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<P>Brent,</P>
<P>Thanks for the tip on B&N Books. Based on your experience, they’re
the 2<SUP>nd</SUP> to last place I’ll go for trading books. The last place
is buybooks.com (see my other post on the subject).</P>
<P>For your information, both Traders Library (</FONT><A
href="http://www.traderslibrary.com/";><FONT
size=2>www.traderslibrary.com</FONT></A><FONT size=2>) & Traders Press
(</FONT><A href="http://www.traderspressbookstore.com/";><FONT
size=2>www.traderspressbookstore.com</FONT></A><FONT size=2>) <I>will match any
price on the net</I>. They just lopped off about 40% off a book advertised by
buybooks.com. And their service is far superior.</P>
<P>Best regards,</P>
<P>Michael Spencer</P></FONT></DIV></BODY></HTML>
</x-html>From ???@??? Sat Nov 27 16:49:35 1999
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From: gary@xxxxxxxxxxxx (Gary Funck)
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Date: Sat, 27 Nov 1999 15:05:45 -0800
In-Reply-To: "Dr. John Cappello" <jvc689@xxxxxxxxxxx>
"[realtraders] Cappello Strangles Follow-Up {02}" (Nov 27, 3:29pm)
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Status:
John, you may be interested in this book:
http://www.amazon.com/exec/obidos/ASIN/0930233670/o/qid=943735205/sr=2-1/102-4888422-8323268
Schiller advocates a strategy of selling out-of-the money options
and spreads.
-----
The 100% Return Options Trading Strategy
by Jon Schiller
Price: $41.97
Hardcover - 224 pages (April 1999)
Windsor Books; ISBN: 0930233670
Book Description
Options are currently experiencing an unprecedented boom as investors
and speculators begin to realize that-traded properly-these fascinating
markets can offer unlimited upside potential with limited downside risk
-----
Attached, is a series of articles on the subject from both past
realtraders mail, and mail to the omega-list. Some of the pros/cons
are discussed.
I think you'll find that in practice, some of the factors that
Hans discussed will affect profitability. Lack of liquidity and
bid/ask spreads will come into play on the out-of-the-money options,
and can really screw up theoretical results.
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>From owner-realtraders@xxxxxxxxxxxxxx Tue Jul 14 10:27:01 1998
Date: Tue, 14 Jul 1998 06:08:36 -0400
Reply-To: knight@xxxxxxxxxxxx
From: "Walt Downs" <knight@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: TRD GEN: Book review: Jon Schiller's "100%" Option Strategy
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RT's,
Here's a few thoughts on Jon Schiller's book, "The 100% Return
Options Trading Strategy".
Some interesting ideas on OEX trading can be found in this book.
However, Schiller does "candy coat" some of the concepts, and
some of the data in the book is contradictory or a bit misleading.
In the case of the CVSS covered write options strangle, Jon would
have you believe that they are safe as CD's. Not necessarily. On
page 152, Jon paints a rosy picture of exponential returns, enabling
the trader to turn $5,000 dollars into $89,623 over a 36 month
period. Whoops! Take a closer look: This run is based on Gaussian
probability and *assumes* a 90% winning percentile based on a
2 Sigma SD distibution. In real trading, it is very likely that these
levels will hold up no more than 70% of the time. (This is in line
with statistical evidence that markets trend strongly about 30% of
the time.)
As an example, please view the spread sheet given on Page 88
I was a bit suprised, as Jon claimed that only 5 of the losing
positions would have incurred max loss. Looks to me like *11*
of the losers would have incurred max loss, as they consumed
or eclipsed the entire 5 point spread of the short and long calls.
