Proprietary/options Ecn?

"Edge in options off floor? I don'ty think so. Limited auto-ex(that can be broken by MM's or the exchange), "

I don't even know what that is.

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Relatively high commission rates compared to a floor trader or upstairs Option MM firm($1.00 to $3.00 per contract compared to .50 on the floor)

If you are trading stocks on the floor you don't pay any commissions at all. Stock Daytraders pay thousands of dollars in commissions per month. Big difference between being on the floor and off.

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"customer margin on option postions(Synthic Call, Put etc.), "

there you have a point

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"cancelation fees,Option's controlled by a relatively few big MM firms "

this has never caused me any problems.

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"no after hours trading"

I don't feel a need to trade premarket or after hours.

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"many strategies that require premium selling require large capital to earn a living. If you cannot sell premium and you are an option trader, you have a big disadvantage. I was an option MM for 12 years and I know this to be true. If you can only buy option premium at all times, you cannot earn a living trading options unless you can pick direction(and option volatility). "

There you have a very big point. The point is the same as the one earlier, which is that you arent getting proffesional leverage, whicn is why people want to trade options at a pro firm that will give them professional leverage.

'A good stock trader can make 250,000 + per year at a pro firm in a stock account with 50k using leverage . Unless a trader has alot of capital, has sophisticated pricing models and extremely low commissions rates-YOU WILL NOT MAKE A LIVING TRADING OPTIONS OFF FLOOR with 50k-and I mean a good living, not selling spreads 20 times or buying 50 contracts to take a shot at making money. "

That potential earning power is due to getting professional leverage. 50k at 10:1 is 500k buying power, so you are saying a good stock trader can make 50% of his buying power in a year.

I am sure there are many proffessional options traders that make 50% a year on their available margin. Some of them probably make 10 times that much. Victor Sperandeo "Trader Vic" said in his book that he made 600% as a proprietary trader with a 50/50 split of profits and losses trading options almost exclusively. I am sure he had professional margin. This was also over 10 years ago so commissions were much higher than today. Perhaps his firm was willing to go along with it because they were getting a cut of his profits and he was a proven money maker.
 
Maverick74,

I think you make some good points . However, there are times that it is best to sell premium in options and you can't do it as a customer unless you have a solid six figure account. Now is a good example , Though there is some risk , I would rather sell a strangle in the OEX (or index's ) than buy. The option volatilty is now too high for buying premium(unless we get huge moves everyday). The odds say you will lose. That is my point, if you can only buy premium and do long gamma strategies, you are at a big disadvantage trading options, especially when the option volatility is too high to make money buying premium. Why do you think many option traders have gone upstairs and now trade stock or only use options only as a hedge?


Gene Weissman
Lieber & Weissman Sec., LLC
gweissman@stocktrade.net
 
Option trading is very similiar to counting cards in black jack. If you can quantify your edge, you can put the odds in your favor. Just ask Blair Hull. I guess after he did just that in Vegas he started Hull Trading.

Originally posted by Maverick74

My point exactly! When Blair Hull started trading, no one had Volatility models, there were wide option spreads, plenty of lay-up option orders etc. You could stand in the crowd and lock-in riskless arbitrage transactions or spreads for 1/4 profit on each trade , with market maker margin! A good trader could turn 100K into millions. This is not the case anymore. Option Seat prices tell the story. Option meberships on the P-coast for example are down to 20k. Blair Hull Sold out to Goldman Sachs, for a good reason I'm sure, he made money when times were easier and now he wants less risk and more time to enjoy life.



Gene Weissman
Lieber & Weissman Sec., LLC
gweissman@stocktrade.net
 
Originally posted by Gene Weissman
Maverick74,

I think you make some good points . However, there are times that it is best to sell premium in options and you can't do it as a customer unless you have a solid six figure account. Now is a good example , Though there is some risk , I would rather sell a strangle in the OEX (or index's ) than buy. The option volatilty is now too high for buying premium(unless we get huge moves everyday). The odds say you will lose. That is my point, if you can only buy premium and do long gamma strategies, you are at a big disadvantage trading options, especially when the option volatility is too high to make money buying premium. Why do you think many option traders have gone upstairs and now trade stock or only use options only as a hedge?


Gene Weissman
Lieber & Weissman Sec., LLC
gweissman@stocktrade.net
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Gene,

OK, now we are getting somewhere. Thanks for the reply. While I agree with you that if I had a gun to my head and I had to sell premium I would do it on an index rather then an individual stock just because index vols don't tend to jump the way individual stocks do. However, I will point out there is a lot of cheap vol in this market. We find it every day. And we buy it, and we get 10 to 40 pops in it. So it is out there, like I said before, you just have to find it.

But back to your short gamma plays. Lets say you go ahead and short a boatload of premium on the OEX because it is way up there now right. And everything is going along just fine. Then out of the blue the United States launches an attack on Iraq. And Iraq in turn launches an attack on Israel. First news headline in the morning, 10 american fighter jets shot down. Guess what buddy. Game over. That could wipe out your account the first hour of trading. That's the point I am making about selling premium. You never know when that will happen. And when it does, you have no way to hedge that short gamma. Because the vol is going to jump.

