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A nice, long explanation.
FYI - I do not know Greeks very much either- Only that a deep in the money
option has a higher Delta. I care as much about Gamma, Vega or Rho as the
Organic Chemistry I learned in the first year of medical school. And that does
not amount to much.
I do not think that it is essential for you to know all the details about the
Greeks. Simple common sense, and money management with appropriate stops should
work. Reason for my option trades is simple- I do not have the guts to trade
futures, where the risks can outstrip the rewards. Even in option trades, I
prefer buying calls and puts to sell them later. I do not have patience to
wait for the whole month for spreads or naked sells to expire. Not good for my
blood pressure. A 45% return after two month's trades has convinced me to stay
with my strategy of trading options with the trend and applying money management
technics I have learned by reading Dr. Elder's book and other literature. If I
am wrong later, it will be OK. My original investment is now safe.
I try to keep it simple. Use my common sense.
Just an opinion from the novice at this game.
Girish Patel, M.D.
Bill Eykyn wrote:
> 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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