Why Is The Obvious Not So Obvious?

[M4-1]

Does it mean you make your living writing options, for instance ?

no..i am retired..i used to work to make a living..but..then i realized i was just doing the same thing as everyone else..and..if you do the same thing..then..you will get the same results

funny thing options..how come around 80% of traded options expire worthless..and..how come the majority of them are puts..and not calls!

if you sell a put..you want the market to go up..if you sell a call you want the market to go down..

if you buy a put..you want the market to go down..so why not sell a call instead!

if you buy a call you want the market to go up..so why not sell a put instead!

oh wait..unlimited risk..i forgot..but..what about the statistics..that never seem to change..what is going on here..are there monkeys trading options..or what

 

[Tradex]

how come around 80% of traded options expire worthless..

Because options are mainly used for downside protection, not speculation.

 

[M4-1]

True.

i think you should give an example if you want your statement to be understood..

i have thoroughly explained WHY and HOW the MES can be used to make some money..it is very simple..yet very hard for people to understand..the main reason why people do not understand..is also very simple..it is the same reason why they will not understand your thorough explanation..

do you understand

 

[M4-1]

Because options are mainly used for downside protection, not speculation.

downside protection..for what..an index can never go to zero like a stock can..so..why would idiots be prepared to throw away some paper profits to protect the remaining paper profits!

the answer is Obvious !!!

 

[Tradex]

downside protection..for what..an index can never go to zero like a stock can..

A big US hedge fund invests 2 billions in dozens of US stocks.

To protect its capital it buys S&P500 put options at the same time (or short the futures contract).

Most of the time their put options will expire worthless but the fund does not care a bit, for them it's just insurance money.

 

[M4-1]

A big US hedge fund invests 2 billions in US stocks.

To protect its capital it buys S&P500 put options at the same time.

Most of the time their put options will expire worthless but the company does not care a bit, for them it's like insurance money.

you mean it is not their money

Example of a Double No-Touch Option Trade
Assume a trader is watching the USD/JPY. The current rate is 108.55. The trader believes that the price is likely to stay between 109 and 108 for the next 24 hours.


They purchase a double no-touch option with these barrier levels, expiring in one day, and invest $100. The broker is offering a payout of 50%. That means that if the price stays between 108.999 and 108.001 the buyer will receive $50 (and their $100 back), since the price didn't touch or exceed the barriers.

If the price touches 109 or above, or 108 or below, the trader loses their $100.


The payout or loss will automatically occur within the trader's account when the option expires.


A 50% payout may sound very good for a day's work, yet the trader is risking 100% of their invested capital to only make 50%. Most traders seek to make more on winners than they lose on losers, and this payout is actually the opposite of that goal. The trader will need to win twice for every one loss just to breakeven.


Also, if the payout is higher, such as 80%, that means it is highly unlikely that the price will stay within the barriers of that contract. The payout is higher, but the chance of receiving the payout will be very low.

 

[Tradex]

you mean it is not their money

No, it's just insurance money, the cost of doing business if you prefer.

 

[Tradex]

A 50% payout may sound very good for a day's work, yet the trader is risking 100% of their invested capital to only make 50%.

Yes, but what if your strategy wins, say, 80% of the time?

That said I truly don't trust options as a speculative instrument, binary or otherwise, the payoff probably favors the "house".

I could be wrong, just my opinion folks.

 

[Mysteron]

i think you should give an example if you want your statement to be understood..

i have thoroughly explained WHY and HOW the MES can be used to make some money..it is very simple..yet very hard for people to understand..the main reason why people do not understand..is also very simple..it is the same reason why they will not understand your thorough explanation..

do you understand

You have indeed provided insights and sufficient explanations for how to trade the MES.

In fact you have given something not asked for, because many who visit this thread are fixated on finding the holy grail 'obvious' and seek certainty of knowing. Discarding the habits and baggage acquired in that long quest is just too difficult for some.

The approach should be clear by now, as a potential means of making money, which is what everyone wants surely.

If price is observed long enough certain features are eventially recognised as being significant to have an eye for, especially near significant levels and at events during the day.

Of course, anyone who chooses to try will have to deal with their own mental demons of facing uncertainty and discipline dealing with losses and when to take profit, gradually refining their technique over some time.

 

[Vindago]

At the end of the day the search for the holy grail of trading is as fruitless as all the technical analysis. There is one sentence that has been repeated over and over again in this thread: "low risk entry".

I wonder how many followers of this thread have been giving the right attention to this concept and to what it implies.