SPX Credit Spread Trader

[Maverick74]

Quote from yip1997:

If fat tail events happened more often than theoretical, it means the probability of other sections in the prob curve will be lower. Isn't it make sense to buy a "positive" edge lottery with FOTM options? BTW, where is Taleb now? He can't survive long neither. Slow bleeding for a long time can kill a trader too. LOL.

Yip, it's not that rare events happen more frequently then we think (they do) it's that rare events are seriously underpriced.

Again, there are no "positive edge" options.

It's my understanding Taleb did very well for himself. He made money for 20 years running several institutional derivatives desks. He is now purely an academic and can now enjoy the fruits of his labor by spending the rest of his life researching and writing about things that interest him.

There is a common misconception that Taleb simply bought DOTM options. This is not true. He was actually a big seller of ATM options and bought wings. I'm not endorsing this strategy, just want to explain that very few people on ET really understand what it is he did and why he did it.

Anyway, his new book is coming out April of next year called "The Black Swan". Get your copy now!

 

[Maverick74]

Quote from spreadn00b:

I hate to bring this down a few notches (but I have to) ... is the argument here that trading options regardless of buying, selling, strike selection, strategy, etc is a losers game always? In other words, is the argument that you're better off trading stock over the long haul? I've never considered options an "edge", but I'm reading that its just a downright disadvantage (according to some). What did I miss?

No, we are saying trading in general is a losers game (90% of all traders lose).

 

[yip1997]

Quote from Maverick74:

Yip, it's not that rare events happen more frequently then we think (they do) it's that rare events are seriously underpriced.


I agreed 100% especially on the call side.

He was actually a big seller of ATM options and bought wings. I'm not endorsing this strategy, just want to explain that very few people on ET really understand what it is he did and why he did it.

Isn't that the same strategy that I suggested in my previous post?

 

[Maverick74]

Quote from yip1997:

Well, yes and no. I am oversimplying it for the benefit of all the soccer moms on this thread. LOL. Please don't attack the messenger.

 

[yip1997]

Quote from spreadn00b:

I hate to bring this down a few notches (but I have to) ... is the argument here that trading options regardless of buying, selling, strike selection, strategy, etc is a losers game always? In other words, is the argument that you're better off trading stock over the long haul? I've never considered options an "edge", but I'm reading that its just a downright disadvantage (according to some). What did I miss?

When you have to fight for the b/a spread, you create a negative expectancy, and you lose an "edge".

 

[jeffm]

When I get a break between real work tasks, I will take a look at the b/a spreads on fotm ES and ER2 options. If I spot a super tight spread, I will often take the inside bid or offer and use that to make a cheap debit spread as crash insurance. This month, I have a bunch of ER2 NOV705/702.5 put spreads that I picked up for 0.05. You can do this kind of trade on globex, where you participate more directly in the market, compared to sending an order down to the SPX pit. Cheap partial-insurance against a black swan.

Quote from domestic:
again, if anyone else has repeatedly used partial hedges or done any analysis; i would be interested in hearing your thoughts.

 

[yip1997]

Quote from Maverick74:

Well, yes and no. I am oversimplying it for the benefit of all the soccer moms on this thread. LOL. Please don't attack the messenger.

I also over simplified my strategy.

 

[Maverick74]

Quote from Maverick74:

Well, yes and no. I am oversimplying it for the benefit of all the soccer moms on this thread. LOL. Please don't attack the messenger.

Sorry Phil, I should not have excluded you. Soccer dads too.

 

[yip1997]

Quote from Maverick74:

Well, yes and no. I am oversimplying it for the benefit of all the soccer moms on this thread. LOL. Please don't attack the messenger.

Did you mean "yes and no" to my second statement? Or "yes" to my "agree" statement, and "no" to my strategy statement.

Just want to clarify and not to confuse the soccer dads and moms.

 

[RichardRimes]

Quote from Maverick74:

Well, yes and no. I am oversimplying it for the benefit of all the soccer moms on this thread. LOL. Please don't attack the messenger.

NOW THAT's and ELITIST comment :eek: