options on futures analytics software

[dmo]

Quote from Johno:

Hi dmo,
Thanks for sharing your observations. Do you use the probability cones and three dimensional modeling, if you do are these concepts hard to learn! Are they of any particular value in general options trading or geared more towards exotic options combinations.
Thanks and best regards

Johno

I don't use the probability cones. As for the 3D modeling - again, I highly recommend it as a learning tool. You can see in black and white how vegas, thetas and gammas change over time, which is very important to understand.

When you say "exotic options combinations," do you mean option positions other than "cookie cutter" strategies such as iron condors, etc.? If so, I would encourage you to become comfortable trading and managing such positions, which I don't consider exotic at all. If an option trader is uncomfortable with any position that does not have a name (IC, butterfly, vertical, etc.), then he or she is handicapped. They are trading options with one hand tied behind their back. They are going into the ring every day against world champions without having adequately trained for the fight. I would really encourage anyone who does not feel equipped to analyze, understand and manage ANY option position to work on developing conceptual fluency in options and greeks. To that end the OSET is a good tool.

 

[Johno]

Quote from dmo:

I don't use the probability cones. As for the 3D modeling - again, I highly recommend it as a learning tool. You can see in black and white how vegas, thetas and gammas change over time, which is very important to understand.

When you say "exotic options combinations," do you mean option positions other than "cookie cutter" strategies such as iron condors, etc.? If so, I would encourage you to become comfortable trading and managing such positions, which I don't consider exotic at all. If an option trader is uncomfortable with any position that does not have a name (IC, butterfly, vertical, etc.), then he or she is handicapped. They are trading options with one hand tied behind their back. They are going into the ring every day against world champions without having adequately trained for the fight. I would really encourage anyone who does not feel equipped to analyze, understand and manage ANY option position to work on developing conceptual fluency in options and greeks. To that end the OSET is a good tool.

Hi dmo,
In reference to Exotic I was thinking more along the lines of positions generally uneconomical for retail traders due to spreads, commissions etc, often used by arbitrage traders. The main reason for all the questions is more about the time required to become profficient and effective with the program rather than the $ cost and whether I can improve discipline thru standardised benchmarks using this software. We're all on a journey where most of us seek to improve.

Once again thanks for your insights and best regards

Johno

 

[dmo]

Quote from Johno:

Hi dmo,
In reference to Exotic I was thinking more along the lines of positions generally uneconomical for retail traders due to spreads, commissions etc, often used by arbitrage traders. The main reason for all the questions is more about the time required to become profficient and effective with the program rather than the $ cost and whether I can improve discipline thru standardised benchmarks using this software. We're all on a journey where most of us seek to improve.

Once again thanks for your input and best regards

Johno

Okay, sorry for the lecture LOL.

I think every option trader should have analytical software. Or perhaps I should just say that I personally need analytical software to be successful. I'm sure some people can be successful with a seat-of-the-pants approach, but I can't. I rely heavily on comparing the market reality with the theoreticals in order to be oriented as to what is going on in the market. For example, I closely follow the skew in markets I'm trading. That's an example of comparing the real with the theoretical. For that I need analytical software. The Hoadley functions give me the flexibility to crunch numbers and display them any way I want. So I can try new things, explore, play. I can't even imagine trading options without analytical software such as Hoadley.

That said, that's just me. And as strongly as I feel about it, and as obvious as it seems to me, it may or may not have any relevance to you. Option Coach and Dagnyt for example are both highly experienced option traders who have an entirely different approach. As I've said before, I never argue with what works for an individual - which is often so often different from what works for someone else. So if you are successful with a seat-of-the-pants approach, or feel a natural affinity for that approach, and the analytical greek-oriented approach leaves you cold, then perhaps that's your biggest clue.