The EDGE of premium decay

The very definition of the edge is "an intrinsic quality of your setup the improves your changes of winning". E.g. it could be cost of capital (if you cost is lower then most people, you can play interesting games), ability to make markets and this collect bid/offer spread etc. While, as I said before, a retail trader has certain advantages due to his unique position in the market place, you need to think hard about how to use those edges.
 
W.J. Feathermaker III said:
I haven't perused the other couple of dozen threads with the same OP talking about this strategy, so all I read are vague references to what he is talking about. Let's talk about what you did (or hypothetically did) during the week of December 5-9. ES range was essentially 2179.00 (Sunday night low) to approx 2260.00...81 pts or so. Big move for the index.
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I had longs , I closed a few and opened shorts using a strategy which would gain on the gamma , this strategy would very little on expiry higher.It gave me 2 months to achieve a profit on a pullback ,otherwise losses neglible on shorts.my strategy was ready for for options gamma upside profit

Wthin two months a pullback will be gamma profitable omshort side , so in the meantime sold several weekly straddles . upside short risk is covered , because I have trades open already on another strategy makes a fotune for upside breakout.

Now understand sun tzu and options


https://www.elitetrader.com/et/threads/sun-tzu-art-of-trading-war-the-edge.304608/


Options is a zero sum game , understand this , at any given point , but options is a great game when mutiple strategies are ready for sun tzu

“The supreme art of war is to subdue the enemy without fighting.”

“Supreme excellence consists of breaking the enemy's resistance without fighting.”

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win”

Every knob looks at option formula and sucks it and option formula pays income to winning warriors

IGNORANCE.jpg
 
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sle said:
The very definition of the edge is "an intrinsic quality of your setup the improves your changes of winning". E.g. it could be cost of capital (if you cost is lower then most people, you can play interesting games), ability to make markets and this collect bid/offer spread etc. While, as I said before, a retail trader has certain advantages due to his unique position in the market place, you need to think hard about how to use those edges.
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You have zero edge , unless you have a mental edge .All your illusionary edges are worth zero , if you can't execute your edge.

 
Trading Education Buyer said:
True ! But you can get someting close to an edge , if you appply it to stock indices .A true edge is present , before any trade is placed .Over a series of trades , rather than a single trade , it does become an edge.

You need to learn advanced trading and rollover your losing position , that adds to your edge.There is an edge over a series of trades .

Five fundamental truths:
1. Anything can happen.
2. You don’t need to know what is going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in the market is unique.
– Mark Douglas
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#2 is false. You always need to know what is going to happen next in order to make money. You need to also plan ahead for a worst case scenario and plan how to handle it at least try to grasp an approximation of expected market situations. (ie Fed reporting in next week, ex-dividend dates,etc..)
justrading said:
You were talking about weeklies sunshine, not monthlies.

Anyway, first point, stipulate that 240 is points. You talk about weekly profit in dollars, and don't qualify the numbers for trades.

Secondly, if you really want to attract a following, as said by someone before me, you need to explain more. The logic of buying a futures contract and selling an ITM call escapes me. If the market moves against you, the call will mitigate your futures loss, to a point, by diminishing degrees. Your sold call is about 0.50% ITM, well within the realm of possibility for a single days move. If it moves in your favour, convexity of the ITM option means an ever reducing benefit from the move as delta increases.

If you have confidence in direction, why run the race with one arm tied behind your back? If you don't, why not, and why that particular choice of call?

As suggested, you really need to explain more.

If you'd like a great example of how to explain, here is one.

https://charmandcolor.wordpress.com/2016/12/09/inner-workings/

I don't mean to be patronising, but I believe many who read this don't trade options. The title of the blog, charm and color (gawd, I hate that, I spell it colour), refer to second and third order greeks.

Read and enjoy.
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I have been trading options for years and I am confused here all this talk about points??. :)
 
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justrading said:
You were talking about weeklies sunshine, not monthlies.

Anyway, first point, stipulate that 240 is points. You talk about weekly profit in dollars, and don't qualify the numbers for trades.

Secondly, if you really want to attract a following, as said by someone before me, you need to explain more. The logic of buying a futures contract and selling an ITM call escapes me. If the market moves against you, the call will mitigate your futures loss, to a point, by diminishing degrees. Your sold call is about 0.50% ITM, well within the realm of possibility for a single days move. If it moves in your favour, convexity of the ITM option means an ever reducing benefit from the move as delta increases.

If you have confidence in direction, why run the race with one arm tied behind your back? If you don't, why not, and why that particular choice of call?

As suggested, you really need to explain more.

If you'd like a great example of how to explain, here is one.

https://charmandcolor.wordpress.com/2016/12/09/inner-workings/

I don't mean to be patronising, but I believe many who read this don't trade options. The title of the blog, charm and color (gawd, I hate that, I spell it colour), refer to second and third order greeks.

Read and enjoy.
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Perhaps someone can ask him why he is buying spot and selling a call when he should be selling that put?
 
The thread title is akin to stating that there is edge in getting a no-interest auto loan. The rate is embedded in the price of the car. Or that an 8% note on a biotech is edge bc it's trading at coupon 500bp over Treasuries.

It's sad that the least knowledgeable feel the need to express it.
 
destriero said:
Perhaps someone can ask him why he is buying spot and selling a call when he should be selling that put?
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If you are who I think you are sir, delighted at your posting. Yes, your point about greed and stupidity overwhelming logic is all too true.
 
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