures which make losses more manageable. I'd bet they are doing the same, just like everyone who wants to preserve their capital.