This means corrective action would have had to have been taken in
all instances. A different result from what Jon claims on pages 78
and 80. In simplistic terms the end result of
the trading term would have been:
Based on 1.82 differential in risk/reward (For every 100.00 you make
you lose 182.00)
33 trades/12 losers/21 winners = W/L Ratio: 63% (told you)
12 x 182 = (2184)
21 x 100 = 2100
Total Loss/Gain = (100)
We can of course assume that the trader would take action to
prevent the maximum loss, so he actually would have made
money. However, I don't think 100% returns are as simple as
Jon states.
As far as Jon's day trading Delta strategy, the description was
awfully simplistic. "Just watch the little RSI thingy, and when it
turns you can buy or sell, or just jump in when you see the big
programs buy or sell". To me, this can be equated to telling
someone to just "Buy low and Sell High". It isn't quite that
easy.
The thing that bothered me most about the book, was the fact that
nowhere was volatility mentioned. Volatility is the cornerstone of
the option trader. Without a firm grasp of its use, and a few trusty
vol indicators that work, an option guy can be in *real* trouble
very quickly.
Some of the ideas and practical trading info were good though. Mark
Jon Schiller's book as a place to *start* your learning process of
OEX trading. You will have to do a lot more reading if you want to
trade the OEX profitably. It's probably worth 50 bucks, but it's no
Holy Grail.
Walt Downs
CIS Trading
>From owner-realtraders@xxxxxxxxxxxxxx Tue Jul 14 14:49:23 1998
Date: Tue, 14 Jul 1998 10:43:26 -0400
Reply-To: gta3@xxxxxxxxxxxxx
From: "Tom Alexander" <gta3@xxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: TRD GEN: Book review: Jon Schiller's "100%" Option Strategy
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I haven't read the book but based on Walt's review there seems to be far
more information that could lead a trader to ruin than could put one on the
road to success. This reminds me of the spam I received a day or two ago
from Don Fishback claiming some ridiculous rate of return by following some
system he was hawking (no doubt selling out of the money options).
This stuff makes a ton of money - for the purveyor of the trash. It will
never go away because of the P.T. Barnum effect, which when applied to
trading should be restated as, "there are dozens and dozens of suckers born
every minute".
There will always be a ready supply of junk for those looking for the easy
answer. Just use a tiny bit of logic before biting on this stuff and a lot
of time, anguish, and money will have been saved.
Regards,
Tom Alexander
>From owner-realtraders@xxxxxxxxxxxxxx Wed Jul 29 16:11:25 1998
Date: Wed, 29 Jul 1998 11:47:20 -0400
Reply-To: shazlewood@xxxxxxxxxx
From: "Stuart Hazlewood" <shazlewood@xxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: DON FISHBACK - WHAT A CROOK!
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Tom & RTers:
I too have had mailings from Don Fishback. What a moron! Worse, what a public menace!
First off there's a mailing for a trading approach that succeeds over 90% of the time (where have I heard that before?). He's asking several thousnds of $$$$ for that. A few weeks later, I see advertised his "Options for Beginners" book for $14.95, with a special offer guide to trading that elsewhere would have cost thousands of $$$.
For $14.95 I satisfied my curiosity. His failsafe system? Get ready for this:
* the market will supposedly trade within a 2 standard deviation bound (based on historical volatility) 95% of the time. (this is an absolute lie. Anyone with Tradestation can run the data for themselves an see the market exceed these 2 sigma bounds MUCH more frequently than 5% of the time, normal distribution simply doesn't apply).
* therefore novice traders should sell naked strangles at 2 standard deviations out of the money. (Even if the market exceeds 2 SDs only 5% of the time, that 5% will wipe out the novice trader who does not know how to adjust).
* if you're a little more conservative, you should buy the wings, i.e., buy options one extra strike price out of the money. (The resulting credit will in most cases not equal the commissions, fees and slippage cost for establishing this position. Remember now, he's advocating 4 options per position for a typical credit of around $125 with 30 days to expiration. So you take in $5 - 10 if you're lucky, to carry a maximum risk of $1,250. What a moron!)
