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CMA
Thanks for the concise explanation. This is what I've found in the past. I
don't watch the market during the day and when I tried options in the past,
it appeared to me that you really needed to be in constant touch with the
market. Every time I traded I found that there was a big difference between
what I paid getting off at the open versus what I could have picked off
during the day. On most trades, I noticed there were times during the day
when I could have exited at a profit but I always managed to turn that into
a loss. <G>
Sometimes I don't look at what happened with my systems until the early the
next day, just due to our methodology. For example, I just entered
yesterday's numbers, because we require a contrary indicator to execute our
trades, and with a down day, it would be almost impossible to get a sell
signal (actually only 1 signal overrides the contrary requirement).
It always seemed to me that you needed a real time ticker to even attempt to
play the option market, but that's just my opinion. Those 30 minute delays,
10 minute delays just don't seem to cut it.
I know even less about LEAPS or whatever they are??? I guess I need to look
at them as well. JimG also mentioned them as a possibility. They are
longer term options, right?
Regards
Guy
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx
[mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of CMA
Sent: Tuesday, June 08, 1999 8:32 PM
To: Metastock Digest
Subject: Options vs. futures
Guy raised the question of using options vs. S&P
futures. I was an Options market-maker for 5 years on
the AMEX, so am very conscious of the difference.
Considering the drawdowns with even your best
signals, Guy, options with their wasting premiums are
probably contra-indicated. Unlike futures,options
require very precise timing; it is no good being
ultimately right; you have to be right first, not
later. Otherwise, premium erosion will take away most,
if not all, of your profit.
The second problem is volatility. If you chart $VIX
over time, you can see that you have to be right, or
at least not wrong, on the level of volatility
incorporated into the premium. If you buy options and
implied volatility declines, say over a 2-week holding
period, this will have a very negative effect on the
level of premiums.
My guess is that if you do options at all, they
should be long term in-the-money LEAPS.
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