Question for the experts, please

Don Bright · Sep 1, 2012

Quote from Ansare:

Appreciate the reply and additional information, thank you. But unless it went zooming over my head I didn't see a reply to my question: "Are there a few generally accepted and well-known products which offer good volume but higher volatility that I'm missing?"

Just do a Finance.Yahoo.com search I suppose. Or go to Ivolatility and search out higher vols for the products that interest you (equities, indexes, etc.).

Don

Ansare · Sep 1, 2012

Quote from Don Bright:

Just do a Finance.Yahoo.com search I suppose. Or go to Ivolatility and search out higher vols for the products that interest you (equities, indexes, etc.).

Don

There you go, thanks.

Don Bright · Sep 1, 2012

Quote from Ansare:

There you go, thanks.

I still like TrackData for much of my research. We have an expensive real time feed, but they offer a really cheap, delayed quote alternative. Something like $10 bucks a month or something, great for research.

Don

Martinghoul · Sep 3, 2012

Quote from Don Bright:
Sorry for what loss? Am I missing something?

I don't think any newbie should trade options at all. Learn the conversion valuations, then they will view all the hype much differently.

If you buy an option, every day causes you to lose premium. If you're dead set on betting on direction, then you have the same risk with deep ITM that you do by buying the stock. To buy OTM calls hoping for big move, is just not great risk reward IMO.

If you buy calls or puts, all you risk is everything you paid. If you sell them, and understand that about 90% go out worthless (please check that number, it may have changed with more index options being traded), then the risk reward seems to make more sense.

And, yes, I agree that some basic understanding of the simplicity of options should be a no brainer, before risking any $$.

Don

Very depressing to read this... Anyways, I don't want to derail this thread any more, so I'll shut up.

MTE · Sep 3, 2012

Quote from Don Bright:

...If you sell them, and understand that about 90% go out worthless (please check that number, it may have changed with more index options being traded), then the risk reward seems to make more sense...

This is probably the most often misquoted/misused statistic in options.

90% or whatever the exact % may be of options that are held to expiry go out worthless, however that doesn't automatically imply that selling options is advantageous to buying them.

What nobody seems to mention when quoting this 90% thing is that the majority of options are closed out prior to expiry, so those 90% represent a much lower fraction, when you consider the total number of options that are in existence at any point in life of a particular contract. In adition, nobody mentions that in order to be among those 90% statistic you need to be able to withstand huge swings in your equity and thus require a very large account relative to your position.

Martinghoul · Sep 3, 2012

Quote from MTE:
This is probably the most often misquoted/misused statistic in options.

90% or whatever the exact % may be of options that are held to expiry go out worthless, however that doesn't automatically imply that selling options is advantageous to buying them.

What nobody seems to mention when quoting this 90% thing is that the majority of options are closed out prior to expiry, so those 90% represent a much lower fraction, when you consider the total number of options that are in existence at any point in life of a particular contract. In adition, nobody mentions that in order to be among those 90% statistic you need to be able to withstand huge swings in your equity and thus require a very large account relative to your position.

+1

It's unfortunate that someone like Don repeats this meaningless number.

Put_Master · Sep 3, 2012

Quote from Ansare:

I regularly trade /SI and occasionally place an option trade for giggles. Have been working on something I'd like to try with a bit more serious effort and need some advice.

Love the liquidity of spy and the q's but prefer those that move more like goog/amz/bidu etc. Are there a few generally accepted and well-known products which offer good volume but higher volatility that I'm missing?

BTW, I have awesome respect for anyone who regularly is profitable trading options. The complexity is pretty mind-boggling.
Thanks very much.

That last paragraph really doesn't seem to go with the 1st 2 paragraphs.
It almost seems like someone mixed up 2 different posts from 2 different investors and blended them together, as some sort of joke.

Ansare · Sep 3, 2012

Quote from Put_Master:

That last paragraph really doesn't seem to go with the 1st 2 paragraphs.
It almost seems like someone mixed up 2 different posts from 2 different investors and blended them together, as some sort of joke.

Huh. Well, I don't see the incompatibility of them at all and assure you it's no joke in the slightest. Don't you tend to respect people who capably do things you can't?

neke · Sep 3, 2012

Quote from Don Bright:

If you buy calls or puts, all you risk is everything you paid. If you sell them, and understand that about 90% go out worthless (please check that number, it may have changed with more index options being traded), then the risk reward seems to make more sense. Don

Yeah, the 10% you are wrong might be the 13-bagger loss like I had on GOOG the week ended 5/18/2012

. So the 90% rate is useless without putting a context to it. By and large I believe options are fairly priced. You will make no money randomly selling or buying (after costs). The edge is your market experience in knowing what/when to trade.

Put_Master · Sep 3, 2012

Quote from Ansare:
Huh. Well, I don't see the incompatibility of them at all and assure you it's no joke in the slightest. Don't you tend to respect people who capably do things you can't?

Of course. Everybody here has the capacity to do things I can't.
But I have no intention of trying more complex, more risky, lower probability, or more leveraged trades,... just because I see others doing them.

You stated.... "I have awesome respect for anyone who regularly is profitable trading options."
Really?
Because you should actually save that "awesome respect" for non option traders who are regularly profitable.
Making regular profits with options, is a lot easier than making a profit without them.
If you don't realize that, you really should be sticking with the more basic option strategies, before moving on to the more complex ones.
Just because a trade is more complex, doesn't make it a better trade, or one with a higher probability of being successful.

You may have noticed, not many traders tend to share their more complex trades in "real time".
There could be a reason for that.