Writing options for a living

[Anseld]

once again, mav is revealing his level of knowledge in options volatility, which is he knows very little.

he seems to have this odd philosophy that "hey, if i don't know what's going on, then everybody else can't know neither!"

amusing.

Quote from Maverick74:

Great post Mike. I am in complete agreement with you. But let's play along here for a second. Let's assume we have two possibilities here. Either one, markets are pretty efficient like you, me and riskarb agree, and that any opportunities to capture these slight inefficiencies are very short lived and the resources it takes to find them are substantial, or two, Anseld is right and option prices are quite inefficient and opportunities are present to take advantage of them. Let's assume the latter is true for arguments sake.

Here is where Anseld's argument completely falls apart (big surprise). He is assuming that all the pricing inefficiencies are in his favor! In other words, let's assume the implied vols for GOOG are substantially overpriced and appear to be presenting an opportunity to sell them. How does Anseld not know, that these options are in fact UNDERPRICED! According to his own words, he is claiming that they are inefficient. That could mean they are being underpriced or overpriced. How the f*ck does he know before the fact? He doesn't. And vice versa with cheap options. you might have options trading at historical lows that appear to be presenting an opportunity to buy them when in fact, those options, as cheap as they are, are actually UNDERPRICED! Again, if he makes the argument that prices are not efficient, he can't have his cake and eat it too and assume they are only inefficient in the direction he thinks they are.

A perfect example of this last year was in the biotechs. There were over a dozen FDA plays last year where vols were trading at all time highs well into the 300's. When in reality, those options turned out to be substantially underpriced. So he can't have it both ways. Either the markets are efficient or close enough. Or they are not efficient but we have no way of knowing if the prices are actually overpriced or underpriced. We might believe they are overpriced because on paper, they look so high. But the reality is, there is no way of knowing this until after the fact. If markets can error on the side of making options too rich, then certainly they can error on the side of making them too cheap. Either way, Anseld's argument holds no water.

 

[Maverick74]

Quote from Anseld:

once again, mav is revealing his level of knowledge in options volatility, which is he knows very little.

he seems to have this odd philosophy that "hey, if i don't know what's going on, then everybody else can't know neither!"

amusing.

Once again Ansled refuses to back up his argument with facts. Instead he chooses the route of personal attacks. You completely evaded Vulture's request for any trades you made in the past demonstrating this tremendous edge you claim to have.

And you don't even attempt to respond to Mike's post which basically ripped you a new one. LOL. Come on man. We're all adults here (I think), back up your statements with something more then personal attacks. Myself, Riskarb, and Dummy-Variable all think you are full of it. We have at least 30, if not 40 years trading experience between the three of us. Show us where we are wrong. Give us your trades, something, anything! All you do is tell us how stupid we are but you can't post a single shred of evidence backing up anything you say. Come on now, it's time to step up to the plate. This is your opportunity to shine. Let's have at it!

 

[Anseld]

Quote from Maverick74:

Once again Ansled refuses to back up his argument with facts. Instead he chooses the route of personal attacks. You completely evaded Vulture's request for any trades you made in the past demonstrating this tremendous edge you claim to have.

And you don't even attempt to respond to Mike's post which basically ripped you a new one. LOL. Come on man. We're all adults here (I think), back up your statements with something more then personal attacks. Myself, Riskarb, and Dummy-Variable all think you are full of it. We have at least 30, if not 40 years trading experience between the three of us. Show us where we are wrong. Give us your trades, something, anything! All you do is tell us how stupid we are but you can't post a single shred of evidence backing up anything you say. Come on now, it's time to step up to the plate. This is your opportunity to shine. Let's have at it!

now you're turning desperate.

me no care if you think i'm full of it.

me no care if you think i'm anything.

i make trading decisions by throwing darts on the wall and looking at my magic ball. happy now?

just 3 hours ago, you were telling me to go fuck myself. the fuk would i ever care if you never know what i have been taught or learned myself.

you're so funny.

*shrugs*

 

[Maverick74]

Quote from Anseld:

now you're turning desperate.

me no care if you think i'm full of it.

me no care if you think i'm anything.

i make trading decisions by throwing darts on the wall and looking at my magic ball.

just 3 hours ago, you were telling me to go fuck myself. the fuk would i ever care if you never know what i have been taught or learned myself.

you're so funny.

*shrugs*

Anseld, I'm trying very very hard to treat you like an adult here. You have no idea how hard this is. All we are asking you to do is make an argument. I'm not calling you names. Just bring something to the table here. Anything! I don't even care at this point. I'm willing to accept any tiny scrap of a fact you can muster. You come on this thread and make all these claims, which is fine, that is your right. But then when over 10 people ask you to back these claims up, you simply run and hide and occasionally come out to throw a personal attack at me. Look, just forget about me for a second OK. Can you do that? And respond to Vulture's post and to Dummy-Variable. They asked valid questions and deserve a response. What do you say ol pal?

