The EDGE of premium decay

[Trading Education Buyer]

Bro, theta is not edge. The market is aware that time passes.

So if you know your instrument , I only know one instrument , I am more aware of supports restance , trends on the one instrument , therfore market and option formula do not have my on which edge on which options to sell and which options to avoid.

The edge is derived from the instrument edge , the premium decay and specific strike prices , the timing of the trades and my support and resistance anylysis for the instrument.

There is no edge in randomly trades based on the option formula.

 

[justrading]

So if you know your instrument , I only know one instrument , I am more aware of supports restance , trends on the one instrument , therfore market and option formula do not have my on which edge on which options to sell and which options to avoid.

The edge is derived from the instrument edge , the premium decay and specific strike prices , the timing of the trades and my support and resistance anylysis for the instrument.

There is no edge in randomly trades based on the option formula.

I don't disagree with your general premise.

As the great Atticus chipped in once when I was having a long discussion on the esoterica of options;

"None of this amounts to a hill of d*cks if you can't forecast price or vol with some degree of accuracy."

So, my skill is with price, ie direction, not vol, and when someone pointed out that the rewards for a straight directional trade were much greater as opposed to those from spreads, I went back to my roots. I still put on options trades, as a hedge, to cap risk/limit exposure. My efforts learning were not wasted.

I have looked at selling naked options, credit spreads; I could never get my head around the crap R:R from all this. You need to be right, what, 80% - 90% of the time, if you want to make money? And the rest of it, if you don't manage your risk well enough, that can wipe out months and years of profits, or wipe you out like it did Niederhoffer, more than once?

I'd rather go the other way. Pick the appropriate instruments and make money by being right anything north of 35% of the time.

 

[Trading Education Buyer]

I don't disagree with your general premise.

As the great Atticus chipped in once when I was having a long discussion on the esoterica of options;

"None of this amounts to a hill of d*cks if you can't forecast price or vol with some degree of accuracy."

So, my skill is with price, ie direction, not vol, and when someone pointed out that the rewards for a straight directional trade were much greater as opposed to those from spreads, I went back to my roots. I still put on options trades, as a hedge, to cap risk/limit exposure. My efforts learning were not wasted.

I have looked at selling naked options, credit spreads; I could never get my head around the crap R:R from all this. You need to be right, what, 80% - 90% of the time, if you want to make money? And the rest of it, if you don't manage your risk well enough, that can wipe out months and years of profits, or wipe you out like it did Niederhoffer, more than once?

I'd rather go the other way. Pick the appropriate instruments and make money by being right anything north of 35% of the time.

Here is a clear trend signal I called , risk is 20 ticks for a daily option ,and so far reward is 400 ticks , weekly option cost for 10800 calls was 80 and reward 320 ticks

technical analysis dax signal

So buying randomly every week for trend breakout calls is going to lose money , but when used with technical know how , it can reap great rewards.

 

[justrading]

Here is a clear trend signal I called , risk is 20 ticks for a daily option ,and so far reward is 400 ticks , weekly option cost for 10800 calls was 80 and reward 320 ticks

technical analysis dax signal

So buying randomly every week for trend breakout calls is going to lose money , but when used with technical know how , it can reap great rewards.

Thanks, I follow that thread. It began because I wanted to know more about the DAX, but as someone posted, it has been disappointing because you offer no rationale for your trade decisions. You rather patronisingly said people need to understand options to understand why you did all that. I understand options very well, and I wouldn't put on the positions you did. You didn't explain your logic, so I'm left wondering. No explanation of why you do anything. If you are fishing for paid mentoring, you are doing a great job.

After boasting that $900 a week is a good living and easy to achieve if people know all you do, you are way down this past week and trying to fill the hole.

I'm not going to sling mud at you for that. You are being very honest about being in the hole, that I respect you for. Losses and drawdowns are a fact of life in trading, if anyone else says otherwise, run away as fast as you can. The bragging was a bit too early though.

 

[Trading Education Buyer]

Thanks, I follow that thread. It began because I wanted to know more about the DAX, but as someone posted, it has been disappointing because you offer no rationale for your trade decisions. You rather patronisingly said people need to understand options to understand why you did all that. I understand options very well, and I wouldn't put on the positions you did. You didn't explain your logic, so I'm left wondering. No explanation of why you do anything. If you are fishing for paid mentoring, you are doing a great job.

