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> Why would I be happy to give up slippage if I *don't* have to pay it
> with futures? I'd be happy the trade went my way, but if slippage
> takes 2-3x more of my profits than if I'd traded futures, that's not
> a very efficient way to trade a strategy.
I didn't mean to make any assumptions about your happiness, slippage-induced
or otherwise. :-) The message I tried to convey with my little example was
that the price of the underlying has to move quite a bit for the liquidity
of an at-the-money option to dry up in any noticeable way (of course this is
true only for reasonably liquid markets, not for cotton or lumber). Option
trading when done right will give much better protection than the use of
stops; therefore, a certain amount of slippage is perceived by the option
trader to be a comparatively cheap price to pay for this added safety.
IMHO, most markets have such overnight risks that if it weren't for option
strategies I for one would never touch them. Not only futures, but stocks,
too - remember AAPL or PG or the EMLX incident last year. Not to forget the
crash of 1987 when prices moved more than 12 standard deviations, an event
that statistically should have occurred less than once in the history of the
universe.
> Yes, more complications of options. :-) But it appears that options
> may be a more viable vehicle for me than I thought.
Gary, with your mathematical mindset I believe you might actually enjoy
them.
> Thanks for the tips, Michael!
My pleasure!
Michael Suesserott
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