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Thanks for the positive comment.
Note: Out of laziness, I wrote replies directly below your individual comments.
Purely Mechanical Option Trading
- Thread starter jeffalvinson
- Start date
Thanks for the positive comment.
Note: Out of laziness, I wrote replies directly below your individual comments.
Quote from dipper17:
I have not made any assumptions. The problem I have is you donât seem to grasp the FACT that the price of the options is not predicated on yesterdayâs options prices.
contrary to your assumption,Tom Demark has writen a book on options contradicting your above statement.( fyi.....over 30 years of active investing and trading with clients like george soros, paul tudor jones etc etc if your not familar with his work) His day trading system incorperates the previous days option closes
cheers
john
Quote from Appleseed:
Quote from dipper17:
I have not made any assumptions. The problem I have is you donât seem to grasp the FACT that the price of the options is not predicated on yesterdayâs options prices.
contrary to your assumption,Tom Demark has writen a book on options contradicting your above statement.( fyi.....over 30 years of active investing and trading with clients like george soros, paul tudor jones etc etc if your not familar with his work) His day trading system incorperates the previous days option closes
cheers
john
Thanks John for the reference.
Quote from Appleseed:
Quote from dipper17:
I have not made any assumptions. The problem I have is you donât seem to grasp the FACT that the price of the options is not predicated on yesterdayâs options prices.
contrary to your assumption,Tom Demark has writen a book on options contradicting your above statement.( fyi.....over 30 years of active investing and trading with clients like george soros, paul tudor jones etc etc if your not familar with his work) His day trading system incorperates the previous days option closes
cheers
john
Have you or anyone else traded DeMark's system (sory for the detour). I was thinking the same thing; DeMark has some rules on creating a buy range based on the previous close, td %f . Dipper 17 I think everyone understands your point that the system should be based on the underlying spy, etc. I think you are questioning whether the system is predictive, I am a sceptic there and still waiting for a trade. I like the idea though.
Apple and King,
Thanks for bringing that to my attention, I did not know of it nor, obviously did Jeff.
I am talking about basic options pricing principles which are totally lacking in the context of this thread on Jeff's part. I will look into Demarks work, but I speculate he has a firm grasp on the concepts of delta and basic options fair value pricing.
Thanks again Apple and King
Thanks for bringing that to my attention, I did not know of it nor, obviously did Jeff.
I am talking about basic options pricing principles which are totally lacking in the context of this thread on Jeff's part. I will look into Demarks work, but I speculate he has a firm grasp on the concepts of delta and basic options fair value pricing.
Thanks again Apple and King
Jeff in response to the two examples you posted and your replies to my remarks:
In case one: If the market going into you opening the position was 2.00 to 2.50 and you paid 2.50 and immediately placed a stop loss order at 1.90, that stop would not be executed until the offer reached 1.90 and then your order would hit the next bid. So essentially what you are saying is that youâre up set that the 2.00 bid went down a dime to 1.90 after you placed a stop at that level? Your stop has nothing to do with the 2.00 bid that was there before or the 1.90 bid thatâs there now.
In case two: I have traded thousands and thousands of OEX contracts over the past 20 years, I know the rules regarding the width which mmâs can spread their bid and offer. If the index has moved 5 to 8 dollars the mmâs are not going to stand there and leave their offer in a call series unchanged just so they donât have to take the bid up because one order has been executed. That would force them to sell calls below fair value since they can not breech the maximum spread width set in the rules of the product. Nor would there be any incentive to.
As far as Najarian making a statement like that in a DVD for sale? Being that he makes a living trading options and his ultimate goal is to bring in as much order flow to the exchange where he trades I am sure heâs not selling videos that tell you other mmâs break the rules there just to screw the public. Thatâs absurd.
The proof is in the pudding my friend. You claim that you system based on whatever, tells you whether to buy a put or a call it tells you exactly what strike and month and exactly what price will give you 90% chance of making 25%.
Lets see it?
In case one: If the market going into you opening the position was 2.00 to 2.50 and you paid 2.50 and immediately placed a stop loss order at 1.90, that stop would not be executed until the offer reached 1.90 and then your order would hit the next bid. So essentially what you are saying is that youâre up set that the 2.00 bid went down a dime to 1.90 after you placed a stop at that level? Your stop has nothing to do with the 2.00 bid that was there before or the 1.90 bid thatâs there now.
In case two: I have traded thousands and thousands of OEX contracts over the past 20 years, I know the rules regarding the width which mmâs can spread their bid and offer. If the index has moved 5 to 8 dollars the mmâs are not going to stand there and leave their offer in a call series unchanged just so they donât have to take the bid up because one order has been executed. That would force them to sell calls below fair value since they can not breech the maximum spread width set in the rules of the product. Nor would there be any incentive to.
As far as Najarian making a statement like that in a DVD for sale? Being that he makes a living trading options and his ultimate goal is to bring in as much order flow to the exchange where he trades I am sure heâs not selling videos that tell you other mmâs break the rules there just to screw the public. Thatâs absurd.
The proof is in the pudding my friend. You claim that you system based on whatever, tells you whether to buy a put or a call it tells you exactly what strike and month and exactly what price will give you 90% chance of making 25%.
Lets see it?
<i>"Quote from jeffalvinson:
Example No. 2
You bought an option for 2.50 and the OEX index then moves several points (5 to 8 points) in your trade direction, but the bid remains deadpan at 2.00. Is that manual manipulation? or lack of volume? I believe both.</i>
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That's absurd. OK, I was mistaken in my belief this was a serious thread. My apologies.
**
If an OEX call option at 500 strike is bought for $250 with index trading at 495 and the index moves +8pts to 503.00 the now itm call will be worth at least $400 at any part of the option's expiry cycle.
If that happens during the last two days of expiry, a $250 OEX option in quoted example goes $600 ~ $750+ with ease. It had to be slightly otm in the first place for such a price, then +8pt index move (+16pt SPX move) takes it somewhere itm.
Other than any OEX floor traders or market makers here, I traded more collective OEX volume from 1999 thru 2002 than most of the 100K aliases who've passed thru this site. I never saw even a 2pt OEX move (4pt SPX move) in favor of an option's direction which did not increase value. The spread may widen momentarily where bid remains frozen, but it must revert to the mean if price move is legit.
Example No. 2
You bought an option for 2.50 and the OEX index then moves several points (5 to 8 points) in your trade direction, but the bid remains deadpan at 2.00. Is that manual manipulation? or lack of volume? I believe both.</i>
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That's absurd. OK, I was mistaken in my belief this was a serious thread. My apologies.
**
If an OEX call option at 500 strike is bought for $250 with index trading at 495 and the index moves +8pts to 503.00 the now itm call will be worth at least $400 at any part of the option's expiry cycle.
If that happens during the last two days of expiry, a $250 OEX option in quoted example goes $600 ~ $750+ with ease. It had to be slightly otm in the first place for such a price, then +8pt index move (+16pt SPX move) takes it somewhere itm.
Other than any OEX floor traders or market makers here, I traded more collective OEX volume from 1999 thru 2002 than most of the 100K aliases who've passed thru this site. I never saw even a 2pt OEX move (4pt SPX move) in favor of an option's direction which did not increase value. The spread may widen momentarily where bid remains frozen, but it must revert to the mean if price move is legit.