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-----Original Message-----
From: khanitha <charlie@xxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Saturday, August 22, 1998 7:37 AM
Subject: oex vs. s+p thoughts.....
>on monday i deposited $1,200 in an old stock account from years past. the
>$10 in there somehow never seemed to automatically close? I just throw
>away the monthly statement, and recall trading intel, oex, type options in
>early 1992/3 ! then i "graduated" to futures and never looked back to
>stocks or options, it was only futures.
>on monday i bought an aug call (530?) for 11.5, $1,150 plus i think about
>$35 comm.
>sold it on wed for 24.75, now with $2400 in the account i added an
>additional $500,
>and bought a total of 4 , 515 sep oex puts at "7", they closed friday at
>9.75 (although
>i heard they had a high of 16!), oh, and on friday i deposited another
>$900. and bought
>a sep 500 put for "8", it settled at 6.75.
>Recap: total deposits for the week 1200+500+900= $2,600
>current account value based on friday close and excess few hundred =
>~$4,800
>(was probably worth about $7,000+ with about 2 hours left on friday, oh
>well)
>Here's my point though, because i was obviously so bearish and ignored the
>trin thing above 4.00, and if i was daytrading s+p's i probably would of
>sold at the 1059 break?
>knowing me i would of (ya, maybe i would of yes't i don't know) but let's
>say i sold
>at 1059, i would of stubbornly held and probably dumped 'em after i was
>clearly proven wrong in the 1080's with 1/2 hour or less to go..........
>losing 20 to 30 handles!!!!!!!!!!
>again, i literally forgot about oex all these years i was daytrading the
>spooooz!!!!
>don't you all agree there is more bang for your buck if you are day-trading
>oex, verses s+p, not to mention NO MARGIN CALL, even if holding only a few
>days, the time value is basically irrelevant (spelled right?).
>should i act like i'm daytrading the spooz again, except just deal with oex
>trades instead.........look what i've been missing!!!!
>everyone who has day/position traded both spooz and oex, what are your
>thoughts!!!
Hi Gary,
I day trade or short term trade the OEX and have followed your
posts this week with some interest. I kept hoping you would give us more
insight into your reasons for entering the trades as you did.
As you get back into trading options you will find that many if
not all the indicators you used to trade S&P futures work for the OEX,
including money management techniques.
Two important points about trading options that you should be
aware of are delta and volatility.
The best way to look at delta is this: The out of the money
options you favor because they are cheep may have a delta of only 0.20
This means that there is only a 20% (or 1 in 5) chance they will be in the
money at expiration. On the other hand, an in the money call option may
have a delta of 0.70 or a 70% chance of expiring in the money. This is like
handicapping a horse race. The favorite might go off at 2 to 1, while a
long shot may be at 99 to 1. While it is exciting and profitable for a long
shot win, how often does it happen?
With volatility the thing to understand is that when volatility
is high the price of the option (both puts and calls) will be high. When
volatility is low the price will be low. As a general rule you want to be a
buyer when volatility is low and be a seller of options when volatility is
high. If you ignore volatility, some day you will buy when it is high,
paying to large a premium for the options, only to have volatility decline.
As the volatility drops, the option's value will drop even if the OEX
remains unchanged or moves in the direction you expect. It's like buying
real estate in Tokyo at the height of the recent bubble, only to see it drop
in value as the market collapsed.
Can you successfully trade options without taking these into
consideration? Yes. Will you miss some trades if you follow these rules?
Yes. But, since 90% of all options traders lose money, you need to take
every advantage. If you don't someone else will, along with your money.
Good luck and good trading,
Ray Raffurty
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