We are in the minority here which is fine. There are probably, 1,000 ways to make monies in the stockmarket. At the end of the day, trading is playing the percentages. If you have a trading edge, you should make monies after 500, 1,000 or 5,000 trades. The number does not matter. If you do not have an edge, do yourself a favor and gamble in Las Vegas. Atleast, the casinos will give you some comps for losing all your monies. If you lose all your monies on Wall Street, you got nothing coming to you.
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Options.,... Argh... no more!!
- Thread starter Jdesey
- Start date
We are in the minority here which is fine. There are probably, 1,000 ways to make monies in the stockmarket. At the end of the day, trading is playing the percentages. If you have a trading edge, you should make monies after 500, 1,000 or 5,000 trades. The number does not matter. If you do not have an edge, do yourself a favor and gamble in Las Vegas. Atleast, the casinos will give you some comps for losing all your monies. If you lose all your monies on Wall Street, you got nothing coming to you.
I am fundamentally against trading straight direction and option repair. Its wrong on many levels.
I agree with you on trading straight direction. However, if you are short an option that is being challenged by the underlying, why not adjust it (reduce delta)?
When you say constantly buying 15 delta calls wont work over a large number occurences,you are really asking for 2 things
1) A well diversified portfolio of stocks to run a backtest on in varying market conditions
2) A Delta equivalant amount of options to measure against stock number of shares..
I'm not even considering 15 delta calls to match performance against equivalent number of shares. It's not the same trade as the downside risk on the calls is limited only to the premium. For most stocks the strategy won't be profitable. Adding more calls will only make it less profitable.
Its not a question of whether "it will work"..For a directional trade,its a question of outperforming the underlying...No long directional bet will work in a meltdown,but some strategies work better than others,and some offer a much better R/R and "appear" to offer significantly more edge given ones chosen market scenario...
I agree with this. That's why I have moved away from selling naked puts and calls and more towards ratios and butterflies. For directional trades with high IV, verticals are probably the way to go.
Forget economic factors..Its meaningless if you have a plan,ie Momo,Swing,Mean Reversion etc..Focus on Money Management(preservation) and getting as much edge as possible if you use options..Simple example,buy stock vs sell put vs buy a boatload of flys..
I disagree on the economic factors. We're in a Fed-driven market. If the Fed came out tomorrow and announced that they are expanding their balance sheet by another $4T to fight climate change and inflation (makes no sense, but neither did continuing QE while talking about tightening in a couple months to fight inflation), that's going boost asset prices. If you don't incorporate that directional bias into your plan, you will be fighting an uphill battle. But I'm not sure how to backtest for that.
My reccomendation would be to get a realy good scanner
Which one do you use and how do you use it to come up with trade strategies? TastyTrade and others have backtested different option strategies. I find them interesting, but I think the edge is in how the options are managed after they are placed although the risk is determined at the time the initial trade is made.
95percent of your risk in the Netflix trade is delta.
You not quite getting it....You sold an option to be short,because vol was high or both..It was a directional bet.You are dead wrong on direction,and now if the stock rallies in your face you want to start delta hedging?? FWIW,I was a trader of Equity derivatives at IB's,a market maker on the floor,and have made EVERY mistake known to man..This is one of them. You arent a market maker being forced into taking one way flow..Learn to take a loss when you are dead wrong and find a trade with edge..or dont trade ..or trade with a much larger size above your comfort level and let pain teach you a valuable lesson.Thats,how I learned. Surprisingly effective,assuming you live to tell the tale..
You are guessing and missing the point on 15 delta...Understand a Delta neutral backspread .
Come up with a directional filter,MM and forget everything else..My 2 cents..
Look at ORATS..Forget Tasty Trade..
You are guessing and missing the point on 15 delta...Understand a Delta neutral backspread .
Come up with a directional filter,MM and forget everything else..My 2 cents..
Look at ORATS..Forget Tasty Trade..
I agree with you on trading straight direction. However, if you are short an option that is being challenged by the underlying, why not adjust it (reduce delta)?
I'm not even considering 15 delta calls to match performance against equivalent number of shares. It's not the same trade as the downside risk on the calls is limited only to the premium. For most stocks the strategy won't be profitable. Adding more calls will only make it less profitable.
