Selling delta 3-5 ES Puts with 40-57 days left

[oldnemesis]

Excellent thread.

It's useful to hear other traders' views of their trading strategy and especially what their perspective is on the risks they take without all the usual blathering and chest pounding.

Tomorrow morning I will get on an airplane to Myrtle Beach. Now my mother and father would NEVER have done such a thing because they would have thought it 'too risky'.

But I WANT to go to Myrtle Beach and while there is a certain risk there will be a disaster on the plane, studies have shown that driving to the airport is far more risky than taking the plane.

I take the risks I take in order to live the life I choose. Traders take the risks they take in order to trade as they choose. One can always quote a particular plane crash to try to scare a traveler out of his trip. If those stories bother you: don't fly.

BUT if you choose to fly anyway it's not a moral issue for Christ's sake.

Likewise there are stories of market events or company events in the past that are used to try to scare traders out of their proposed trades. If those stories bother you: don't trade.

As a traveler it is wise to be aware of past events so you can better evaluate your risk and likewise it is wise to be aware of past market events so one can better evaluate the risk of the trade.

One of these days I MIGHT be killed in a car accident, or my plane to Myrtle Beach MIGHT crash in the South Carolina swamps and my body MIGHT be eaten by the alligators.

Get some perspective folks.

 

[ironchef]

No man, you're confusing providing a service with an edge. I could bake cookies and sell them to you for $6 per dozen, that is a service, not an edge. Your friend provided a service and was compensated for it. My local McDonalds doesn't have an edge either, they make food and sell it, anyone can do it and anyone can earn the yield that comes from that.

I never said with my definition of edge that "no one" can do it. Please re-read my post. I said it had to be "difficult to obtain" and "not freely available to everyone". Your edge is actually extremely easy to replicate, I could do it in my sleep, and certainly is widely and freely available to everyone. I know there are people on here that truly and deeply believe that most traders just can't manage risk, but that is not really the reason why they fail. Being able to roll out and get out is something that 98% of the people can do just fine here. Honestly, it's not that hard and it's not an edge.

What you wrote made sense.

I kept trying to understand why Buffett was doing so well: Others paid to have him kept their money (insurance float) and so he had a 2:1 leverage margin at negative cost; he could afford to wait, not having to answer to anyone about profitability; he could buy at a discount when there were "blood on the Street"; he bought stocks with a big margin of safety...

Now if all us retail investors, investing part time, with no connections and resources, can duplicate his edge....

Any coaching is greatly appreciated especially regarding option trading.

Regards,

 

[OptionGuru]

What you wrote made sense.

I kept trying to understand why Buffett was doing so well: Others paid to have him kept their money (insurance float) and so he had a 2:1 leverage margin at negative cost; he could afford to wait, not having to answer to anyone about profitability; he could buy at a discount when there were "blood on the Street"; he bought stocks with a big margin of safety...

Now if all us retail investors, investing part time, with no connections and resources, can duplicate his edge....

Any coaching is greatly appreciated especially regarding option trading.

Regards,

Don't get too distracted with "Edge", it means nothing. Even the people who use the term can't define it - but it looks good in posts.

 

[ironchef]

Don't get too distracted with "Edge", it means nothing. Even the people who use the term can't define it - but it looks good in posts.

Thanks. But what should I do then? You can't just leave me hanging.

Maverick at least offered some methodology for me to go on.

Regards,

 

[Maverick74]

Excellent thread.

It's useful to hear other traders' views of their trading strategy and especially what their perspective is on the risks they take without all the usual blathering and chest pounding.

Tomorrow morning I will get on an airplane to Myrtle Beach. Now my mother and father would NEVER have done such a thing because they would have thought it 'too risky'.

But I WANT to go to Myrtle Beach and while there is a certain risk there will be a disaster on the plane, studies have shown that driving to the airport is far more risky than taking the plane.

I take the risks I take in order to live the life I choose. Traders take the risks they take in order to trade as they choose. One can always quote a particular plane crash to try to scare a traveler out of his trip. If those stories bother you: don't fly.

BUT if you choose to fly anyway it's not a moral issue for Christ's sake.

Likewise there are stories of market events or company events in the past that are used to try to scare traders out of their proposed trades. If those stories bother you: don't trade.