After boasting that $900 a week is a good living and easy to achieve if people know all you do, you are way down this past week and trying to fill the hole.

I'm not going to sling mud at you for that. You are being very honest about being in the hole, that I respect you for. Losses and drawdowns are a fact of life in trading, if anyone else says otherwise, run away as fast as you can. The bragging was a bit too early though.

With this strategy I am buying the weekly options a stop /protection , buying futures and sell calls or sell puts and sell futures , just in case trend breaks out I am covered and if weekly volatility is good , I can take 50 points a week .It is a new strategy I am working on.It fits in fine with my other strategies , where I don't have to buy down side protection.Usually I am buying supports and selling resistances.

That last trade was below selling support 10650 at 10600 , s/be 10750 sell , a mistake that resulted in losses.

 

[justrading]

With this strategy I am buying the weekly options a stop /protection , buying futures and sell calls or sell puts and sell futures , just in case trend breaks out I am covered and if weekly volatility is good , I can take 50 points a week .It is a new strategy I am working on.It fits in fine with my other strategies , where I don't have to buy down side protection.Usually I am buying supports and selling resistances.

That last trade was below selling support 10650 at 10600 , s/be 10750 sell , a mistake that resulted in losses.

And that sir is where you lost me.

Now let's start with the fact I know sweet buggerall about the DAX. I actually thought the options were European options, for the benefit of those who don't trade options, no early exercise. I had to look up the Eurex contract specs to see they are actually American style options.

Take your post #51 on page 6.

If I understood, you bought the DAX futures at 10650, stop 10350, 300 "ticks", (sic).

You wrote that you sold a 10600 call for 240.

What? A call is the right to buy. You sold a call 50 POINTS ITM, the DAX contract specs say a point is €25, in increments of 0.5 at €12.50. Yes, the tick is 0.5, the point is 1, so you might want to start by using the right terminology.

A call 50 points ITM would have an intrinsic value of 50x€25, plus time premium.

You sold it for 240?

That is precisely where you lost me.

 

[Trading Education Buyer]

And that sir is where you lost me.

Now let's start with the fact I know sweet buggerall about the DAX. I actually thought the options were European options, for the benefit of those who don't trade options, no early exercise. I had to look up the Eurex contract specs to see they are actually American style options.

Take your post #51 on page 6.

If I understood, you bought the DAX futures at 10650, stop 10350, 300 "ticks", (sic).

You wrote that you sold a 10600 call for 240.

What? A call is the right to buy. You sold a call 50 POINTS ITM, the DAX contract specs say a point is €25, in increments of 0.5 at €12.50. Yes, the tick is 0.5, the point is 1, so you might want to start by using the right terminology.

A call 50 points ITM would have an intrinsic value of 50x€25, plus time premium.

You sold it for 240?

That is precisely where you lost me.

I am referring to points , full points all the times.Not ticks.

I always mean points when I say ticks.

 

[justrading]

I am referring to points , full points all the times.Not ticks.

That's fine.

How did you sell a Call 50 points ITM, with a point value at €25, for 240?

Let's not get lost in semantics, let's just stick to the numbers.

50x25 is not 240, and we haven't even factored in any time premium. Yes, I understand these are weekly options, I believe they would expire the next week, and I understand convexity of the greeks.

Let's not fuck around anymore if you want to continue this discussion.

 

[Trading Education Buyer]

xxxxxxxxxxxxxx

 

[Trading Education Buyer]

That's fine.

How did you sell a Call 50 points ITM, with a point value at €25, for 240?

Let's not get lost in semantics, let's just stick to the numbers.

50x25 is not 240, and we haven't even factored in any time premium. Yes, I understand these are weekly options, I believe they would expire the next week, and I understand convexity of the greeks.

Let's not fuck around anymore if you want to continue this discussion.

Market is liquid , you can sell most strikes , so at 10650 sold 10600 = 50 intrinsic plus 190 premium.

These are monthly , this is monthly

bought 10550 put for 35 ticks weekly option as protection

Trading Education Buyer said:
Buying dax 10650 stop 10350 , selling 10600 call for 240 , till end of this week