The reason this gets me so upset is that I was a novice once too. There are going to be people who get taken by this crook, spend their thousands of hard earned $$$$, get NOTHING they can use, and maybe even lose it all. This is an industry in serious need of regulation!
At the very least, Eddie Kwong might think of establishing somewhere on the RT website that warns the public about rip off traders. Maybe just posts like these, so he can avoid all the libel cases!
This ends today's sermon.
- Stuart
>From owner-realtraders@xxxxxxxxxxxxxx Wed Jul 29 17:32:49 1998
Date: Wed, 29 Jul 1998 10:57:06 -0600
Reply-To: brente@xxxxxxxxxxxx
From: "BrentinUtahsDixie" <brente@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Fw: DON FISHBACK - WHAT A CROOK!
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Don has some of my money (not thousands but several hundred). I did learn
quite a lot from it. I paper traded the strategies for a while and 4 out of
5 trades were successful. I had great difficulty putting on the trades when
I tried and when my broker told me how much margin was required to cover
the trades I chickened out. So he is like the many many others not all bad
not all good.
Brent
>From owner-realtraders@xxxxxxxxxxxxxx Sun Aug 30 22:49:46 1998
Date: Sun, 30 Aug 1998 16:49:46 -0600 (MDT)
Reply-To: maui@xxxxxxxxx
From: Dean Chahley <maui@xxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: GEN - Index Options
Mime-Version: 1.0
Content-Type: text/plain; charset="us-ascii"
RT's, I'm trying to learn about index options and would like to know what
books you would reccomend?!
While both "trading index options by james bittman" & "insider's automatic
options strategy by jon schiller" have been suggested, I wanted to get some
input from this forum...
Regards,
Dean
>From owner-realtraders@xxxxxxxxxxxxxx Sun Aug 30 23:46:45 1998
Date: Sun, 30 Aug 1998 16:46:46 -0700
Reply-To: ist@xxxxxx
From: Ira <ist@xxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: GEN - Index Options
MIME-Version: 1.0
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I have found that some of the best literature comes from the exchanges. Call
their 800#s or go to their web sites. The cboe, cbot, cme , nymex all have
excellent options booklets. Much more informative then a lot of books that are
published. Ira
>From owner-realtraders@xxxxxxxxxxxxxx Mon Aug 31 01:10:51 1998
Date: Sun, 30 Aug 1998 18:07:27 -0700
Reply-To: petena9090@xxxxxxxxxxxxxx
From: petena9090@xxxxxxxxxxxxxx
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: GEN - Index Options
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You get a section with 9 chapters - over 330 pages in Mc Millan's "Options
as a Strategic Investment"
Pete
>From owner-realtraders@xxxxxxxxxxxxxx Fri Sep 11 11:05:23 1998
Date: Fri, 11 Sep 1998 07:13:30 -0700
Reply-To: mrasoc@xxxxxxxxx
From: "MR Associates International" <mrasoc@xxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: Options: Don Fishback
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Come with deep pockets before and after the seminar. You can basically
understand his system by purchasing his intro kit (for about $50) or get
more details by studying Jon Schiller's book - The Insider's Automatic
Options Strategy.
All the best ...
Mike R
>From omega-list-request@xxxxxxxxxx Thu Jun 18 18:37:21 1998
Date: Thu, 18 Jun 1998 09:52:32 -0700
From: Mark Johnson <janitor@xxxxxxxxxxxx>
MIME-Version: 1.0
To: omega-list@xxxxxxxxxx
Subject: Jon Schiller's book "The 100% Return Options Strategy"
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Has anyone else read this book? I got my copy from Windsor
Books, for about $55. I would like to exchange opinions
with other purchasers/readers by email.
The book advocates two strategies using stock index
options, either the OEX (CBOT) or the SIS (LIFFE).
One of the options strategies is intermediate-term
(approx 30 day trade duration) and the other is short-term
(approx 2 hour trade duration).