As a traveler it is wise to be aware of past events so you can better evaluate your risk and likewise it is wise to be aware of past market events so one can better evaluate the risk of the trade.

One of these days I MIGHT be killed in a car accident, or my plane to Myrtle Beach MIGHT crash in the South Carolina swamps and my body MIGHT be eaten by the alligators.

Get some perspective folks.

You are confusing risk and edge. You can take all the risk you want if you have an edge. But assuming there is an edge just because there is a lot of risk is kind of stupid. Nobody here is saying not to take risk. Have no idea what flying and driving has to do with edge.

 

[Maverick74]

Ok let me get this straight:
1) Standard oil's edge was he "bought up all the railroads". How is that elusive? Pretty obvious oil is not going to go anywhere on its own. He just got there first. Now I will agree with you if you say that buying "first" in business/technology etc is an edge in of itself. Otherwise quite frankly even mcdonalds has an "edge" (they did hit all time highs btw : ) because they were the first truly mass market fast food and took up some of the best real estate across the country.
YET

2) Buying up all the data on a seabed and packaging it is NOT an edge? Why? Pretty much same as buying up all the railroads (this is just controlling information vs controlling actual physical plant). The edge here was that he was able to get it done first and there was no point for someone to come after.

So if managing positions in a specific way is not an edge...can you describe (again broad terms are fine not asking you to write out your whole strategy) what YOUR edge is? Can you accurately predict where the market is going directionally? If so that would be pretty damn impressive if you can do it consistently and I would agree with you that is quite an edge above mine and above 99.999% of all traders. Can you accurately predict where volatility is going consistently (beyond the simple mean reversion we all know about)? Again I would give you that it would be quite an edge.

And I do think that many if not most traders who fail it's because they 1) do not position size properly, 2) do not manager losers and winners properly. Because no one I have ever met can predict 100% of the time where the market is going, so by definition, their edge comes from something else

By the way, in all my years or trading I have always asked myself "why isn't someone/everyone else already doing this?". I have a good answer now, but I agree with you that many many people (including myself for many years) do not, and that's a good reason to really evaluate one's strategy

No, buying the RR's was not an edge. His edge was logistics. He could undercut the market because his basis was lower then everyone else's. He had a "monopoly". And no, everyone couldn't just buy the RR's. At the time wildcatters were guys like you and me. We drilled for oil in small towns like Titusville, PA and then wrote sales agreements to move the oil. The only way we could profit is if the price we sold was greater then our marginal cost of production. All these people thought about was the oil. They didn't understand the concept of logistics and basis. Rockefeller instinctively knew that the pricing power could not come from oil itself, but from the infrastructure to move it. NOBODY at the time understood this. Still to this very day the money made trading energy comes primarily from the basis, not the product itself.

 

[Maverick74]

Guys I have clearly spelled out what an edge is. The fact that you don't have one is why you are not understanding the definition. Edges should be difficult to obtain and not freely available to everyone. Is this really that hard to comprehend?

 

[OptionGuru]

Edge = Financial Success

• Arnold Achwarzenegger has edge.
  
• Tiger Woods has edge.
• Bono has edge.
• Bill Gates has edge.
• Pablo Escobar had edge.
• Elon Musk has edge.
• Howard Hughes had edge.
• Vladimir Putin has edge.
• Donald Trump has edge.

And so on..................

 

[ironchef]

Edge = Financial Success

• Arnold Achwarzenegger has edge.
  
• Tiger Woods has edge.
• Bono has edge.
• Bill Gates has edge.
• Pablo Escobar had edge.
• Elon Musk has edge.
• Howard Hughes had edge.
• Vladimir Putin has edge.
• Donald Trump has edge.

And so on..................

But none of them traded options. Guru, who among us has a real edge trading options?

 

[Niten Doraku]

Guys I have clearly spelled out what an edge is. The fact that you don't have one is why you are not understanding the definition. Edges should be difficult to obtain and not freely available to everyone. Is this really that hard to comprehend?

I think at this point this thread is about to descend into the usual semantics and pedantics often espoused by those who do not want to venture into the true complexities of quantitative finance. By the way, thank you for elevating my appreciation for risk and expected value in this thread.