Now as far as your statement regarding being long gamma as a bad strategy. I really don't know how you can say that. Most traders that work on the floor who have any kind of lengthy career have done so by staying long as much gamma as they can afford. Every trader that has gotten escorted off the floor because he blew out his account was short gamma not long gamma. I never knew one guy on the floor that blew out of his account because he was long gamma.

And the reason why guys are going upstairs is because the competition for oder flow is becoming so great that they just can't stay on the floor trading 15 stocks when they have 5 and soon to be 6 exchanges competing for that order. And if they are turning to stocks to trade upstairs its probably because they never made any money on the floor.

Although I disagree with your comments on this matter I do appreciate your feedback. It's just that I see so much money to be made in these options every day I have trouble sleeping at night. I think Metooxx is doing very well too. So when someone says that there is no edge, I get a little edgy.

Again, If you care to respond, where is the edge in daytrading. I know you run a prop shop and it's in your best interest to promote it. But I am just curious as a guy who runs a prop shop, where exactly do you find the edge there?
 
Now as far as your statement regarding being long gamma as a bad strategy. I really don't know how you can say that. Most traders that work on the floor who have any kind of lengthy career have done so by staying long as much gamma as they can afford. Every trader that has gotten escorted off the floor because he blew out his account was short gamma not long gamma. I never knew one guy on the floor that blew out of his account because he was long gamma.

And the reason why guys are going upstairs is because the competition for oder flow is becoming so great that they just can't stay on the floor trading 15 stocks when they have 5 and soon to be 6 exchanges competing for that order. And if they are turning to stocks to trade upstairs its probably because they never made any money on the floor.

Although I disagree with your comments on this matter I do appreciate your feedback. It's just that I see so much money to be made in these options every day I have trouble sleeping at night. I think Metooxx is doing very well too. So when someone says that there is no edge, I get a little edgy.

Again, If you care to respond, where is the edge in daytrading. I know you run a prop shop and it's in your best interest to promote it. But I am just curious as a guy who runs a prop shop, where exactly do you find the edge there?

Originally posted by Maverick74

I think you are not really listening to what I am saying. The option volatility is probably too high to buy now. I was using index's as an example. I am not going to go into a long analysis on option trading, but to make things simple, the option volatility is probably too high to trade around in most stocks and certainly all index's now. Sophisticated traders that are option buyers (Timber Hill for example) I'm sure are selling premium or laying off option volatility in other related products to get neutral. You cannot buy option premium all the time and make money, that is a fact.

And if they are turning to stocks to trade upstairs its probably because they never made any money on the floor.

Originally posted by Maverick74


This is really a silly statement. Bob Bright and many others started their firms from money made trading on the option floors. They left because of the high costs,tight spreads and no trading edge(Trading EDGE-Simple definition-a spread is worth 1.5. In the old days I could buy the spread at 1.25 and sell the spread at 1.75 all day. Now the spread market is 1.5625-1.625 (no edge) or pick off order flow.


Without getting into detail, Metooxx , is not your average customer . He's a fine trader, but most option traders don't have his sophistication ,capital or knowledge.

We have traders that have 50k to 150K capital at our firm and make solid incomes. They are exceptional, but they are able to use what I feel is the edge upstairs- well maintained hardware,Multiple T-1 lines, access to all ECN's , professional analytics and direct access order execution and trading terchniques that I can't go into , but involve monitoring and trading off the underlying index's . You get Broker Dealer margin when you are a LLC member(S 7) , which applies to stock as well as option postions.


Gene Weissman
Lieber & Weissman Sec., LLC
gweissman@stocktrade.net
 
Originally posted by rs7
BTW, I am clearing through SLK and using Redi's Options Montage.
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What some call an edge others might call a license to steal. The only remaining edge is owning a trading firm. don't misunderstand, I truly respect the opinion of those who were smart enough to take advantage of "edge", and turn $100 into millions. But I don't know if they are saying you cant make a couple % per month returns, or if thats just not worth it. And todays edge is in execution technology, I think.

Anyway because of your experience, I look forward to your view of todays option trading. I would be interested in the type of trades you are looking for and what tools you will use to find them. I understand you could be taking advantage of price disparities or techniques that you would rather not tell all about. If so, no problem.
 
redzuk,

We are looking into many other areas including risk arb, stat arb, matched pairs, intra-market spreads, Long Gamma option strategies(when the Vol. is low) etc. Times are tough, but I hope they will improve-have a good weekend!!


Gene Weissman
Lieber & Weissman Sec., LLC
gweissman@stocktrade.net
 
Is it possible at some prop firms to trade options? I've been looking a bit on the internet and get the impression however that you can not limit your orders? Is this correct ?
 
Quote from cvds16:

Is it possible at some prop firms to trade options? I've been looking a bit on the internet and get the impression however that you can not limit your orders? Is this correct ?
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Not at rates you can live with ...
 
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