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Gitanshu,
I never turn down input.
I probably misspoke when I referred to volume in my post. I was referring
to a combination of the number of trades and the OI at the close of trading,
and I sort of lumped them together into something I called "volume". I
took this to mean that I would select that month where the trades and OI
were the biggest.
When making some trades, we did use your recommended approach of picking a
price halfway between the bid and ask and that appeared to work fine.
Whenever we add to our positions, we use that technique. Again, we are
currently working in lots of 10. But how would I insure that I actually get
my fills? With our futures trading, we trade market on the open, since the
S&P volume is sufficiently large that our trading volume is equivalent to a
flea on an elephant's rear.
When it comes to options, I guess I'm worried about scalability. What
happens when we start trading some volume? It's one thing to trade 10
options. It's another when you're trading 50. I guess that's why we're
starting to test writing naked options, since that way, we wouldn't have
that problem.
Another thing that puzzles me is, what about "Out of the Money" options?
This next trade, I might add 10 of those little $1 to $2 options and see how
they perform compared to our trading "In the Money". Again, I'm not sure if
this is a viable trading alternative. We're never in a position too long
and our "average" holding period being approximately 2 weeks. Since our
time exposure is limited, I don't think it will enter into the calculations.
Again, we're still running tests and trying to learn.
Finally, I need to emphasize that we're working strictly with OEX and SP
options. These appear to move in conjunction with our S&P trades.
Guy
Paranoia...you only have to be right once to make it all worthwhile!
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]On
Behalf Of Gitanshu Buch
Sent: Friday, July 07, 2000 6:40 PM
To: metastock@xxxxxxxxxxxxx
Subject: RE: What a chicken! I'm out!
Guy, some unsolicited suggestions:
>In terms of my option experiment, I have determined that I'm going to go
>with volume.
>In addition, since I bought them market on the open,
a/ Also look at open interest at close of prior date. Volume @ the open is
meaningless, and depends on what the floor wants to open first - and on size
order flow.
Large concentration of OI is the clue to difficult fills in fast market
conditions at that strike since everyone is leaning one way and rushing for
one exit simultaneously.
b/ If lot size <= 10, place limit order midway between bid/ask, you'll save
lots of money. B/a spread on volatile days with 2-3 weeks to go for
expiration is typically $1400-$1600 on 10 lots. You'll save half. Esp in
large OI concentrated strikes.
Over time, these b-a spreads add up.
Regards
Gitanshu
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