Writing options for a living

Quote from Samson77:

Guys

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

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 :confused:

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!!!!!!!!
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agreed!!!

when all else fails look up from your screen and see what is happening
 
Quote from MajorUrsa:

So, it comes down to trading after all :).

I'd appreciate your comments, as always,

Ursa..
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I didn't to imply gamma over vega. I should have termed it gamma + vega. I am referring to opportunity greeks -- the reduction in vega due to a mark-down from decay. I don't have any risk in a position I'm not holding. Of course, this comes at price; the risk of holding a naked short straddle.

There are too many iterations to outline a strategy here. It's an impossibility as I don't know what I am going to do until presented with the situation. I rarely replicate the original straddle as the underlying has usually moved past another strike. It's most often the case that I will convert the straddle and choose a new strike which flattens my delta position in the stock. I may have a broad-market prediction or signal which precludes the conversion and forces my hand to take a profit. If the combo has accummulated too many delta I will offset, regardless of profit or loss. I don't fly a position exhibiting -edge[paper loss]. In this case edge is used to describe an open position marked profit or loss.

The most important considerations are predicted P+L to expiration and a reduction in vegas.
 
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I caught this TOP two days ago, if you don't believe me check my blog www.samsontrading.blogspot.com

Do you think I gave a darn what the volitility was on the PUTS I bought ?

I'm not posting this to bost I just don't see how knowing all the MATH would have helped me in this trade or any other trade that isn't correct in the first place.

If I'm wrong please correct me !
 
the fact that you bought "overpriced puts" is what i would call a discretionary edge over the pure options greek trader...

one can put anticipated volatility " stock is going to hell "in your value and it looks cheap to you...basically you are replacing shorting the stock by buying the put...
i do it all the time...


this being said thr greek options trader is going to win a higher percentage over time...

my 2 cents
 
Quote from Samson77:

I caught this TOP two days ago, if you don't believe me check my blog www.samsontrading.blogspot.com

Do you think I gave a darn what the volitility was on the PUTS I bought ?

I'm not posting this to bost I just don't see how knowing all the MATH would have helped me in this trade or any other trade that isn't correct in the first place.

If I'm wrong please correct me ! [/B]
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Appreciate the ad, but it's not relevant to expectancy. No, I don't think you give a damn what vols you pay. I am glad you trade options.
 
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Quote from chiguy:

the fact that you bought "overpriced puts" is what i would call a discretionary edge over the pure options greek trader...

one can put anticipated volatility " stock is going to hell "in your value and it looks cheap to you...basically you are replacing shorting the stock by buying the put...
i do it all the time...


this being said thr greek options trader is going to win a higher percentage over time...

my 2 cents
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OK I know where your going but I think for everytime you save a buck because of trading the greeks, you will lose a buck because of the missed oppertunity, at least that has been my experience.

If the price of the option is high maybe there is a darn good reason for it !!!

I just use common sense, maybe that's a little too simple for this crowd but it's worked for me for 20 years.
 
Quote from Samson77:

Sorry but I'm not selling anything :)
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You're selling your "nailing the top" trade. I for one done care what you nailed. Nor does it have anything to do with writing options for a living. You've outlined the "what not to do when trading options for a living"

So thanks
 
Quote from riskarb:

You're selling your "nailing the top" trade. I for one done care what you nailed. Nor does it have anything to do with writing options for a living. You've outlined the "what not to do when trading options for a living"

So thanks
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I was asking a question and I will rephrase it for those that care to share !

On a trade like this or any other that I can get the direction correct 70% of the time, do you really think that understanding all the greeks would be of any importance at all and do you think if I shared the exact same set up with one of you "pro's" and we both sell againt the set up, that you will come out better then me????????

I ask this because I believe that it's really just about common sense at the end of the day and all the math is just nonsense imo.

Once again correct me if I'm wrong!
 
Quote from MajorUrsa:


When is a strategy actually adding positive expectation to the original situation?
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to me the simple answer is "when the new position has a net cost basis better than the identical trade created at current market prices."

in my opinion, that is why it is always better to convert a winning trade into another position rather than close it for a profit. example: say riskarb's short straddle could be closed for $2 profit but instead adding the strangle converts into a fly position at a net cost $1 better than the current market. it really doesn't matter if the potential max payoff is better than the current bird in the hand gain. the better-than-market-cost fly position is always better than taking the locked profit.

why? simply opening and closing a trade is no different from buying and holding to expiration. in either case, the expectancy is the same. by converting to a fly the expectancy has changed to +$1.

it may seem counterintuitive or absurd. but that is the way this game is played and won.
 
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