Niederhoffer's year end contest! ($2500 prize for 3 best 2011 trading ideas)

Quote from GTG:

Thanks, how does option charm help one to make money selling OOM puts? (I didn't find any explanation for how this might work from googling it.)
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GTG,

Hello there... You could probably answer this question yourself. What do you think will happen to the delta of an option if the underlying does not pierce the short strike very close to expiration? (Consider how the ITM options' delta rises quickly to 1.00 and the OTM options' delta falls quickly to 0.00) Good luck.
 
thoreau777 - Forgive the question if it doesn't make sense but I am curious as to how Charm can play an integral role in selling OTM options?

Wouldn't that assertion imply you are trading Delta/Gamma/Vega neutral?

Thanks.
 
Quote from thoreau777:

Visaria,

You are a detritivore of the human species. Clearly, you are a nobody who simply wishes to engage the ranks of those you could never touch or emulate.

Your kind has not seen that amount of money in even a yearly salary. I can see you now, with your $200.00 trading account, logging onto your E Trade site, buying your last shares of Netflix, hoping your trading will at permit you to purchase a cup of coffee and maybe a loaf of bread for your hungry family.
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I have no desire to touch and certainly not to emulate those ranks that have no modicum of methodology and have a tendency to blow up their hedge funds.

I suspect if your "friend" Niederhoffer could read your drivel on this thread, he would be ashamed. Whatever his professional faults, from what I know of him, he sounds like a decent chap on a personal level.

I would advise anyone here taking any advice from thoreau to investigate it thoroughly because i assure you s/he will not have done so.

This is my last word on this thread.
 
Quote from Soon2Bgreat:

thoreau777 - Forgive the question if it doesn't make sense but I am curious as to how Charm can play an integral role in selling OTM options?

Wouldn't that assertion imply you are trading Delta/Gamma/Vega neutral?

Thanks.
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Dear Soon2Bgreat,

Option charm can be used indirectly in picking your short strikes close to expiration. For example, regarding the short puts on SPY, consider the 127 strike. As I write, the delta is "decaying" at a rapid rate, nearing zero, as we are just one day from expiration and the underlying is sitting at 128.34. When you are hedging your deltas to capture your calculated edge, you must understand that you are losing short deltas very quickly. In addition, right now I am studying option "color", its vanna and vomma as well along the next expiration cycle, as I anticipate the speed of volatility will change after Friday. Selling puts on the SPX/SPY is a very involved process. But thanks for the question.
 
Quote from thoreau777:

Dear Soon2Bgreat,

Option charm can be used indirectly in picking your short strikes close to expiration.
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Ok, let me re-phrase: When you short a put (for example) is your intent to capture/profit from Charm or is it simply another tool you use in your evaluation and hedging process?
 
Quote from Visaria:

I have no desire to touch and certainly not to emulate those ranks that have no modicum of methodology and have a tendency to blow up their hedge funds.

I suspect if your "friend" Niederhoffer could read your drivel on this thread, he would be ashamed. Whatever his professional faults, from what I know of him, he sounds like a decent chap on a personal level.

I would advise anyone here taking any advice from thoreau to investigate it thoroughly because i assure you s/he will not have done so.

This is my last word on this thread.
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As Visaria has permanently left this thread, I would like to reveal that everything I have said about him I did not mean in the slightest. I only wish him well, and I retract any negative words. I agree with him that Victor is indeed quite a "decent chap" on a personal level, and Victor is a loving, kind, compassionate, and most of all a humble man.

I hope I did not seem upset or agitated in any way, as nothing he said bothered me in the least. I took no offense to anything he said. Even though I remained completely undisturbed in his comments, I felt the need to return his harsh words with a few words that may bruise his delicate ego and make him think twice about insulting Victor.

This is not in my character to do this, ever, and I hope that I did not mislead anyone. I bear no ill will towards anyone or anything in this Universe. I only hoped that by returning "like for like", he would cease and desist and refrain from commenting with negative energy. And I was successful in my turning on "my shadow". He has left permanently, and he will not be commenting on this thread which was created to call attention to Victor Niederhoffer's contest and website, to enrich and educate.

I hope Visaria is well, and has a profitable year. He likely is an intelligent and skilled trader, and I am somewhat disapppointed that I had to use a language and tenor that is completely not a part of me. But sometimes one has to resort to uncomfortable measures to obtain an honorable end.
 
Quote from Soon2Bgreat:

Edit: Sorry, trouble posting here, don't mind me.
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Dear Soon2Bgreat,

No worries. If you keep asking good questions, you will fulfill your account ID... Soon you will be great.

Selling S&P puts naked is an incredible way to make money, and if done properly, is not a risky method at all.

Recall that synthetically, a naked put is simply going long the underlying and selling a covered call... nothing else.

And being long the underlying and and selling covered calls is often associated with a retired secretary trying to get extra income.

The caveat of course is when the market falls greatly and IV rises fast. You can hedge for this of course, and if one does this properly, the strategy can and will earn you a comfortable living.

In Victor's case, his methodology was flawless, but in certain situations such as illicit market manipulation and terrorist attacks made being bullish the SPX a difficult task.

However, being long Apple, Netflix, Amazon, and Priceline have had extremely difficult periods before they ran up to new highs as well.

I exhort that had Matador Fund not closed a few years ago, the fund will be hitting new highs at this point, of that I am certain. Listen, selling SPX/SPY put options is basically going long the underlying equity market. Recall that the S&P is hitting multi-year highs and even though I am not exactly a big fan of Warren Buffett myself, he primarily is simply long the S&P index (In Google Finance, do a comparison between SPY and BRKa across different time frames). He just magnifies his performance with the insurance premiums he collects. In addition, note that one of Berkshire's biggest investments ever was selling naked put options on the S&P 500 during the financial upheaval.

And Mr. Buffett's selling of those naked S&P 500 puts was one of his greatest investing triumphs in his 8 decade investing lifetime.

Now, do not just go out and randomly start selling naked put options though. Victor is an incredible risk manager, and one must always take into account the worst case scenarios. You can be right 100 times in a row, but in trading you only have to be wrong once... just once.

God Bless, and good luck.
 
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