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Hi WALT,RTrs,
After sufficient back-testing, I plan to buy straight call or put when
volatility is low, option undervalued ,combining it with chart pattern to
have both directional and volatility play. Buying both puts and calls , a
straddle would be hedging your bet and may be more successful. I plan to
trade futures when volatility is high. I am attracted to options because of
possibility of better percentage return, and ability to trade such markets
with overnight risk like currencies or markets with very high margin
requirements like coffee etc. I did plot volatility 100 vs 6 days and I am
trying to make head and tail of it.
As far as David Caplan's Opportunities in Options is concerned - I agree
that writing naked options with 90% odds of options expiring worthless is a
dangerous strategy, the 10% time you lose, you can get wiped out - the size
of your winners and losers are important. There are quite a few examples of
such wipeout in the recent market crash. I did asked them for account
statements based on Caplan's recommendation - they offered me snapshot view
(likely winning trades only) - I said that was useless to me since I would
get an unrealistic view of his trading recommendations.
Don Fishback strategy is similar except that he does credit spreads with
80/90% chance of winning, less risky than naked option writing.
Most textbooks on option trading cover the above type of option trading.
They may or may not be profitable, I defer judgement.
Happy trading,
Ashif
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