This Forum overtrades options

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To make money, you need to good to predict the direction:
1) UP
2) Down
3) Side Way (revert to mean)

Option trading work in the same way, the tricky part is that you need to know which way and when the market will go .. If you are good in this, you are millnionaire at least. No one even in GS can do this, so if you are good in this, you are sure one day you will be as rich as Buffet.

Trying to use a complicated options strategies is PURELY negative expectancy game - consider the fees + slippage (the worst part in oprions).

Those "neutral" strategies is for big boy that have some kind of special access to certain "things" that retail traders DON'T have.
 
Quote from IVtrader:

...yet the fact is that for those who are wiling to invest some time, study and labor to understand the different option strategies and how and when to use them, alot more opportunities to make $$$$ open up.

...and of course one can trade both ways: directionally and non directionally.... that's the optimum way. you just have to learn how

its just that simple and just that difficult
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Well said.
 
Quote from IVtrader:

Bwolinsky

(I noticed that you've been registered on this website since 2008 and have posted over 400+ times? in various forums on here)

after all this time, you submit this posting(over 7 paragraphs), wondering why some traders will put on a strangle, butterfly or iron condor when "as far as you can tell" the only reason to use options is.......... to hedge a stock position or make $$$$ trading directionally.

of course more seasoned and astute option traders could tell you that:

some NON directional trades are designed to profit from a change in IV(implied Vol) of option premiums such as (negative vega trades like the butterfly and iron condor) and positive vega trades like the calendar)rather than price direction; and the strangle(which is a positive vega trade) designed to capitalize from a big move where the direction is u-n-k-n-o-w-n and when IV is L-O-W, typically right before a earnings release

some time spreads used directionally such as the OTM butterfly(when you want to capitalize on a possible move up but don't when the move will happen and you want theta on your side) or an OTM put calendar(when you want to capitalize on a possibile move down but don't really know when the move will happen and you want theta on your side

and yet any and all these strategies have been around for many years, traded by many successfull traders , some of whom have been the subject of articles in Industry related magazines and since these strategies can be easily learned from very well marketed trainings (easily found on the Net)plus several books,none of which are new, I have to ask:

is it just that you really don't want to take the time to know the how and why others trade these strategies OR do you have some other agenda for posting?
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Black Scholes will give you all the greeks you can want, but knowing them does not help you trade. I've never seen the technology to do this and properly research the process for optimal execution. In my opinion if you're doing things like that manually then it is only discretionary trading and without some results to determine your profitability I don't think too many of those people who might be able to teach you to trade vola really only have a feeling or gut reaction and if there's no systematic process or quantitative hard logic then there's not really anything but holding and hoping without some type of trading platform that will do this <b>automatically without discretion.</b>
 
Quote from Martinghoul:

Just like the people you're indiscriminately accusing of overcomplicating things, you're guilty of sweeping generalization. Everything has its place in moderate quantities, including flies, condors and the like. Just 'cause you don't know how to deal with the complicated bits doesn't mean others can't.
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It's not that I don't understand it but that I don't know any off the shelf technology that'll let you attempt to code these things into a backtestable platform. I've never seen it, and all I've seen is possibly some option pro platforms that could calculate IV or your delta hedge ratio and I know some will even keep your position at the right hedge ratio but that is the absolute limit to what I think can be done right now.

Sure you can use Binomials or monte-carlo path dependent simulations but unless there's some data then testing just to prove where volatility might go to still won't tell you the direction you really need to be trying to catch. It's not so much I don't understand them, I've never seen any options strategy analysis performance summaries...ANYWHERE.

This makes me believe that it really is as simple as getting a broker whose got the greeks and just trusting their calculations of IV, intrinsic value or implied volatility. As far as basing strategies around this you know the bottle top floating on the ocean is right on. And if your trades are lasting more than an hour there's definitely a lot of things that makes me say you will only want to use options to make directional bets or to hedge.

If I'm not understanding greeks that's not it at all. I can calculate so many things with my BA-II TI that there's absolutely nothing quantitative out there that I couldn't master. So when it comes to these options traders on these forums starting discussions to ask somebody about screenshots of the smile or the wave nobody really knows what to say even when you do have an opinion about where the greeks might go I think you're still guessing without backtesting and without the backtesting there is zero chance you'll ever really know how much you're risking and if you don't have the time to learn how to program that well I don't think you should even trade (options) much longer without those analyses.
 
