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<DIV><FONT face=Arial size=2>Mervin and others interested in this
thread:</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Ira and the OEX Doctor have given you good starting
point input, and this may have raised some questions in your mind.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>To further learn about implementing there
strategies, I recommend the following course of action:</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>a/ Go to CBOE's website (<A
href="http://www.cboe.com";>http://www.cboe.com</A>) and download everything you
see under Education, or call 1-800-OPTIONS to order their investor education CD.
Almost all basic strategies are discussed - as if you knew nothing about
options.</FONT></DIV>
<DIV><FONT face=Arial size=2>b/ Follow through with attending CBOE's free
seminars that get conducted around the country. If your needs are not
satisfied with the first seminar take the seminar again. </FONT></DIV>
<DIV><FONT face=Arial size=2>c/ CBOE now also has an "advanced" seminar. I went
to one recently conducted in NYC and found the </FONT><FONT face=Arial
size=2>Doc doing the difficult balancing act between reconciling the needs
of beginners and people who use options as a way of life. He was willing - and
able - to deal with abstract and not-so-abstract questions very admirably. For
example, I had some questions about the VIX - which I really expected a 2 minute
response to, but got a 15 minute dialogue before the session began - and it went
on as if the session was 2 hours into astrophysics.</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT> </DIV>
<DIV><FONT face=Arial size=2>The same happened when he was discussing some
spreads and talked about Strategy X, I had experience to the contrary in the
markets I trade using Strategy X, and he went into detail - but more
importantly, he kept admitting that there was "no one right way and that the
markets moved sometimes beyond the gaming power of options" - which was honest,
and not a "I know it all" one would expect from someone who was placed on the
spot in front of an audience. He did not get defensive, but came across as
someone as confounded by the mystery as I was.</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT> </DIV>
<DIV><FONT face=Arial size=2>The Doctor conducts the classes himself - and
trust me, he is a good teacher - both for the beginner and advanced seminars. He
will stay back after the seminar to explain anything that nags you. He has a
humble, and patient approach, which speaks well for someone with his personal
wealth, who does not really need to travel the country all year around taking
lumps from the audience. </FONT></DIV>
<DIV><FONT face=Arial size=2></FONT> </DIV>
<DIV><FONT face=Arial size=2>Best of all, since the exchange conducts these
classes, there is no hidden motive to sell a newsletter or an advisory or a
software package - all they really benefit from is in expanding the total
market for options trading and the business that generates for the exchange over
many years. </FONT></DIV>
<DIV><FONT face=Arial size=2></FONT> </DIV>
<DIV><FONT face=Arial size=2>Fair, I would say.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>At these seminars you have to be prepared to let go
of personal speed on the uptake, because you are in the midst of a diverse
audience with their own needs, attention spans and questions.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>c/ It helps if you have done some reading before
attending the seminars. Most exchanges have a link for education, and this is
sufficient for the seminar. I have found CBOE's to me most extensive, but also
check out Nasdaq-Amex if you live in the NYC area - they conduct workshops
themselves, and one is scheduled for June.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Any beginning level book will get you used to the
language of the options, as opposed to the strategies. Once you get a handle on
this, read the following 2 books which basically cover everything and the rest
is only learnt after real life experience:</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>- Books by Larry MacMillan</FONT></DIV>
<DIV><FONT face=Arial size=2>- Option Volatility and Pricing - Sheldon
Natenberg. This is really the only book you need, but Larry's books come replete
with ready-reference examples in textbook style that Natenberg
lacks.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Both books are available at your local library and
at online bookstores.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>d/ Go into these seminars and/or books with an open
mind, whether you trade currencies, equities or anything else that has an option
offset market. The concepts are the same, the transaction costs and individual
volatility/liquidity characteristics are different.At this stage, you are
probably better off just focussing on the concept.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Once you're done with the above, I recommend you
start at least paper-trading options on futures to see the results of your
intended strategy. Start with settlement prices or live bid-offer obtained from
the floor - in my experience the quote services do a very poor job of updating
intraday bid-offers.</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT> </DIV>
<DIV><FONT face=Arial size=2>It will help if you i</FONT><FONT face=Arial
size=2>nteract on RT and expose your trade ideas to critique from the list. This
list has its share of real world options practitioners, and you will get a
combination of inputs from the various traders with their various risk appetites
and experience levels. Names I can think off right off the bat are the Doc
himself, Norman Winski, Ira, Bob Roeske, and if I recall right, Larry Mac
himself was an RT member 2 years ago - maybe he still lurks.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Just remember to use OPTN or FUTR on the subject
title :)</FONT></DIV>
<DIV><FONT face=Arial size=2></FONT> </DIV>
<DIV><FONT face=Arial size=2>Afraid there are no shortcuts, and the above
process won't let you start trading options from Tuesday morning. But in the
long run, you will realize that options are a great invention for risk
transfer, outright speculation and generating cash flow- esp for the futures
markets.</FONT> </DIV>
<DIV> </DIV>
<DIV><FONT face=Arial size=2>Gitanshu</FONT></DIV></BODY></HTML>
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From: "BrentinUtahsDixie" <brente@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: OPTN: Re: Options vs Stops (Resend)
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>(1). Short D.Mark futures and then place a stop loss order (buy stop);
>
>(2). Short D.Mark futures and then buy D.Mark call options;
>
>(3). Buy D.Mark put options.
>
I would use choice #2 most of the time. The following is some very basic
thoughts and examples about options by me.
Regarding your example; you don't just call your broker and
say I want to buy DM call(s), you have to specify the month and the strike
price. When ordering I never go with an "at the market" order unless I'm
desperate. I
always bid low. If your timing is right (a big if) you can get cheap
options. Good timing is usually when Volatility and Implied Volatility is
low and a pull back is in process.
Trading options is exactly like an auction; you bid what you want to pay and
if someone likes your bid you have a sale. If not, they will most times
counter offer,
then you must decide to accept, stand, or to place another bid. Today
(Friday) I bought a July Wheat 250 Put option. I started out bidding 5 1/2.
The price started
out at about 7. As the price came down I moved my bid to 6 where I was
filled. I might have gotten a fill at 5 3/4 but it's only 12 dollars
difference and I might have missed it.
When you become a seller it's the same thing in reverse. You are trying to
get the best (highest) price that you can for your option. Naturally, if it
is a Call and it's an up day you are going to do better than on a down day.
Same thing for a Put on a down day.
A day that has a large range is going to get you even higher prices so it's
a good day to sell but not to be a buyer unless you have a good reason.
Implied Volatility is used to determine option prices.
I was also selling a Wheat Call today (Friday) and I was anxious
to sell it because today was the first day that the price was up strongly
and because my loss had hit my mental stop. I got 2-3 points more then it
was just yestersday because of the up day and volatility. I lost about $350
dollars on the Call but I have traded several Puts against that Call option
on its way down so I am only out about $100 and if we get new lows over the
next few weeks in Wheat I should be on the plus side.
Options are less liquid than the corresponding Futures Contract. You want to
paper trade some options to start with and then I suggest that you buy a
real cheap option in something so that you get a feel for it (by bidding
less etc). A cheap
option will most often expire worthless, but sometimes not a price explosion
will sometimes make a $20 option worth thousands but again its rare.
http://www.mytrack.com has the best intra-day option information for the
money (free, or you can pay for option chains etc.) that I know of. A good
Option Site is at http://www.optionsanalysis.com/ Take some time to
learn how it all works. If you're like me you will find that going naked and
using stops only is for suckers.
Brent
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