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Kevin
I agree with you, these are some refinements that i use:-
* Implied Volatility must be high, coming down.
* Implied Volatility must be higher then Historical or Statistical
vols.
* The call / put premiums must be receding if an options writer.
* I use a 20 day Bollinger Band to gauge the volatility on the
underlying futures.
* As a writer, premiums should not be at a discount to fair or
theoretical value.
* Finally, i use chart / price action filtering techniques to filter
the trade and determine correct entry.
I trade from a very small account, and this is the best way I've found to be
risk averse.
Regards
Trevor De Vries
> -----Original Message-----
> From: Kevin Shin [SMTP:kalalex@xxxxxxxxxxxxx]
> Sent: Saturday, August 01, 1998 7:25 AM
> To: RealTraders Discussion Group
> Subject: Re: Day trading futures options.
>
>
> This is not really a post about daytrading options,,,but since
> I was considering posting about a way of initiating position with options
> I decided to post now.
> If I think I find an end of 5th wave and try to pick a top or bottom,,,I
> thought it's better to take positions in options first,,,and preferably
> writing options,,,since I would have to take less risk.
> Specially,,,writing options would benefit more.
> Example,,,I notice the end of 5th wave of downtrend at 15.00 in XYZ U8.
> I write as many puts as my risk management allows just next below striking
> price put,,say 14.50,,considering there's high enough volitility.
> If I'm right about the wave evaluation,,,and trend reverses,,,I would be
> able to add with XYZ U8 futures long with my normal risk-take limit plus
> the credit I'm getting from writing options,,,or place a stop that will
> cover just with the credit from options.
> If the retracement of 2nd wave breaches the end of 5th wave level,,,,then
> I'm wrong and buy back the options I sold,,,,and I'll be still be able to
> come ahead a little bit because of time decay of option value??
> and if 2nd wave fails to break that level,,,,then I could add with futures
> contract.
>
> This was the idea that I was playing with recently,,,and I was going to
> post to ask if there's any drawbacks in the idea. Any improving idea to
> add??? or this one's not good enough to consider further research??
>
>
> *********** REPLY SEPARATOR ***********
>
> On 7/31/98, at 10:04 PM, POMPATIS@xxxxxxx wrote:
>
> >In a message dated 98-08-01 00:51:02 EDT, brente@xxxxxxxxxxxx writes:
> >
> ><< In the recent past I considered day trading futures options even in
> liquid
> > markets like Bonds or the S&P to be difficult or likely to be
> unprofitable.
> > Since THE DOCTOR at the CBOE told me that he day trades options everyday
> > for a living I've been thinking about it some more. Could any of you
> > educate us about the advantages or disadvantages of day trading futures
> > options in these or other markets? I'm hoping to get a little discussion
> > about this. Advanced thanks.
> >
> > Brent >>
> >
> >Likewise, I too am developing an interest in learning more about the
> >advantages of using options as a venue to trade the futures markets. I
> have
> >heard that the risk per position is less than holding the underliying
> >contract.
> >
> >Any informed input here would be appreciated, and would seem to make a
> new and
> >interesting string of discussions.
> >
> >Sincerely,
> >
> >Pompatis
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