Quote from bwolinsky:

Black Scholes will give you all the greeks you can want, but knowing them does not help you trade. I've never seen the technology to do this and properly research the process for optimal execution. In my opinion if you're doing things like that manually then it is only discretionary trading and without some results to determine your profitability I don't think too many of those people who might be able to teach you to trade vola really only have a feeling or gut reaction and if there's no systematic process or quantitative hard logic then there's not really anything but holding and hoping without some type of trading platform that will do this <b>automatically without discretion.</b>
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http://www.amazon.com/Art-Racing-Rain-Novel/dp/0061537969/ref=sr_1_1?ie=UTF8&qid=1320978843&sr=8-1

http://www.amazon.com/Boyd-Fighter-...=sr_1_1?s=books&ie=UTF8&qid=1320978875&sr=1-1

It's like Satchmo said about jazz: If you have to ask what jazz is, you'll never know.

Ditto here. Or at least that's how I feel when I'm trading options. Knowing the math only gets you so far. Black-Scholes is a useful fiction.
Mostly you see folks on here saying they get that feeling trading other things, but none of those other things, stocks, etfs, whatever, do that for me. With options, I get it. That's all.
 
bwolinsky

re:"Black Scholes will give you all the greeks you can want, but knowing them does not help you trade. I've never seen the technology to do this and properly research the process for optimal execution. In my opinion if you're doing things like that manually then it is only discretionary trading and without some results to determine your profitability I don't think too many of those people who might be able to teach you to trade vola really only have a feeling or gut reaction and if there's no systematic process or quantitative hard logic then there's not really anything but holding and hoping without some type of trading platform that will do this automatically without discretion."

as someone who's use of options is limited to perhaps married puts, and has never traded nondirectionally,your comments show that r-e-s-p-e-c-t-f-u-l-l-y you clearly don't understand the greeks, how their use contributes to the profitability of non directional trading or non directional trading itself.

you clearly are living in some kind of "vacuum" considering that you are unaware of the many trading platform available(from TOS, Trade Monster, IB just to name some)or alternatively software such as OptionVue)used to support trading decisionmaking or what you call "discretion"
I suggest that you refrain making any more comments about it as you clearly haven't studied the topic enough to offer any credible comments.
there is a HUGE community of traders who do this trading EVERYDAY and several who have been successfull enough to be the subject of articles in SOM, Expiring Monthly etc. All of them learned this skill(whether as a former CBOE marketmaker, or taking classes, or 1 on 1 mentoring as is available out there),a skill that was originally taught to me, is and is being taught to many individuals, and is teachable to those who WISH to learn.

I hope you are a better directional trader than a commentator about the subject of option trading
 
Quote from trefoil:

http://www.amazon.com/Art-Racing-Rain-Novel/dp/0061537969/ref=sr_1_1?ie=UTF8&qid=1320978843&sr=8-1

http://www.amazon.com/Boyd-Fighter-...=sr_1_1?s=books&ie=UTF8&qid=1320978875&sr=1-1

It's like Satchmo said about jazz: If you have to ask what jazz is, you'll never know.

Ditto here. Or at least that's how I feel when I'm trading options. Knowing the math only gets you so far. Black-Scholes is a useful fiction.
Mostly you see folks on here saying they get that feeling trading other things, but none of those other things, stocks, etfs, whatever, do that for me. With options, I get it. That's all.
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If I ask you to provide backtested performance results I'm sure you cannot provide them. The ROR is certain if you read some of my other threads.
 
Excellent thread. Finally someone says something.

I never understood why someone would be so concerned about what crazy option strategy to employ when the majority of what's being done is pointless.

There's a pre-requisite to options---->Having an edge in the market.
 
There's more than one way to skin a cat..

surprised-cat1_sqs.jpg
 
Quote from Soon2Bgreat:

Dude, that's a lot of words, not sure you said much...and if you think the CFA helped you study options you're more than mistaken. Cheerio.
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You don't even know who he is? That says a lot about you.
 
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