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What strategies do you guys use?
- Thread starter klurby
- Start date
Quote from Betapeg:
They say selling far OTM puts on gold is a sure bet.
Honestly, that sounds like a disaster waiting to happen.(and this is coming from someone who's biggest trade has been long-gold for the last 6 years) It's the type of market that could be down 100 in a day or 300+ in a week. Eventually the bull market will end, and it will end with a bang.
Maybe look at vertical spreads, where you can define your max-risk(assuming you learn how to handle/avoid expiration when the market is around the short strike.)
As someone mentioned earlier in the thread, the vol skew may offer some alpha from the strategy you mention, but I'm not sure I trust anyone to succesfully extract it over the long-term.
I think your corn trade gave you a valuable less at a relatively low cost. Hopefuly you treat it that way.
Quote from Betapeg:
Ha! It happened. I took a 5x loss on corn. You guys were right. Dangerous indeed. Kind of looks like a Taleb distribution of returns, doesn't it?
So how does this Liberty Trading Group do it so well? They wrote a book called The Complete Guide to Option Selling where they detail this far OTM futures options strategy.
Taleb distribution? I assume you mean fat-tails, Cauchy, etc. The problem is that CORN DIDN'T MOVE THAT MUCH. It's flat over the last ten days. You can't sell pennies in these commodities because the vol can explode on a single large order (in vol). Often you're as much or more exposed to the smile than outright vol... and you don't look at vol!
Inwestors still thrilled?
Betapeg, you still arguing about this?
Quote from Betapeg:
Ha! It happened. I took a 5x loss on corn. You guys were right. Dangerous indeed. Kind of looks like a Taleb distribution of returns, doesn't it?
So how does this Liberty Trading Group do it so well? They wrote a book called The Complete Guide to Option Selling where they detail this far OTM futures options strategy.
Betapeg,
You mentioned a book. Its not the book you should start off with.
The best book on options trading is Option Volatility & Pricing, by Sheldon Natenberg. It was written in the late 80s (revised in the early 90s) but its still highly applicable. except maybe the ease of finding mispriced options using a retail broker's platform - not referring to options that are over priced because implied vol is expected to snap back down or underpriced because because implied vol is expected to increase.
Anyway, the book is dry, because the author deals with facts, very little opinion or emotion and he covers the subject very well. If you are like me, you'll have to read it more than 1x to get it. I am still reading the same thing again and again and I still haven't mastered it.
Another good book is Options as a Strategic Investment by Lawrence McMillian. This is a more a better read, because it is easier than Natenberg. But, if you master the chapters Mathematical Applications and Advanced Concepts, it is a good foundation.
Start with Natenberg first.
You mentioned a book. Its not the book you should start off with.
The best book on options trading is Option Volatility & Pricing, by Sheldon Natenberg. It was written in the late 80s (revised in the early 90s) but its still highly applicable. except maybe the ease of finding mispriced options using a retail broker's platform - not referring to options that are over priced because implied vol is expected to snap back down or underpriced because because implied vol is expected to increase.
Anyway, the book is dry, because the author deals with facts, very little opinion or emotion and he covers the subject very well. If you are like me, you'll have to read it more than 1x to get it. I am still reading the same thing again and again and I still haven't mastered it.
Another good book is Options as a Strategic Investment by Lawrence McMillian. This is a more a better read, because it is easier than Natenberg. But, if you master the chapters Mathematical Applications and Advanced Concepts, it is a good foundation.
Start with Natenberg first.
Quote from JSHINV:
Betapeg, you still arguing about this?
Quote from JSHINV:
Betapeg,
You mentioned a book. Its not the book you should start off with.
The best book on options trading is Option Volatility & Pricing, by Sheldon Natenberg. It was written in the late 80s (revised in the early 90s) but its still highly applicable. except maybe the ease of finding mispriced options using a retail broker's platform - not referring to options that are over priced because implied vol is expected to snap back down or underpriced because because implied vol is expected to increase.
Anyway, the book is dry, because the author deals with facts, very little opinion or emotion and he covers the subject very well. If you are like me, you'll have to read it more than 1x to get it. I am still reading the same thing again and again and I still haven't mastered it.
Another good book is Options as a Strategic Investment by Lawrence McMillian. This is a more a better read, because it is easier than Natenberg. But, if you master the chapters Mathematical Applications and Advanced Concepts, it is a good foundation.
Start with Natenberg first.
Better clarify... what I haven't mastered is the math needed to work the formulas in the Appendixes in Natenberg with the model formulas and other financial formulas. I knew calculus and statistics in high school and college. So aptitude isn't the problem, motivating myself to learn it again is another story. I figure most of the people who know their stuff and are experts at one time crunched the numbers on their hand helds to determine pricing and greeks using Black Scholes and other models. They have a familiarity with them because they crunched the numbers (including the greeks) themselves. I know for any financial formula or even simple ratios, you understand them less if you don't crunch the numbers yourself.