Who is really making a living trading options??
- Thread starter nnfx
- Start date
Quote from StarDust9182:
"Volatility and risk go hand in hand."
Respectfully, I used to think that volatility was a measure of risk. Now I think risk and volatility are correlated but are not quite the same thing. If that is what you were saying then we agree.
The context of my comment was in regard to the suggestion that RMBS is a high IV stock for Darp's consideration. All I'm saying is that high IV stocks tend to be more volatile. More volatile goes foot in foot with risk
To another comment:
I would argue that size is indeed an advantage in the options market since the options market is so small relatively and quite illiquid at times and for some stocks.
The liquidity aspect means that capital size can be an edge. I think Livermore would trade options were he alive today since I think that was his edge as well in the bucket shop days.
Again, context. Mel suggested that because his account is large, he can take assignment and ride out the correction. He feel that's an edge. My point is that if selling 10 naked XYZ puts is reasonable for a $25,000 account, selling 20 of them in a $50,000 account is the same risk. It's the same "ride out". It's no edge.
IIRC LAC was busted for manufacturing bogus performance. Certainly not by IB. I have/had no connection with LAC. My info comes from another former trader who was there for a few months back in 2003-4.
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Yea, I have an idea of your source if that person lives in Chicago.
I think the division that got busted for the bogus performance was the hedge fund off shore in the Bahamas.
The complaint filed by IB was about comissions and how LAC got around paying full commission to IB even though they did massive volume.
Whats funny is LAC was basically the first HFT group.....
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Yea, I have an idea of your source if that person lives in Chicago.
I think the division that got busted for the bogus performance was the hedge fund off shore in the Bahamas.
The complaint filed by IB was about comissions and how LAC got around paying full commission to IB even though they did massive volume.
Whats funny is LAC was basically the first HFT group.....
I was a market maker on/through the ISE and this is true. It was called the "fade or trade" rule. If two exchanges crossed they had a few seconds to move their quotes or they would trade through connection system (whose name I have forgotten). It's been a while, but I think the time was relatively long (like 30 seconds) but it was almost 10 years ago when I was concerned with it.
AFAIK etf's (like qqq) do NOT quality for 1256 treatment even though it it based on a broad based index it is not the same as trading ndx or spx. the irs hasn't allowed or disallowed etf's based on a broad based index for 60/40 tax treatment. this trader you mentioned could be hit w/ a huge tax bill for past taxes, penalty and interest if he ever gets audited.
Atticus is correct.
The problem with following a "guru" besides the fact that legitimate ones are hard to find, is that you will not understand what you are doing. You will not know when to get in or when to get out. You will not know why you are doing what you are doing and when the trade is most probably bad.
I think it is better to take the time and learn and understand yourself. It is much cheaper in the long run to get this kind of education, but in our hurry up world, it is old-fashioned. Most want the secret to the empire right now for free.
Ironically, if I gave it to them, they would likely say "that can't be it!", call me a name and move on. Life is funny sometimes.
Just so you know: I have looked at dozens of options gurus and found none that I would use. In fact, a couple started asking me for advice - LOL! One began quoting stuff I told him to his classes. I dumped him fast when he became a pain.
If you want my advice - take the long (and cheapest) road home.
The problem with following a "guru" besides the fact that legitimate ones are hard to find, is that you will not understand what you are doing. You will not know when to get in or when to get out. You will not know why you are doing what you are doing and when the trade is most probably bad.
I think it is better to take the time and learn and understand yourself. It is much cheaper in the long run to get this kind of education, but in our hurry up world, it is old-fashioned. Most want the secret to the empire right now for free.
Ironically, if I gave it to them, they would likely say "that can't be it!", call me a name and move on. Life is funny sometimes.
Just so you know: I have looked at dozens of options gurus and found none that I would use. In fact, a couple started asking me for advice - LOL! One began quoting stuff I told him to his classes. I dumped him fast when he became a pain.
If you want my advice - take the long (and cheapest) road home.
The edge of account size in an options trade is if you sell naked PUTs and don't have enough funds to take delivery, you have to buy them back at market whick could be a nastly loss. I may take a paper loss getting assigned the stock, but then sell calls to get rid of them at a profit.
It can also be an edge if you've ever seen a margin call. Had that happen years back and lost a bundle. Never let that happen again. But it is all part of learning. What doesn't kill you makes you stronger.
You're right on the risk part. If you follow rules of risk & capital mgmt., but a lot don't. People like to trade stocks like AAPL with options, but don't have enough account to take delivery. To me that is additional risk over the normal risk/rewad ration.