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Re: [Metastockusers] Stock Option



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Freddie  Pablo
I was wondering if you could help with a few 
beginner type questions? 
I just became interested in Options and was 
thinking of using it as a hedge as well as short term. 
 
I am hearing rumors from many different areas that 
the bottom will be in 2006. One chart actually mentions Dec 26 2006 and a 50% 
drop from here. I though a simple put on the DOW and NASDAQ would act like a 
good hedge for my long positions.  Using 5k as an example for two PUTS 
leaps. First terminology. How would you state that. Buy a.... contract on the 
 ???
For a PUT on the DOW does drop 50% I would be 
up how much? Obviously if I am wrong it is all gone.
 
I suppose if felt really strongly about this I 
could by Call options on  Gold
 
I was following ticker   (VESA ) 
UESQD.X  PUTS late last week and noticed it is now at 1.90 up from 
1.60. If one was used to taking 10k positions on a stock could one now take 2k 
positions. If so I would assume the most would lose is 2k if it 
expired. 
 
BTW I am back to using point and figure charts. 
 
Regards Martin
 
 
<BLOCKQUOTE 
>
  ----- Original Message ----- 
  <DIV 
  >From: 
  Freddie 
  Ng 
  To: <A 
  title=Metastockusers@xxxxxxxxxxxxxxx 
  href="">Metastockusers@xxxxxxxxxxxxxxx 
  
  Sent: April 08, 2003 12:18 AM
  Subject: Re: [Metastockusers] Stock 
  Option
  Pablo,Thanks for the advise for buy/sell on volatility. 
  You are right, the IV high-low must have a base for reference, otherwise it is 
  meaningless. If we can have a  historical volatility of the option IV, 
  that should serve our purpose, right ?. Apply IV/HV will then yield the ratio, 
  if ratio <1, buy and if ratio is >1 sell. Is this what you use ? 
  Thanks for the Meta HV formula, on comparison, I realize I had it 
  programmed in my indicator already. It was kind of you to point out that HV is 
  for stock and not on option. I would have taken it for option.The IV 
  indicator you mentioned is referring to the "option volatility" in the 
  indicator drop down menu ?As for the Greeks, as an example, say you 
  bought a call, its price will rise dollar for dollar with the stock if delta 
  is 1, if the delta is near to zero, even if the stock gap up, you would not 
  see any up price in option. Such position should be disposed asap. Delta of 
  0.5 has the max time value with no intrinsic value. If trade is against your 
  direction, for every dollar of stock decline, option will fall by 50cts. 
  Direction is abstract if we can forecast direction accurately, buy simple call 
  and put will be neat, forget about other complex strategies in options. Then 
  we will enjoy the leverage in options, less outlay and high % return. However, 
  volatility could override greeks.Best RegardsFreddie Ng
  
  At 11:54 PM 4/7/2003 -0300, you wrote:
  I 
    actually didnt mention specific options soft on account your request was 
    related to metastock capabilities and use for options, the best options soft 
    is optionvue, or you can use the web service of <A 
    href="">www.optionetics.com.<FONT 
    face=arial size=2>there is other site like <A 
    href="">www.IVolatility.com<FONT 
    face=arial size=2>forget about the greeks in my experience they dont add 
    anything crucial to your trading, but volatility is crucial, this was the 
    reason i used the ip/hv ratio when i was still investing in options in the 
    american marketmostly you must buy low 
    volatility and sell (or write) high volatility, but the problem is high or 
    low comparing to what, so i started to use the ratio to spot it fast, i dont 
    have the exact code for the ratio with me, but you can find the iv indicator 
    on metastock quick indicator list and for the hv i usethis 
    formula: <FONT face=arial 
    size=2>Std(Log(C/Ref(C,-1)),10)/Std(Log(C/Ref(C,-1)),100) <FONT 
    face=arial size=2>make notice that while the implied is calculated based on 
    the option price the hv is calculated on the 
    underlying. about the 
    group/industry ranked by their 
    volatility, you can find in the sites mentioned by me and debra that 
    infomation i never used it but 
    optionetics is very much discussed and recommended inoptions boards and 
    usenet groups, but as a rule you should check the cboe 
    site Bye
    
      ----- Original Message ----- 
      From: Freddie Ng 
      To: <A 
      href="">Metastockusers@xxxxxxxxxxxxxxx 
      
      Sent: Sunday, April 06, 2003 10:13 PM
      Subject: Re: [Metastockusers] Stock Option
      Pablo,
      Appreciate your valuable systematic explanation. Those points that you 
      discussed were very important in option trading. If it can determine or 
      anticipate the correct underlying direction, this info can then be used to 
      interpret the option direction. Call follows underlying while Put is 
      reverse. I also understand that not all indicators are suitable for each 
      stock and Metastock can search and match the best indicator to optimized 
      profit, I wonder if I had missed out anything in Metastock for 
      option.
      Volatility(implied and Historical)
      Keen to know how you use these info to analyze the option. I am aware 
      that one can lost trade due to volatility. You mentioned about use ratio 
      of IV & HV, can you elaborate a little bit more. The option volatility 
      indicator is for IV, how do you obtain HV in Metastock.
      Btw, do you have any good source where I can obtain the volatility 
      info. Is there any such listing of group/industry ranked by their 
      volatility.
      Best Regards
      Freddie Ng
      At 04:07 AM 4/5/2003 -0300, you wrote:
      
        Freddie,
        on using metastock for options you have 2 problems
        1 Data problem
        2 analysis problem
        1 since options trade for a short period, the problem arises, you 
        cannot
        make any analysis for a while, there is 2 ways around it : 
        continuos
        contracts (i tried them for a while , but they are not reliable in 
        my
        opnion), the alternative is using intraday data, so even if you can 
        make
        analysis on daily charts for a while, at least you can run intraday 
        an.
        2 about the analysis:
        you must keep an eye on the stock or whatever the option is for
        then you can analyze the option itself by common tech an. tools
        then you have to keep an eye on implied volaitity and hystorical 
        volatility,
        for while i used a ratio between the implied volatility and 
        hystorical
        volatility
        check the quick drop indicator youll find some options 
        indicators
        Pablo
        ----- Original Message -----
        From: "freddie_ng" <n07476@xxxxxxxxxxxxxx>
        To: <Metastockusers@xxxxxxxxxxxxxxx>
        Sent: Saturday, April 05, 2003 2:00 AM
        Subject: [Metastockusers] Stock Option
        > Hi all Metastock experts,
        >
        > Can anyone enlighten me how to make use of Metastock to trade 
        on
        > options. I own a Metastock ver 8.0, just recently upgraded from 
        v7.2.
        >
        > Best Regards
        > Freddie Ng
        >
        >
        >
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