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> In looking at my almost RT feed from CBOE through Quote Tracker, I show
the
> low today for the OEZSR Puts was 14. Were you stopped out yesterday?
>
> Oops, just checked again and my brother is in OEZSR Puts (Jul 2000 OEX 790
> Puts) not your OEXSR.
I was in the OEZSR (Jul OEX 790 Puts). I saw your followup message about
closing prices. I was stopped out late Wednesday afternoon.
>
> His OEZSR Puts closed up 19.52% while my OEXST Puts (Jul 2000 OEX 800
Puts)
> closed up 12.75%. Here's where I get confused. When we bought these
Puts,
> the OEX was at 802.5 (2.5 points out of the money). My 800 Puts were
> basically in the money (so I thought) and I paid $17 for the Puts. My
> brother's Puts were at 790 (12.5 points out of the money) and he paid
> $13.00. I thought this meant that he paid $4 less than I did, but that
the
> OEX would have to move an extra 10 points to get in the money. Now, to my
> little mind, this looked pretty good to me. Pay the extra $4. If it
> doesn't move the full 10 points, I should be further ahead. Today, at the
> close, his Puts were ahead 19.52% (granted from a lower base) while mine
> were ahead 12.75%. In terms of real dollars, his options are worth $375
> more than mine (in terms of profit) and the OEX went back up and closed at
> 800 (my strike price).
I show OEX close at 800.00, OEXST last 17 3/4, bid 17 1/8 and OEZSR last at
13 1/2, bid at 13 for the close on Wednesday. If you look at the last price
you are up 3/4 while your brother is up 1/2. If you look at the bid price,
which I do, you are up 1/8 while your brother is flat. Either way you're
ahead but ain't no one gettin' rich yet<g>. If the OEX drops below 790 and
you are both in the money then your options should provide a better dollar
return than his. However his will provide a better percentage return due to
his lower entry price. Without using an options calculator I will guess that
the delta on your options are right at .50 and his are about .43. That means
that for every dollar the OEX moves down your profit will go up 50 cents
while his will go up 43 cents but percentage wise his return will be larger.
If the OEX stands at 791 on expiration day your options will be worth $9.00
while his will be worth $0. What if he had bought the 760 put for $6.00 and
on expiration day the OEX stood at 730. You would have a profit of $53 and
he would have a profit of $24. He would have a larger percentage profit but
you would have a larger dollar profit. He started off with a smaller
investment but a larger risk so he should get a larger percentage return.
When I have a large risk I always use stops, but that's a subject for
another discussion.
If the OEX closes lower Thursday lets do this excercise again. Please quote
your closeing prices so we're both on the same page. I'm on the east coast
and usually leave my computer at 4:00 local time so I don't miss happy hour.
So I'll reply Friday morning.
John
Just because you're paranoid doesn't mean they're not out to get you.
> These things just confuse the heck out of me. You would think his would
> move less than mine. Makes me wonder if I understand these things at all.
>
> 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 John Manasco
> Sent: Wednesday, June 21, 2000 12:53 PM
> To: metastock@xxxxxxxxxxxxx
> Subject: Re: Selecting options or writing uncovered options
>
> Guy
>
> Forget everything I just said. I was just stopped out of my OEXSR puts at
> 12.50 for a 2.50 loss. Oh well! However that is well within the parameters
> of the system I'm following. Tomorrow's another day.
>
> John
> ----- Original Message -----
> From: Guy Tann <grt@xxxxxxxxxxxx>
> To: <metastock@xxxxxxxxxxxxx>
> Sent: Wednesday, June 21, 2000 2:12 PM
> Subject: RE: Selecting options or writing uncovered options
>
>
> > John,
> >
> > Our system provides us with absolutely no indication in terms of trading
> > market or bull or bear move. Actually, we seem to do equally well in a
> > trading market as long as the trading range is fairly broad. Since we
> seem
> > to be able to pick those turning points, we have made a lot of money in
> this
> > type of market. I'd be overjoyed in the NASDAQ would continue to trade
> > between 3,000 and 5,000 forever. :) Same with the S&P.
> >
> > A few years ago I mentioned that long bull or bear moves without
> > consolidations, retracing, etc. are where we do the worst. I think 1997
> (if
> > my memory hasn't failed me) was our worse year ever, and while we made a
> > 100% return that year, our profitable trade percentage declined to below
> > 60%, which is highly unusual for us. We spent a lot of time working on
> this
> > and subsequently modified our trading rules (not the system or the
> > calculations) to better handle this type of market. With this modified
> rule
> > set, we are able to maintain our historical profitability percentages
> > without sacrificing control.
> >
> > I should drop a warning in here. The current market appears to work
well
> > with our system and we are running slightly above our historical 75%
> correct
> > profitability level. In case anyone is following what we do, they
should
> > remember that historically we're wrong on 1 out of every 4 trades.
Never
> > forget that.
> >
> > Here are the dates of all of our futures trades since last October (when
> we
> > started keeping track of them for our little family newsletter). You
can
> > see that we're always in the market. I will look at your VIX suggestion
> to
> > see if there might be any relationship to our trades.
