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Your poll, Brent, should bring the vested interests out!
It is my experience that many people start with options because they seem
safer. In England, we have a number of 'option course' sellers and their
main point is that you can only lose the amount you put up - so keep away
from futures, because you can lose the lot!
So very often options is the route for getting into trading. It all seems
very innocent and possible. Let's have ago, who knows...
However, after constantly losing the amount you put up (all very safely of
course!), while you grapple with the Greeks, someone tells you that the
reason you are losing so much is because 90% of options expire worthless -
what you want to do is become a seller of options than a buyer. At just
about the time you can't think how you didn't come to that conclusion for
yourself, you find out about Opportunity in Options and how you can straddle
and roll over and.... then your money really does start to go fast - only
not quite so safely!
I was lucky and only met the IOI guys when I went on an Option Vue sponsored
course in the Bahamas, and so was able to resist their blandishments rather
better than most. The really lucky part of that options' seminar was that
Tom Demark was supposed to be the main speaker, but he never showed, and I
met Larry Williams who came in his place. Now Larry was a great guy. He
started by saying that he would be very pleased to talk about trading and
that we might be able to apply some of his knowledge to options - but
frankly he didn't understand options and - notwithstanding politeness to his
hosts - made it clear he didn't want to know either!
Larry talked a lot of sense about commodity trading, as you would expect
from a guy who was a real trader and a highly successful one at that. But
he was clearly in a different financial bracket to me. I just don't have
the loot to position trade, like he does. I ain't got money for margins and
big drawdowns for retracements - before I make the fortune. Me, I'd get sha
ken out with the weak hands!
But if you've got a big bank account and can use the knowledge that Larry
has (as in his first book "How I made a million...") allied to modern
computer technology, plotting the COT, spotting the backwardation, etc., you
too could make the top division. For me, there is no point dreaming that
way - I have to make a living and build up my loot for 'other things.'
So, a visit to two to Chicago and finding out how the pit traders extract
their loot each and very day seemed to me to be the route to take.
Eventually, I really learned about support and resistance and how price
action worked in between them, through them, etc. Of great importance, I
found the most liquid market in the world, with a daily range that was
unlikely to 'kill' me even in a sudden move (which clearly ruled out the
S&P, if you know where I'm coming from...) and then I set about learning how
to trade it - and we all know what market I'm talking about.
So, to sum up. I am not clever enough to beat the market makers and their
black box pricing models and fiddling about with the Greeks. Yes, I will
spoof a long shot with an option very occaisionally, but if anyone wants my
DOS driven Option Vue program...
I ain't got the big bucks to position trade, for a living. And I ain't got
the big bucks for the S&P, to day trade. But I can mingle with the masses
with a one tick bid and ask in the Bonds, each day. What is more, in this
market (if no other) there is method in the pit traders' madness; you can
see an opportunity and be able to act on it in timely fashion. Then, with
good money management techniques, you can afford to be wrong more times than
you are right, and still come out on top.
You don't have to be a genius, but you do have to go through a learning
curve - and there ain't no Holy Grail. So my vote is this: forget the
Greeks and settle for the Romans - particularly in the shape of Mr
Fibonacci! (Believe me, a certain manaul is going to concentrate on the
tick, tike, tock of trading rather than the delta, vega, voodoo... could be
refreshing stuff!)
Finally, for you interest, I have detailed for the manual the whole of
Friday, 13th March 1998 as a classic intraday trading day in the Bonds -
notwithstanding full moon, eclipse, or anything else. In fact is was the
common old PPI, that started things off nicely for what I call a $1,000 day!
Consider the options and happy futures trading, to you all
Bill Eykyn
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