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Ira makes a good point about the old time traders in the futures pits at the
CBOT. Options traders at the CBOT use the futures all the time to hedge their
risk. On the other hand, for the most part old time futures traders do not
use the options to hedge theirs. Kind of a one way street.
I think you might want to be a buyer of option premium and use the futures
whipsaws to hedge and trade your deltas. Volatility is relatively low, so you
are not too exposed on premium decay there. And the illiquid futures
volatility will give good opportunities to see better volatility than the
implieds would indicate. Just a thought.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it!
In a message dated 12/2/98 10:43:31 AM Central Standard Time, ist@xxxxxx
writes:
<< this may all be true and therefor leads a trader in these futures to use
options
as a hedge and not depend on stops. With options a defined risk can be
obtained
with little or no slippage if used properly. There is the argument that most
of
the old-timers in the pits don't understand options, don't want to know about
them, and will stand by the good old boy network they have used for years. In
shallow markets it becomes easy to run stops and manipulate price action to a
certain degree. If run to far out of line, then the big boys come to play,
so
they do use care. Good trading, Ira
>>
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