I was the one who suggested "leverage," or "correlation." But that still begs the question - if your strategy is purely directional, why bother with options at all? If I understand correctly, you're VERY long when you're bullish and less long when you're bearish. If that's the strategy, what do you need options for?
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Negative Theta Options over Weekend
- Thread starter TraderGreg
- Start date
I was the one who suggested "leverage," or "correlation." But that still begs the question - if your strategy is purely directional, why bother with options at all? If I understand correctly, you're VERY long when you're bullish and less long when you're bearish. If that's the strategy, what do you need options for?
Quote from BeatingtheSP500:
Atticus, you have no idea the option positions in my account, so I think it would be hard for you to critique it. I don't even think you understood my point I was making about GE. The daily fluctuations in GE share price compared to the SPX is approx the same as my book.
You couldn't grasp the *idea* of the beta-type number I ascribe to my book. If you did, why didn't you offer the correct term? You might be a great options trader but you have offered nothing but noise here. Either you understood the meaning of what I was getting at, which was pretty simple, or you didn't. It was an unconventional, but accurate way of counting. Take a deep breath man.
by your reckoning you should be down 30% or so, just sayin.
Attachments
Quote from dmo:
I was the one who suggested "leverage," or "correlation." But that still begs the question - if your strategy is purely directional, why bother with options at all? If I understand correctly, you're VERY long when you're bullish and less long when you're bearish. If that's the strategy, what do you need options for?
There are a number of reasons for options.
1. allows for much easier tweaking - as I mentioned earlier I manage my leverage from .75 to 2.0, and can quickly sell an atm call if I want to bring it down slightly, or on major red day, buy longer expiry OTM calls. 4 pm today gave me the opportunity to buy some OTM puts which were less than half price yesterdays 4 pm price (for the reason of bringing down my leverage to about 1.1)
2. I am a net seller of premium, and love those days when nothing happens.
I understand there is no inherent edge to being either a seller or buyer of premium, but I am comfortable as a net seller. Time is on my side.
3. With the cash deposit plus the extra $ from the option sales, I like the extra 3% tacked on my annual return for interest earned. I also like capturing dividends via short puts.
4. There is (for me) a psychological edge to trading options because of the fixed time frame. I'll make a trade and forget about it, If I decide to tweak my leverage and then the trade could be reversed with a gain or heavy loss, but no joy or sorrow regardless of the outcome of that particular trade. It's easy psychologically. Contrast that with trading the XLF or BAC the past 2 weeks. Does ANYONE known when to sell or buy these things on an hourly basis? If you bought BAC at 19 haven't you agonized when to sell it. And if you didn't, you would have beat yourself up yesterday and thrown in the towel and sold, only to see 4 points left on the table today. My point is it's mentally exhausting with stocks because you buy, then are faced with the constant selling decision. Its always shoulda, woulda, coulda and IF ONLY.
Although you could argue a leverage of 2.0 is VERY long, it represents a daily calculation. When the market is down 2% on the week, a leverage of 2.0 would indicate a move of -4% However, its more in the 2.5% range due to theta. That's been my experience during the past year.
Quote from atticus:
Gamma. It defines convexity. dgamma, it defines the slope and modality of the convexity/concavity. And wtf is this "greater than 1" nonsense? An option delta cannot exceed one, but htf is that relevant to a portfolio? I am long 4,000 SPX-equivalent deltas. I must be mistaken.
Isn't gamma a measure of how delta changes when the underlying changes in price? It would seem misleading to say my book currently has a gamma of 1.1, wouldn't it?
Quote from BeatingtheSP500:
Isn't gamma a measure of how delta changes when the underlying changes in price? It would seem misleading to say my book currently has a gamma of 1.1, wouldn't it?
Nobody is this stupid. If so, you're more than a bit unique. The anti-Sidis.
You've pulled "1.1" out of your ass. You're asking for someone to play Jeopardy; solve for an equation that somehow arrives at 1.1. Only you, in your hydrocephalic-state and seemingly infinite-stupidity, would know how you arrived at the magical 1.1.