 

[dummy-variable]

Quote from Maverick74:

Anseld, I'm trying very very hard to treat you like an adult here. You have no idea how hard this is.
[...]

John, i'm up way too late alternating between a dvd of chappelle's show and this thread. i can't decide which is giving me more laughs. take care...

 

[Maverick74]

Quote from dummy-variable:

John, i'm up way too late alternating between a dvd of chappelle's show and this thread. i can't decide which is giving me more laughs. take care...

Night Mike. I tried to get this guy to respond to you and Vulture. I think you intimidate him. LOL. He seems to have no problem responding to my posts. Unfortunately they are all just personal attacks. What can you do you know?

 

[MajorUrsa]

Quote from riskarb:

I wouldn't convert to the iron fly if I didn't expect to earn a multiple of the paper-gain on the straddle. I will typically convert to the iron if my expectation on the iron going forward is at least twice what I could earn from simply offsetting the straddle. I may want to increase scale by removing the unbounded risk in the straddle while remaining short gamma and removing the majority of vega-risk. I may want to duplicate the original, pre-iron straddle position.

Yes, I have done that too for some time, and is kind of satisfying to stack a new fly to the collection every week or so. However, at expiration the underlyer was always outside the wings, so none paid off. I didn't lose either and it was fun and valuable lessons, but it is a lot of work for the result.

My observation: in case the underlyer stays centered and you do replicate the straddle after completing the iron fly, it is even more visible what I mean: you own a short straddle; everytime this straddle has made a paper gain worth a butterfly, you add a fly, keeping the original straddle is place.

So the question is: why do you buy a fly every week, and why use the deterioration of a straddle as the timer when to buy a fly? Because that is what you do. Does the gradual profit made on the straddle have anything to do with the decision to buy a fly?

Again, I'm not trying to dismiss the strategy, because I too have the feeling it has certain advantages; I'm just trying to remodel the strategy to pinpoint what I'm (or you're) actually doing.

I may want to trade-against the fly and neutralize some delta. If the vega/gamma edge allows for an arbitrage credit, then I will always convert to the iron.

Could you give a specific example of a vega/gamma edge? Do you mean literally that the amount of vega per gamma on the wings becomes better?

I guess it can be reduced to the pros outweigh the cons[convert vs. offset]. Can I reduce the argument mathematically? Probably not. If my personal belief, prediction, expectation is that I am better server by converting, then I will do so.

So, it comes down to trading after all .

I'd appreciate your comments, as always,

Ursa..

 

[MajorUrsa]

Quote from smilingsynic:


When I sell stock short several days after I buy a cheap call (or buy stock some time after buying a cheap put), I do so because, who knows, what if the stock gaps down(up)? If I buy a 40 call for 4, sell stock at 46, and then the stock opens at 36, I get a huge payday (lose 400 on the call, gain 1000 on the short). If I had simply sold the call after the stock appreciated, I'd have close to 200 in the bank.

Minimizing risk; maximinizing potential reward. That's all.

Synic, again, the strategy does have attractive sided and I'm not trying to dismiss it, but my point is that, when dissecting the actual decision-making, what you do is selling the call and buying a (synthetic) straddle. The reasons for doing so might me valid, but IMO the fact that you already own a call has nothing to do with whether you choose a straddle as your next investment.

That is my point, as it is in my post to Riskarb: I can understand why one buys flies or straddles or whatever. But basing the decision on what you already own does not add any advantage, I think (apart from small saved commission cost).
You just buy a straddle, period.

I think this a very important issue. When is a strategy actually adding positive expectation to the original situation? If it is just a series of [if this then that] steps, it doesn't perse do so.

Ursa..

 

[chiguy]

boys...

it sounds like you were up way to late drinking way too much...

anseld does sound a tad bitter....

he makes some valid points..but then so does my wife when she is ripping into me...

i will watch this tread today and if anyone gets bitchy ...well...i guess i'll have to push the button...

 

[Samson77]

Guys

Does anyone take into consideration the UNDERLYING .......

I'm being totally serious here!

This is the problem that I have seen with you options guys over and over again.

Sheesh - You guys spend so much time on the MATH of trading, I mean really what's the friggin point if you can't get the direction right

I'm not being condescending I'm asking seriously.

If the volatility on a GOOG put is HIGH but the stock has topped what the heck do I care if it moves $10 south the next day anyways, even if I want to be safe and decide to write a Bear Call Spread I still don't see what the math has to do with it when I have the direction and timing correct.