> >
> > 10/11/99 Sell 1343.00
> > 10/26/99 Buy 1285.20 57.80
> > 10/27/99 Sell 1327.00 41.80
> > 11/23/99 Buy 1409.00 (82.00)
> > 12/23/99 Sell 1477.50 68.50
> > 01/28/00 Buy 1365.00 112.50
> > 02/01/00 Sell 1415.50 50.50
> > 02/28/00 Buy 1327.20 88.30
> > 03/06/00 Sell 1410.70 83.50
> > 04/03/00 Buy 1513.20 (102.50)
> > 04/07/00 Sell 1517.00 3.80
> > 04/14/00 Buy 1439.00 78.00
> > 04/25/00 Sell 1444.00 5.00
> > 05/09/00 Buy 1430.50 13.50
> > 05/16/00 Sell 1428.50 (2.00)
> > 05/30/00 Buy 1381.80 46.70
> > 06/05/00 Sell 1476.50 94.70
> > 06/13/00 Buy 1467.00 9.50
> > 06/20/00 Sell ????
> >
> > We are running over 82% correct at this point in time, however we always
> > have to keep in mind our 75% historical number. You can see that our
> trade
> > duration varies from 1 day (10/26/99) on up. The last couple of trades
> > being 0ne week in duration.
> >
> > That loss last November hurt. It was right at that point when we were
> able
> > to increase the size of our trades (based upon our money management
> rules).
> > Of course the April loss didn't help and it took a while to recover.
That
> > loss could have been avoided, but my brother and I had been dissecting a
> > trading rule change for the past 3 years (we don't like to rush these
> > things). I was the con and he was pro. I didn't think it made much
> > difference, but this loss (real money) helped convince me to surrender.
:)
> > As you can see, we don't make changes just because they might eliminate
a
> > loss. It's easy to tailor a rule set to fit the market. That's why we
> > don't optimize. When we discover something that looks like it might
have
> an
> > impact on our trading, we first back-test if for up to 12 years.
Second,
> we
> > start to watch the current market and paper trade the changes while
still
> > trading the old rule set. In this case, we've been monitoring it for 3
> > years. The proposed change helped, but I wasn't convinced that it made
> any
> > sense (logically and mathematically). After 3 years of paper trading,
and
> > making sure it didn't negatively impact our system, and after that huge
> > loss, I finally gave in and we added the new rule to the rule set.
> >
> > I guess what I'm saying is that we have a collaborative effort here, and
> > don't make changes on the spur of the moment. It's taken us a long time
> to
> > realize that we need to look at our trading over a longer window. Like
> last
> > year when we finally incorporated money management techniques. Since
> then,
> > and since we have taken this long-term approach to trading (like not
> having
> > to make a million dollars by Friday) we have succeeded in building our
> > trading capital to a substantial amount. I'm comfortable taking smaller
> > positions, as I know it really doesn't matter in the long term. After
> doing
> > this for 45+ years, I'm finally maturing. :)
> >
> > 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 John Manasco
> > Sent: Wednesday, June 21, 2000 5:03 AM
> > To: metastock@xxxxxxxxxxxxx
> > Subject: Re: Selecting options or writing uncovered options
> >
> > Guy
> >
> > Spreads can be used for many purposes and in many markets. For example
if
> we
> > are in a trading range market a spread may be an even better way than a
> > directional play to squeeze some money out of the market. Does your
system
> > ever not have a strong opinion of the market direction? That may be a
good
> > time to put on a spread trade. Your example of a spread is just one
small
> > example of a large number of combinations available. And like I said I
do
> > think spreads are a good way to price a future that is locked and
> extricate
> > oneself from a position. Also, an understanding of the uses and
> applications
> > of spreads is helping me get a better understanding of the market.
> >
> > Having said all that I do initiate more directional trades than spreads.
> If
> > I do my research and feel I'm right about the direction of the
underlying
> > I'll buy or write contracts depending on my outlook. This has been very
> > profitable at times but also kinda gut wrenching at the wrong times. I
use
> a
> > broker who accepts stops on options so I sleep better.
> >
> > If you're going to play the OEX then I would suggest getting an
> > understanding of the VIX. This is the put call ratio of several at and
> near
> > the money call and put options on the OEX. When the VIX is high it's
time
> to
> > buy and when the VIX is low it's time to go is a cute saying that does
> have
> > a historical basis. A VIX above 30 often signals a good buying
opportunity
> > while a VIX below 20 is often a sell signal, or at least a signal to
> tighten
> > up your stops. These are my levels and you may come up with different
ones
> > that you're more comfortable with.
> >
> > A high VIX reading is often a good time to start writing puts. It means
we
> > are near a market bottom and puts will lose their value in a rally
faster
> > than a purchased call will gain value. A low VIX is a good time to write
> > calls although my call writes are usually not as profitable as my put
> > writes. In the middle you try to find support and resistance levels and
> move
> > off them. Just so you understand me I don't write options on the OEX but
I
> > use the VIX to guide me in writing options on stocks I follow. Just
> another
> > tool in my toolbag. And yesterday I bought the OEXSR puts at $15.00.
We'll
> > see if you or your brother are better pickers.
