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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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