And no, 1.1 is not an unusual number for one's portfolio gamma. Here's a suggestion... find your VaR and STFU about beta.
i've been checking in on this thread and haven't read the whole thing but i suspected that you were selling premium except the long position trader thru me off,to have the numbers you say ,being a 20% down year in the market,you had to be selling call premium,,is this the first time you mentioned it? I don't understand why you are sparring with atticus about options,wrong guy for that subject,why dont you just pm him and ask him outright instead of wasting his time,he's trying to help you, the greeks are tough for many,just ask and apply what he tells ya,it'll sink in eventuallyQuote from BeatingtheSP500:
There are a number of reasons for options.
1. allows for much easier tweaking - as I mentioned earlier I manage my leverage from .75 to 2.0, and can quickly sell an atm call if I want to bring it down slightly, or on major red day, buy longer expiry OTM calls. 4 pm today gave me the opportunity to buy some OTM puts which were less than half price yesterdays 4 pm price (for the reason of bringing down my leverage to about 1.1)
2. I am a net seller of premium, and love those days when nothing happens.
I understand there is no inherent edge to being either a seller or buyer of premium, but I am comfortable as a net seller. Time is on my side.
3. With the cash deposit plus the extra $ from the option sales, I like the extra 3% tacked on my annual return for interest earned. I also like capturing dividends via short puts.
4. There is (for me) a psychological edge to trading options because of the fixed time frame. I'll make a trade and forget about it, If I decide to tweak my leverage and then the trade could be reversed with a gain or heavy loss, but no joy or sorrow regardless of the outcome of that particular trade. It's easy psychologically. Contrast that with trading the XLF or BAC the past 2 weeks. Does ANYONE known when to sell or buy these things on an hourly basis? If you bought BAC at 19 haven't you agonized when to sell it. And if you didn't, you would have beat yourself up yesterday and thrown in the towel and sold, only to see 4 points left on the table today. My point is it's mentally exhausting with stocks because you buy, then are faced with the constant selling decision. Its always shoulda, woulda, coulda and IF ONLY.
Although you could argue a leverage of 2.0 is VERY long, it represents a daily calculation. When the market is down 2% on the week, a leverage of 2.0 would indicate a move of -4% However, its more in the 2.5% range due to theta. That's been my experience during the past year.
Quote from ammo:
i've been checking in on this thread and haven't read the whole thing but i suspected that you were selling premium except the long position trader thru me off,to have the numbers you say ,being a 20% down year in the market,you had to be selling call premium,,is this the first time you mentioned it? I don't understand why you are sparring with atticus about options,wrong guy for that subject,why dont you just pm him and ask him outright instead of wasting his time,he's trying to help you, the greeks are tough for many,just ask and apply what he tells ya,it'll sink in eventually
Selling call premium has saved my ass the past year. I have 4 types of positions, all on the SPY: long calls, short calls, long puts, short puts. Simple as that. The sum of the naked shorts, iron condors, short straddles, collars, strangles, double diagonals, lottery tickets, etc are represented by one number. The leverage number. (formally known as something else, I won't mention it to avoid an apoplectic response) fwiw leverage was 1.1 end of today.
Quote from BeatingtheSP500:
Selling call premium has saved my ass the past year. I have 4 types of positions, all on the SPY: long calls, short calls, long puts, short puts. Simple as that. The sum of the naked shorts, iron condors, short straddles, collars, strangles, double diagonals, lottery tickets, etc are represented by one number. The leverage number. (formally known as something else, I won't mention it to avoid an apoplectic response) fwiw leverage was 1.1 end of today.
Funny on your web site you say those strategies or positions above are no good because you have to wait for expiration to make any money. Now in the above post you say you use them.
When you understand options you learn you're either long options and the associated risk or short them with the associated risk. Delta can be adjusted to suit.
Quote from ammo:
i've been checking in on this thread and haven't read the whole thing but i suspected that you were selling premium except the long position trader thru me off,to have the numbers you say ,being a 20% down year in the market,you had to be selling call premium,,is this the first time you mentioned it? I don't understand why you are sparring with atticus about options,wrong guy for that subject,why dont you just pm him and ask him outright instead of wasting his time,he's trying to help you, the greeks are tough for many,just ask and apply what he tells ya,it'll sink in eventually
It should be noted that beatingtheSP is not consistent in his claims. Sometimes he says he's up 35% over that period and other times he says his index is now 35% higher then the SnP. There is a major difference. Thatâs just one of many inconsistencies in his posts.
It appears as if he changes stories as he learns the correct terms and phrases here and tries to make them fit.