> >
> > Good luck,
> >
> > John
> > ----- Original Message -----
> > From: Guy Tann <grt@xxxxxxxxxxxx>
> > To: <metastock@xxxxxxxxxxxxx>
> > Sent: Tuesday, June 20, 2000 11:24 PM
> > Subject: RE: Selecting options or writing uncovered options
> >
> >
> > > John
> > >
> > > I've seen similar strategies used trading futures. Used them myself
> many
> > > years ago without a lot of success. I've found it sort of like
kissing
> > your
> > > sister. Yes it does limit your risk, but it substantially limits your
> > > profits as well.
> > >
> > > Let's see if I understand you. If you write your call option at
$15.00,
> > you
> > > make $1,500. Then you would have to buy a call option further out at,
> > let's
> > > say $10.00. That way you have nothing invested (you actually make
$500
> > less
> > > commissions) and as long as the market moves the way you think it
> should,
> > > the further out calls should drop faster than the call you wrote. If
> the
> > > trade goes against you, you have at least limited your exposure since
> you
> > > own a call to effectively offset the one you wrote, albeit now under
> > water.
> > >
> > > I guess that makes sense, but I'd have to think about it. My first
> > thought
> > > is that as long as we're able to maintain our current probability of
> > > success, are we better off just buying the puts and calls that we want
> and
> > > not bother writing anything? I really don't know and I am trying to
> learn
> > > the best approach to use. Today I bought 10 OEXST at $17, while my
> > brother
> > > selected OEZSR Puts.
> > >
> > > We'll have to follow this through.
> > >
> > > 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 John Sellers
> > > Sent: Tuesday, June 20, 2000 11:23 AM
> > > To: metastock@xxxxxxxxxxxxx
> > > Subject: RE: Selecting options or writing uncovered options
> > >
> > > Please consider the placing of the writing of a call option say at
value
> x
> > > and also purchasing a call option at 5 or 10 dollars higher in price
to
> > > protect your position with a an approximate maximum loss. This
strategy
> > most
> > > brokers feel more protection and should make them more accommodating.
> > >
> > > This method can also be used to Puts also. Practice moderation in the
> > > beginning as incorrect positions are costly. I used this approach with
> OEX
> > > options in the past.
> > > -----Original Message-----
> > > From: owner-metastock@xxxxxxxxxxxxx
> > > [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of John Manasco
> > > Sent: Monday, June 19, 2000 3:20 PM
> > > To: metastock@xxxxxxxxxxxxx
> > > Subject: Re: Selecting options or writing uncovered options
> > >
> > >
> > > Guy
> > >
> > > Are you going to write options only on indexes or also on stocks? My
> > broker
> > > requires $100,000.00 and lots of history to write naked index options.
> > >
> > > John Manasco
> > > ----- Original Message -----
> > > From: Guy Tann <grt@xxxxxxxxxxxx>
> > > To: Metastock User Group <metastock-list@xxxxxxxxxxxxx>
> > > Sent: Monday, June 19, 2000 2:49 PM
> > > Subject: Selecting options or writing uncovered options
> > >
> > >
> > > > List,
> > > >
> > > > Well, here I come again from our normal position of ignorance.
> > > >
> > > > We're planning on getting more involved with options. For our next
> sell
> > > > signal that could arrive any day now, we plan on writing SPX Calls
and
> > OEX
> > > > Calls in addition to buying SPX and OEX Puts. We have very little
> > > > experience buying options and have had beginners luck with our first
5
> > > > trades. Now we're going to get a little serious here and try to
make
> a
> > > few
> > > > bucks.
> > > >
> > > > We've each budgeted $10,000 for buying options and another $10,000
as
> > our
> > > > exposure writing options.
> > > >
> > > > Now, I'm busy reading my option book, like a good little student.
> Since
> > > we
> > > > lucked out with our previous trades we're feeling overconfident. :)
I
> > do
> > > > have a question regarding buying options (since I haven't gotten to
> that
> > > > chapter yet):
> > > >
> > > > How should I select what option to buy? Currently I select 'in the
> > money'
> > > > options and look for option months that have a pretty large open
> > interest.
> > > > Is there a formula or a decision process we can apply to pick the
> right
> > > > option month?
> > > >
> > > > In terms of writing uncovered options, my question is basically the
> > same.
> > > > How do we determine which options to write? I guess, even more
> > important
> > > > is, do we write options that expire out 3 months or would we write
the
> > > near
> > > > month options? Again, since we're short term traders and will
> probably
> > be
> > > > buying these back before they expire, my guess is that we should
write
> > the
> > > > near month.
> > > >
> > > > Additionally. my idea is that we should write 'in the money' options
> > with
> > > > pretty good open interest. Again, I'm sure there is a methodology
> > > somewhere
> > > > that would help us make a semi-intelligent decision.
> > > >
> > > > Any recommendations or thoughts would be appreciated.
> > > >
> > > > Thanks,
> > > >
> > > > Guy
> > > >
> > > > Paranoia...you only have to be right once to make it all worthwhile!
> > > >
> > > >
> > > >
> > >
> > >
> > >
> >
> >
>
>
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