|
PureBytes Links
Trading Reference Links
|
THANK YOU, RICK M.!!!
I was going to put my 2 cents into this thread, but Rick said it very well!!
>From my past posts, I have said that I like to write/grant/sell options on
the futures markets (and that my replacement data vendor MUST have the
options). Re-read Ricks last statement:
> ....as any option maker will tell you. Just like a lotto ticket, 99.99%
> of these plays expire worthless.....
This is the IMPORTANT point!!!!
The Doctuer's option examples are correct... but only at .01%...
Think about it: I really don't try and go out of my way to let people catch
me on the wrong side of a trade like that!!! Yes, you "CAN" sporadically
get those returns, I am not perfect!!! But it is "sporadic"!! This is the
reason he is "taking this month off"!
Doctuer: How well did you do on the piggies? (read Lean Hogs) I did very
well, thank you. (SteveK. can/could figure it out for the list if he wants!)
Dan H.
---------------------------
At 05:46 PM 2/25/99 +0900, "Rick Mortellra" <rmjapan@xxxxxxxxxxxxxxx> wrote:
>Lionel,
>
>After reading his "proof" exposing this guy is easy and I don't even have to
>check his *hypothetical* trade prices, nevermind his real ones. The guy is
>all over the place, having us in a trade for 3 hours one time and 30 days
>the next. He also expects us to ignore the fact that these gains weren't
>made over a series of many trades but just 2 huge totally disimilar trades
>made months apart. Practically one-offs in other words. Especially since the
>stocks he mentions are extraordinary to say the least as well as the time
>periods in which he trades their options. These stocks have exhibited
>unprecedented prices moves during a never-before-seen 3 month market period
>that saw the Dow gain more than 30% and a NASDAQ gain of almost 85%. To
>imagine this "easy money" is the normal state of the market from now on and
>trades like this can be made daily is total naivete.
>
>Now here's how the math catches up with his charade:
>
>Of course buying CALL options can keep his losses small EXCEPT he bets his
>whole wad on each trade because he infallibly calls the highs and the lows.
>But if he looses, which he implies he sometimes does, he looses EVERYTHING.
>End of fairytale.
>
>Obviously he has lived to trade again so he must not be betting everything
>and perhaps he's practicing a little bit more money management than he lets
>on. In which case, his 2400% return on his *account* is not what it he makes
>it out to be.
>
>Let's keep it simple. Say he still bets a very imprudent 10% or $1000 of a
>$10K account on the AOL trade. He wins $24k. Suddenly his total hypothetical
>account's return is just 240%, still not too shabby. However, maybe he's not
>so wild and crazy and only bets 2%. Now his total hypothetical returns are
>back down to a more believable 48%.
>
>But, he completely ignores slippage and commissions. Not that commissions
>would be adversely huge (maybe for a 1000 contracts though) but they sure
>won't be $20 roundtrip either! Slippage, on the other hand, could be very
>adverse to his options' return and it is a stretch for us to believe that
>he, as a retail customer, could buy 100, much less a 1000, contracts of AOL
>for a 1/16. Frankly I can't even imagine an expiring option with strike of
>$160 for a wild stock like AOL trading barely out of the money that low, but
>perhaps it did among option makers/institutional accounts at the low of the
>cash market. Nevertheless his trade would probably make up a substantial
>part of an expiring options' total open interest that day and as soon as his
>order hit the sheets the options' bid/ask would fly. He's talking trading
>10,000 to a 100k shares of the underlying here too and the options maker is
>also gonna lay that risk off in the cash market. Needless to say, he seems
>to lack a complete understanding of the market dynamics. Cutting him some
>slack and allowing slippage to bump a market order price up to just a
>measily 1/4 point lowers his trade return to 60%. And using 2% of his total
>account to enter lowers the return to a *really* more normal 12%.
>
>Now here's the big surprise! Once he starts making his big profits the IRS
>is gonna want a piece of it. In advance! Because as anybody who has made big
>profits in stocks learns, you gotta pay your estimated taxes quarterly
>whether you finish the year at an overall profit or not. Otherwise the IRS
>paddles your behind with penalties. This directly impacts the amount of his
>trading capital available throughout the year, hence the overall profit he
>can generate, thus lowering his return even more.
>
>So as you can see, unless you belive 1-2 lucky trades vouche for a persons
>trading skill, just overcoming the frictional costs of trading is a big
>hurdle for any trader regardless of his system or lack thereof. Even a huge
>win can be cut down to size.
>
>Of course the simple solution is to make more than 1 huge trade a month but
>I doubt if he could conjure up enough historical data. Certainly not enough
>to satify my risk profile.
>
>At least I give him credit for buying slightly out-of-the money CALLS on
>highly volatile stocks on expiration, as it is a tried and true strategy.
>Especially, in these net stocks like AOL when they are splitting the
>following Monday. It's a great punt WHEN it pays off. But make no mistake,
>that's exactly what it is, a punt, as any option maker will tell you. Just
>like a lotto ticket, 99.99% of these plays expire worthless, except in this
>case the ticket would cost you a minimum of $625. But when they payoff, the
>rewards can be spectacular. I congratulate him on his paper win, but now the
>challenge for him is turn his Monopoly money into cold cash.
>
>cheers,
>Rick
>
>
>-----Original Message-----
>From: Lionel and Gail Issen <lissen@xxxxxxxxxxxxxxxx>
>To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>Date: Thursday, February 25, 1999 1:13 PM
>Subject: Re: S&P 500 (was AOL, CSCO, & WMT)
>
>
>>Docteur:
>>
>>Your "proof" is after the fact. What have you traded?
>>
>>
>>Lionel Issen
>>-----Original Message-----
>>From: Docteur <docteur@xxxxxxxxxx>
>>To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>>Date: Wednesday, February 24, 1999 7:52 PM
>>Subject: Re: S&P 500 (was AOL, CSCO, & WMT)
>
>
>
|