Options.,... Argh... no more!!

[TheDawn]

how does a dumb person practice risk management the same as a smart person?

The same.

The very first line of the book just showed they are not good traders. "If there was one article of faith that John Meriweather discovered at Salmon Brothers, it was to ride your losses until they turned into gains". That is the violation of one of the most important trading principles that we retail traders have to follow. "Cut your losses early and let your winners run." You do NOT keep adding to your losses hoping for a turnaround. If we had all traded like this guy, we would all be bankrupt long time ago. And this guy is supposed to be a trading genius?? The number 1 guy on Wall Street? LOL

Just read the epilogue, it's fascinating to note that "Most of the other partners lost 90 percent or more of their wealth—that is, everything they had invested in the fund..." and yet, "most of the partners remained far richer than ordinary Americans". The big Nazi propagandist used to say "when you lie, lie big". I guess when you fail, it helps to fail big too. LOL

I will read the rest of the book later.

 

[newwurldmn]

The same.

The very first line of the book just showed they are not good traders. "If there was one article of faith that John Meriweather discovered at Salmon Brothers, it was to ride your losses until they turned into gains". That is the violation of one of the most important trading principles that we retail traders have to follow. "Cut your losses early and let your winners run." You do NOT keep adding to your losses hoping for a turnaround. If we had all traded like this guy, we would all be bankrupt long time ago. And this guy is supposed to be a trading genius?? The number 1 guy on Wall Street? LOL

Just read the epilogue, it's fascinating to note that "Most of the other partners lost 90 percent or more of their wealth—that is, everything they had invested in the fund..." and yet, "most of the partners remained far richer than ordinary Americans". The big Nazi propagandist used to say "when you lie, lie big". I guess when you fail, it helps to fail big too. LOL

I will read the rest of the book later.

yeah. Ltcm blew up because they were overlevered. We all know that.

all else being equal, a smart person will be better adept at earning and managing risk than a dumb person. That’s why Goldman Sachs hires the smartest people in the world.

The point of the book is: intelligence vs greed and over confidence.

another example of the above is Raj Gupta of McKinsey or Martha Stewart and her insider trading.

 

[TheDawn]

yeah. Ltcm blew up because they were overlevered. We all know that.

all else being equal, a smart person will be better adept at earning and managing risk than a dumb person. That’s why Goldman Sachs hires the smartest people in the world.

The point of the book is: intelligence vs greed and over confidence.

another example of the above is Raj Gupta of McKinsey or Martha Stewart and her insider trading.

This is not about smart or dumb. This is about looking both ways before crossing the street even though the light is green. Anybody knows how to do that. Meriweather himself knew to check the direction of the wind before betting on Chicago Cubs when he was 11 and he didn't know not to throw money behind losing trades?? LOL

Anyway...

 

[newwurldmn]

that’s the point of the book.

hubris.

This is not about smart or dumb. This is about looking both ways before crossing the street even though the light is green. Anybody knows how to do that. Meriweather himself knew to check the direction of the wind before betting on Chicago Cubs when he was 11 and he didn't know not to throw money behind losing trades?? LOL

Anyway...

 

[TheDawn]

You can have delta by being long the guts of a box..Think about it.You tilt the deeps to have the desired Delta.A box is flat,the guts/wings most likely have delta

If i read it correctly,he is long a DITM Call and Put in the direction of the trend...

Essentially long the strangle..Not sure why you would want to trade the deeps,but I cant find his post..

Not for me

Essentially still a long vol. trade. If there is a vol. crush, he is screwed especially with DITM and so much DTE left...

 

[taowave]

Hard to say without knowing what percent of spot he is long..I cant find his post,but it sounds like he is synthetically long a strangle..I find it very hard to believe he has a 55% win rate being long OTM strangles,but I would need to backtest it...

DITM options are not terribly vega sensitive..All we know is he needs a big move one way or the other,unless he is a master at trading gamma..

And he did say he trades with a delta..Not sure why a good directional trader would opt to trade strangles

Essentially still a long vol. trade. If there is a vol. crush, he is screwed especially with DITM and so much DTE left...

 

[newwurldmn]

Hard to say without knowing what percent of spot he is long..I cant find his post,but it sounds like he is synthetically long a strangle..I find it very hard to believe he has a 55% win rate being long OTM strangles,but I would need to backtest it...

DITM options are not terribly vega sensitive..All we know is he needs a big move one way or the other,unless he is a master at trading gamma..

And he did say he trades with a delta..Not sure why a good directional trader would opt to trade strangles

@TheDawn

Smalfil is a moron. You both are too smart to waste your time figuring out what he's doing in his fictitious Walter Mitty portfolio. Your time is better served butting him on block or ignore.

 

[TheDawn]

Hard to say without knowing what percent of spot he is long..I cant find his post,but it sounds like he is synthetically long a strangle..I find it very hard to believe he has a 55% win rate being long OTM strangles,but I would need to backtest it...

DITM options are not terribly vega sensitive..All we know is he needs a big move one way or the other,unless he is a master at trading gamma..

And he did say he trades with a delta..Not sure why a good directional trader would opt to trade strangles

He's not. Like @newwurldmn said, everything is made up. There is no way he can make money with what he says is his strategy. As I rightly suspected, he's just a troll.

 

[zghorner]

I'm not sure that is true. All the guys over at WSB seem to be pretty focused on maximizing returns via highly asymmetric option positions.

WSB has always been a cesspool of gambling degenerates using FDs to satisfy their addiction. a few years ago there was some talent that frequented, now it is 90% neophyte turd and 10% pump and dump shill...not even worth the sub.

 

[ET180]

before I dive into the deep end of the pool

1) do you trade delta neutral to the stock when you sell premium?? 50 delta put,sell 2, .25 delta sell 4 or do you stick to 1 put for every hundred shares you want to own???

Generally no. In this market, I'm mostly selling call ratios and buy stock as a last resort to hedge the ratio. Generally, when it hits my long strike, I'll either adjust one of the short strikes (buy back, sell longer expiration + sell puts) or I'll buy 30-50% of the position and then another 40-70% when it hits my short strikes depending on the chart and how I feel about the position. I have small positions spread out over 50-100 different stocks and ETFs. This is based on my view that valuations are high and many are holding equities not because they want to, but because they feel that there is no other alternative. When valuations become more attractive, I will go back to selling naked puts, put spreads, and long stock + short calls.

2) have you backtested your "beliefs" and if so,do you use an IV% filter???

No, my adjustments are not purely mechanical. For example, this week I had a ratio on in OXY. I ended up buying enough stock to offset my naked call exposure before it even reached the naked call based on what I see happening with geopolitical risk. So far, that was the right call. Normally, I would have adjusted the short call / sold puts, etc and attempted to avoid being long stock for longer.