You see options buyers are doomed.
- Thread starter qdz2
- Start date
Great trading day today. Why can't every day be just like today
I lived in Vegas for a few years. Worked in the casinos for some of that time (dice dealer and boxman). Employees could not play table games, but could play machines on breaks. Must have played a billion hands of video poker. Got one Royal the whole time (and only had one quarter in
).Did, however have a lot of 4 of a kinds. And more than a few straight flushes (not royals). I feel like I must have won overall. But my better judgement tells me that's wishful thinking. Easier to remember the winners than the losers.
Only poker was truly profitable. And that was strictly because I had the time to carefully pick my times and games. Always played in the higher stakes (for me) games. Just held out to get one good shot. I knew I could not grind out at the low limit games. The rake was gonna get us all. So I would just be very patient and play to win (virtually just play) one hand in a game at stakes I couldn't afford to lose more than once a sitting. Always weekends with tourists. Took a while to watch the other players, so that is an expense. Folded plenty of potential winners. Cheap strategy.
As for options....loved doing backspreads. It was my bread and butter as a MM (in OEX mostly...for the liquidity)
But with the way margin is calculated, is it a viable strategy if you are a customer? Back then, even butterfly spreads were considered two separate trades. So with no downside, you still had to put up margin on the "naked" leg (less the premium). As a MM, with "haircut" rather than margin, this did not affect capital requirements. Same with backspreads. If I had done them on a "margin" basis, I don't think they would have been possible to put on without huge amounts of money. But with "haircut", they cost nothing. (Usually started with a credit). If a position got into the "dead zone", it was just a matter of rolling into different strike prices, or manipulating the position to satisfy the exchange. How can you really do these strategies as a customer without incurring potentially huge margin calls? Or, worse, liquidation?
Also, I have (as I have mentioned here before) been trying recently to establish some option positions. I am so far batting zero on fills.
I need to call he trading desk to put in total prices on any spread positions. I use Redi Plus. I have no way of entering total price orders. Are there any platforms that let you do this? The phone orders are easy enough to place I guess, but I have the feeling the orders are not really being worked. How is it possible to NEVER get fills?
Peace,
rs7That may be the hell I've been in. Playing the play money tables I get winning hands a lot. On the real money tables I can win, but not nearly as easily.
My Royal Flush didn't last either. I should have cashed it in immediately. I doubt I'll ever get one again on that game. But it was my first day using real money, and maybe good to be given that lesson early on.
Why don't you use Interactive Brokers for trading options? You get fills, online, and the cheapest commissions available retail.
My Royal Flush didn't last either. I should have cashed it in immediately. I doubt I'll ever get one again on that game. But it was my first day using real money, and maybe good to be given that lesson early on.
Why don't you use Interactive Brokers for trading options? You get fills, online, and the cheapest commissions available retail.
if I may inquire ... what triggered your entry, was it vol or TA of the underlying, or both. And did u typically, sometimes or never leg in? And, what ratio was typical for u with OEX or was it depenent upon what produced a credit and your 'analysis' of the underlying, so to speak?
Why are you finding difficulty entering backspreads now?
Thanks for any input.
Why are you finding difficulty entering backspreads now?
Thanks for any input.
I think a lot of the guys who would be able to get these orders done are now gone or working for DPMs.Quote from rs7:
... The phone orders are easy enough to place I guess, but I have the feeling the orders are not really being worked. How is it possible to NEVER get fills?
Peace,
Isn't it funny how you could carry a position with a couple of thousand option contracts and 100,000 shares of stock being a MM and yet, as a customer, barely be able to sell a ten lot short because of the differences between margin requirements. I was thinking about the BOX but it appears the minimum capital is $200,000. Maybe something will come along where I can still do it with less capital.
OK, looks like a few questions here.
Because of the MM rules for quantity of trades done at your posts, we had to do a lot of OEX trades to comply with exchange rules.
Then, our "haircut" was calculated by our clearing firm (First Options). So if we were net long, or net short, doing backspreads in OEX would accomplish both goals. Quantity, and hedging risk.
As for legging in, that was not our intention. In reality, all the trades were "legged in" strictly speaking, but when we went into the pit with a plan, it was a foregone conclusion that we would fill at the (overall) prices we anticipated.
We used Reuters "Shwartzatron" (sp?) system (everyone did in those days). We just played with the numbers until we saw a plotted theoretical line we liked. And a cost (or usually a credit) we could live with.
Because we were not subject to margin, but only to risk and haircut, the ratios were whatever worked out. Too involved to explain here. Besides, you may already know, so I won't waste a lot of time explaining. But we did have reportable limit size on many occassions. Even so, they were not considered risky by FOC or OCC, because they used the same plotting software we did. (not positive about OCC, but FOC for sure). In the end, we usually closed all but the outer wing of one side (we sometimes did both sides, but usually not). We would be stuck with holding one wing or the other, knowing they would expire worthless, but it was our cost of insurance.
We did do huge size in the backspreads. But that was just a factor of offsetting other positions that FOC and OCC considered putting us "over the line" (cap. req.). I worked for some cowboys who swung pretty big.
Then you ask why I am finding it difficult to do backspreads now. I have not attempted to do any backspreads. I am on a "customer" basis, and the margin requirements would make it unrealistic.
What I am having trouble with is just doing any kind of spreads. I can't seem to get orders filled at reasonable prices. For example, if a spread has a shown bid of $1 and a shown offer of $2 (total), I will call my trading desk and try to buy (for example) at $.50. Using this $1 spread as an example, I have moved my prices from as low as $.30 to as high as $.70. Doesn't seem to make any difference. I am not getting fills. Don't know why. I know if I were on the floor, even going to a post where no one cared, I would have been able to piece together these trades. (Back when I was there in the late 80's and early 90').
So is no one working orders now? Or are the market makers just so greedy they have no interest in filling orders in the middle? Seems hard to believe, because I would think, from the sob stories I hear about MM's not making ends meet, that they would be happy to do as much business as they can. Any business.
Then again, maybe it is my trading desk. Maybe they are too lazy to work the orders. They get paid the same (I believe) whether I get orders done or not. And I am not putting in big orders. 10 spreads is the minimum they let you do on the phone, so I have been trying to test the waters with the minimum. Have gone as high as 50 when I thought I saw something essentially riskless. But the bottom line is I have gotten zero fills, so I might as well be asking them to do thousands. Or one lots.
Peace,
rs7rs7- I share your conclusions about the spread orders not being worked and rarely filled. I trade options almost exclusively amd nearly all spreads of some variety. Have been doing this for some time. I have nearly given up on entering the orders as spreads and now just leg in. I trade four accounts and last week I entered a spread order as a spread order and it sat for nearly two hours with much of the time at the right bid/ask to get filled and it never got filled. This was with a good options spread broker. At the same time I went into the other three accounts and legged in to the same spread at exactly the same prices and was filled within only minutes. Legging does increase comissions but if you rarely get filled whats' the use. IB is good and their comissions help with the legging in. This was a two legged spread so it wasn't too complicated except it was a diagonal calender.