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Friday was amazing.....one of the first in many, many months where there was
NO/ZIP/NADA/NONE intraday rally....
I kept watching the incredible "poker game" going on in the OEX options
pit.....it was amazing.
At-the-money premiums had soared to ridiculousness on the calls as everyone
thought a rally was "imminent".
Gutsy players who sold the premium had to wait till 10-15 minutes before the
bell before the premiums "vanished"....730 calls went from 3 to 1/16 in a
matter of minutes. Totally unpredictable using Black/Scholes.
All in all, a heckuva day !!
Lawrence - Hope your buddy did well on Friday !! Some out-of-the-money OEX
PUT options went to 30x premium....that is to say a $1000 bet brought in
almost $30,000 by the afternoon.
> -----Original Message-----
> From: John [mailto:jyim@xxxxxxxx]
> Sent: Sunday, February 20, 2000 4:49 AM
> To: Omega List
> Subject: Re: Trend Days
>
>
> I was in an irc channel (#s&p on irc.othernet.org) and almost all the
> regular bears suddenly decided to go long as the spoos came down and they
> all got killed. I suppose none of them expected Friday to keep
> selling off
> in a steady straight line like it did and they all were expecting "some
> bounce" intraday that never came. Do you think options expiration had
> something to do with Friday's phenonmenon? Are option expiration days
> usually trend days?
>
>
> ----- Original Message -----
> From: "Bob Heisler" <bheisler@xxxxxxxxxx>
> To: "Omega List" <omega-list@xxxxxxxxxx>
> Sent: Sunday, February 20, 2000 11:04 AM
> Subject: Trend Days
>
>
> This post is fairly long so I thought I would warn you upfront. But I
> thought I would provide some thoughts on Trend Days like we had
> on Friday as
> those used to be just a nightmare for me. Nothing was more
> frustrating then
> seeing the market up or down 30+ points at the end of the day only to see
> that my net for the day was only a few points. Or worse as I may have
> actually been down because I kept trying to sell an uptrend or buy a
> downtrend...ugh! Talk about frustration. But then again, maybe this has
> only happened to me......
>
> We all know that price compression/contraction leads to price/range
> expansion and vice versa. And we also know that when a market does break
> out of a range that it tends to run quite aways. Then why is it that I
> always seemed to fight the trend and focus on looking for the reversal
> rather than looking for places to enter the trend and enjoy the ride? How
> come as soon as the market began to rise I was looking for a sell and vice
> versa? And how come this normally resulted in losses and further
> frustration? But then again, maybe this has only happened to me.....
>
> Why was it that I was always thinking that it has already gone too far and
> it just couldn't go any higher or lower? And my trusty state-of-the-art
> indicator said it was overbought/oversold so I just couldn't buy
> it because
> I was sure to buy the high or sell the low? Why was it that I
> still hadn't
> bought or sold and the market was now 12+ points higher or lower? And my
> favorite indicator/oscillator was still saying it was overbought/oversold?
> But then again, maybe this has only happened to me.....
>
> Then finally I couldn't take it any more and jumped in. But I
> was right, as
> soon I got in it reversed. Another loser and another emotional
> hit. I just
> caused my worst fears to come true but that's not the message I
> got - all I
> remembered was that when I got into the trade it reversed. I didn't
> remember all the prior chances I had to enter that would have
> resulted in a
> nice profit. But then again, maybe this has only happened to me.....
>
> What I painfully discovered was that it was my OPINION preventing me from
> trading this environment successfully.
>
> WHAT IF you had a trading plan that had no bias to market direction or an
> opinion of what you think MIGHT happen. AND what if that plan
> was based on
> things you could really see - PRICE progression or tape/internals or ND/DJ
> confirmation.
>
> WHAT IF you managed this plan based on what you could see continuing
> (PRICE). It is OK to be aware that moves can (and will) reverse,
> but it is
> NOT OK to expect or assume that this will happen. Highs can go higher AND
> lows can go lower. There is a reason for price movement that
> once in motion
> can remain in motion = Momentum. AND if you are always focused on the
> reversal, you will never see or understand this reason and find yourself
> with the above mentioned OPINION. And these OPINIONS almost
> always lead to
> missed opportunities at best and losses at worse.
>
> AND WHAT IF you accept the fact that there is no such thing as
> Overbought or
> Oversold and that there is NO PRICE TOO HIGH OR TOO LOW.
>
> We need to be able to determine if a trade is "progressing" -
> I.e. if we are
> long then we want to see Higher Lows and Higher/equal Highs. If we are
> short we want to see Lower Highs and Lower/equal lows. We want
> to see the
> market break through Resistance and then hold that level as
> Support or vice
> versa, and we want to see this progression throughout the trade. And we
> SHOULD hold part of that position as long as the market is moving in this
> manner regardless of how long the process takes. But how could I do that
> when I was a 1-lot S&P trader?
>
> When the market trends like it did on Friday we have an absolutely great
> opportunity to profit. Quite frankly we can have a good month on
> a day like
> this if we can recognize the environment, throw our opinion out the window
> and employ the proper money management techniques. Ideally we
> want to enter
> at the beginning of the trend and keep part of our original position
> throughout the whole progression - which is why I always hold at least 1
> contract because you never know how far it will go - or when.
>
> Yesterday was one of those days that just confirms everything
> that I believe
> trading is about (not to mention 2/15). IF we can just take our setups
> without OPINION or BIAS as mechanically as possible - Then manage
> the trade
> progression for small loses when it doesn't work - We can then be in a
> position where GREAT things can happen.
>
> Truth is that most times we don't have to do very much, we just have to be
> there.
>
> Hope some of you find this post useful.
>
> Bob
> WWW.PRICE-RULES.COM (no URL exists)
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