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PureBytes Links
Trading Reference Links
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It's evident that stops don't work in markets that gap. The alternative
is a long option with a premium about equal to, if possible, the loss
one would experience if the stop were hit. This kind of why options
were created. Everyone sort of scoffs at the concept of paying premium,
but I am yet to see a trade done in a futures market where a experience
option trader couldn't have created a payoff with at least equal risk or
most often a superioor risk reward.
One of the jokes told at option seminars when folks bring up the
challange of paying premium(the argument being that futures are
cheaper...they are not cheaper..they are merely different) is that
"ANYTHING YOU CAN ACCOMPLISH IN FUTURES CAN BE DONE BETTER IN OPTIONS.
Futures are merely a leveraged surrogate for the cash. You can be long
..short..or not participate...thats it. With options you can create any
payoff you want and it is surprising how many people are amazed at the
ADVANTAGE option traders appear to have on event days. Think about the
traders that were on the other side of Vic Niederhoffer's trades and
were mostly vega hedged. It was like shooting fish in a barrell from
what I heard.
HOWEVER, as long as I'm giving the sermon, NO ONE should trade option
short term without a volatility opinion. To the short term trader if:
You are correct about direction and wrong about volatility...you will
probably not make money!
You are correct about volatility and mistaken about direction..you will
proobably not lose money!
I know dozens of people who had a great year and in some instances a
great decade last week.
Look at yesterday.....MKT up big...VOL down big...spread traders
couldn't lose money yesterday unless they entered their orders wrong.
CBOE gives the seminars for free...visit the website for dates. This
stuff only getss down at the advanced seminars. Not the LEAPS or the
DOW, although we did some of this in Houston on Wed and Thurs nite after
the Dow seminars ended.
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