I agree with this. That's why I have moved away from selling naked puts and calls and more towards ratios and butterflies. For directional trades with high IV, verticals are probably the way to go.
I disagree on the economic factors. We're in a Fed-driven market. If the Fed came out tomorrow and announced that they are expanding their balance sheet by another $4T to fight climate change and inflation (makes no sense, but neither did continuing QE while talking about tightening in a couple months to fight inflation), that's going boost asset prices. If you don't incorporate that directional bias into your plan, you will be fighting an uphill battle. But I'm not sure how to backtest for that.
Which one do you use and how do you use it to come up with trade strategies? TastyTrade and others have backtested different option strategies. I find them interesting, but I think the edge is in how the options are managed after they are placed although the risk is determined at the time the initial trade is made.
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You not quite getting it....You sold an option to be short,because vol was high or both..It was a directional bet.You are dead wrong on direction,and now if the stock rallies in your face you want to start delta hedging?? FWIW,I was a trader of Equity derivatives at IB's,a market maker on the floor,and have made EVERY mistake known to man..This is one of them. You arent a market maker being forced into taking one way flow..Learn to take a loss when you are dead wrong and find a trade with edge..or dont trade ..or trade with a much larger size above your comfort level and let pain teach you a valuable lesson.Thats,how I learned. Surprisingly effective,assuming you live to tell the tale..
You are guessing and missing the point on 15 delta...Understand a Delta neutral backspread .
Come up with a directional filter,MM and forget everything else..My 2 cents..
Look at ORATS..Forget Tasty Trade..
I'm not sure we are talking about the same trade. If I am short a call for whatever reason and the underlying starts trading close to that call...why not adjust the position (at least in some circumstances...)? Yes, if you're trading too large of a position, that can start messing with one's psychology and shake one out of a position...but I'm not sure that fear leads to good decision making.
Most of my ratios are near 0 delta when I enter them. Not sure what you mean.
Directional filter...are we talking about some technical indicator such as advanced decline, breadth indicator, put/call ratio or something entirely different?
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If I trade direction,I trade with a stop.If I sell high vol,I Delta hedge from initiation.I don't let Delta get out of line to gamma..
If the short call I sold explodes in vol,then I would consider Delta hedging as a vol play.Its no longer a directional bet..I accept the loss and have a new trade on..
If vol doesn't pick up and you lost in direction,you will now be short a really cheap straddle if you hedge close to the short strike..Thats bad business.
You are simply doing option repair,and there is no reason to.Take your loss and find better opportunities to make it back..
If you trade a size slightly bigger than your comfort level,you will hopefully be extra vigilant in risk control. I got blown out on short wings trading OPM,so I lived to tell,but lost a significant chunk of change..I won't make that mistake again..
Directional filter could be anything..It could be as simple as the S&P trading above a chosen MA..
If I had one peice of advice,it would be to take small losses when wrong,and don't bother with option repair unless the adjusted position has edge,however you may look at it..
If the short call I sold explodes in vol,then I would consider Delta hedging as a vol play.Its no longer a directional bet..I accept the loss and have a new trade on..
If vol doesn't pick up and you lost in direction,you will now be short a really cheap straddle if you hedge close to the short strike..Thats bad business.
You are simply doing option repair,and there is no reason to.Take your loss and find better opportunities to make it back..
If you trade a size slightly bigger than your comfort level,you will hopefully be extra vigilant in risk control. I got blown out on short wings trading OPM,so I lived to tell,but lost a significant chunk of change..I won't make that mistake again..
Directional filter could be anything..It could be as simple as the S&P trading above a chosen MA..
If I had one peice of advice,it would be to take small losses when wrong,and don't bother with option repair unless the adjusted position has edge,however you may look at it..
I'm not sure we are talking about the same trade. If I am short a call for whatever reason and the underlying starts trading close to that call...why not adjust the position (at least in some circumstances...)? Yes, if you're trading too large of a position, that can start messing with one's psychology and shake one out of a position...but I'm not sure that fear leads to good decision making.
Most of my ratios are near 0 delta when I enter them. Not sure what you mean.
Directional filter...are we talking about some technical indicator such as advanced decline, breadth indicator, put/call ratio or something entirely different?
If I trade direction,I trade with a stop.If I sell high vol,I Delta hedge from initiation.I don't let Delta get out of line to gamma..
If the short call I sold explodes in vol,then I would consider Delta hedging as a vol play.Its no longer a directional bet..I accept the loss and have a new trade on..
If vol doesn't pick up and you lost in direction,you will now be short a really cheap straddle if you hedge close to the short strike..Thats bad business.
You are simply doing option repair,and there is no reason to.Take your loss and find better opportunities to make it back..
If you trade a size slightly bigger than your comfort level,you will hopefully be extra vigilant in risk control. I got blown out on short wings trading OPM,so I lived to tell,but lost a significant chunk of change..I won't make that mistake again..
Directional filter could be anything..It could be as simple as the S&P trading above a chosen MA..
If I had one peice of advice,it would be to take small losses when wrong,and don't bother with option repair unless the adjusted position has edge,however you may look at it..
I generally agree with that. When I say "adjustment" that might mean buying back the call and selling something else or delta hedging by buying shares. So it's technically a different trade. As I mentioned, I usually don't have strong conviction on any of my trades beyond that the underlying will hold up over time. By selling a call or put on something, that means that I'm willing to hold shares of the underlying, but will try to avoid doing that. I only trade things that have weekly options. I only trade things that I don't think will crap out, gap up abruptly and unexpectedly and leave me stuck.
If you can find a directional filter that actually works, I would love to know it. lol So far, Fed policy is the best and most consistent directional filter I have found. I gave up on moving-average-based technical indicators long ago. Backtested several combinations, RSI, PPO, MACD, etc, found no consistent edge when compared to random entry. And in hindsight there should not have been an edge. I published some of my studies on another forum. Can share if interested. If it was that easy, everyone would be doing it. The harder things to track such as market breadth, advance / decline volume, maybe there's an edge there. I haven't studied it.
I generally agree with that. When I say "adjustment" that might mean buying back the call and selling something else or delta hedging by buying shares. So it's technically a different trade. As I mentioned, I usually don't have strong conviction on any of my trades beyond that the underlying will hold up over time. By selling a call or put on something, that means that I'm willing to hold shares of the underlying, but will try to avoid doing that. I only trade things that have weekly options. I only trade things that I don't think will crap out, gap up abruptly and unexpectedly and leave me stuck.
If you can find a directional filter that actually works, I would love to know it. lol So far, Fed policy is the best and most consistent directional filter I have found. I gave up on moving-average-based technical indicators long ago. Backtested several combinations, RSI, PPO, MACD, etc, found no consistent edge when compared to random entry. And in hindsight there should not have been an edge. I published some of my studies on another forum. Can share if interested. If it was that easy, everyone would be doing it. The harder things to track such as market breadth, advance / decline volume, maybe there's an edge there. I haven't studied it.
Instead of using indicators, use chart patterns. Learn patterns of tops/bottoms. But instead of buying options, do credit spreads. Test this out.
Ill PM you
I generally agree with that. When I say "adjustment" that might mean buying back the call and selling something else or delta hedging by buying shares. So it's technically a different trade. As I mentioned, I usually don't have strong conviction on any of my trades beyond that the underlying will hold up over time. By selling a call or put on something, that means that I'm willing to hold shares of the underlying, but will try to avoid doing that. I only trade things that have weekly options. I only trade things that I don't think will crap out, gap up abruptly and unexpectedly and leave me stuck.
If you can find a directional filter that actually works, I would love to know it. lol So far, Fed policy is the best and most consistent directional filter I have found. I gave up on moving-average-based technical indicators long ago. Backtested several combinations, RSI, PPO, MACD, etc, found no consistent edge when compared to random entry. And in hindsight there should not have been an edge. I published some of my studies on another forum. Can share if interested. If it was that easy, everyone would be doing it. The harder things to track such as market breadth, advance / decline volume, maybe there's an edge there. I haven't studied it.
Ill PM you
hahah. handle123 walks into the room and you both start whispering.