His intermediate-term strategy boils down to this: index
options are chronically overpriced, particularly far-out-of-
the-money options. So you should sell options and collect
the inflated premiums and you'll do great. Schiller
establishes option spreads (e.g. sell a call, buy a call
further out) for a net credit ("credit spreads" in Ken
Trester books).
Schiller abandons the standard options pricing models
(Black-Scholes, Cox-Rubenstein-Ross, et al), and instead
presents his very own formulae for options probabilities.
Using his own equations, Schiller finds that if you sell
credit spreads with about 4 weeks till expiration, far enough
out-of-the-money that the net credit is one, then that spread
will typically have about a 95 percent chance of expiring
worthless, and you will get to keep the entire premium (1).
An example:
It is 9:20AM PDT on Thursday June 18, 1998.
The cash OEX index is presently 536.40
July 98 calls @ strike=560 are trading at 3
July 98 calls @ strike=565 are trading at 1 7/8
Schiller would have you sell the July 560 calls and
buy the July 565 calls. The net premium is 1 1/8
credit, which goes into your account. This spread
expires on July 17th. If the OEX is at or below 560
on that date, you get to keep the entire 1 1/8
premium received.
Schiller's probability model says that there is
a 95% probability that the OEX will be at or below
560 on July 17th, so there's a 95% probability that
you get to keep the entire 1 1/8 credit.
Just to horse around with arithmetic, let's do a VERY CRUDE
calculation of expectation on this position.
95% of the time, you win 1 1/8
5% of the time, you lose 3 7/8 (since the spread is 5 wide)
So your expected profit is: (0.95 * 1.125) + (0.05 * -3.875)
which is +0.875 ... 7/8ths. Neglecting commissions etc.
Your risk on this trade is 3 7/8 ($387.50) per contract.
Your expected profit is 7/8 ($87.50) per contract.
If you trade one contract for every $775 in your account,
as Schiller suggests, (he says don't put up more than 50%
of your capital for margin on any one trade), then on the
average you will make $87.50 profit for every $775 in the
account. That's a profit of 11.29 percent, in one month.
And you get to make this trade twelve times a year (once per
expiration month). So your expected annual growth rate is
261% per year.
Schiller deducts commissions (he assumes $7.50 per contract)
and he estimates the impact of the bid-ask spread, and he
assumes you'll get a net credit of 1 rather than 1 1/8 as
shown in this example. That's how he arrives at a figure of
"only" 100% per year.
That's his intermediate-term strategy. His short-term
strategy, and his profitibility estimates for it,
are REALLY surprising.
So, has anyone else read the book? Wanna exchange
opinions? email me please.
-Mark Johnson
janitor@xxxxxxxxxxxx
>From omega-list-request@xxxxxxxxxx Thu Jun 18 22:19:55 1998
From: "Tom Teitsworth" <teits@xxxxxxxxx>
To: "Omega-List" <omega-list@xxxxxxxxxx>
Subject: RE: Jon Schiller's book "The 100% Return Options Strategy"
Date: Thu, 18 Jun 1998 18:15:48 -0400
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Subject: Jon Schiller's book "The 100% Return Options Strategy"
Has anyone else read this book? I got my copy from Windsor
Books, for about $55. I would like to exchange opinions
with other purchasers/readers by email.
Mark,
I used to do a lot of this type of trading. I bought Schiller's
first book when it came out since it basically covered the type
of trading I had been doing for some time. I remember thinking as
I read it that there was the chance of a novice setting up some of
those uncovered strangles and actually believing that 9 out of 10
would be winners. Trading like that can be high stress when the
heat is on... If this new book advocates buying contracts further
out for protection, that sounds like a good idea for safety.
Tom T.
>From omega-list-request@xxxxxxxxxx Fri Jun 19 00:37:43 1998
From: "Neil Harrington" <njh@xxxxxxxxx>
To: "Tom Teitsworth" <teits@xxxxxxxxx>, "Omega-List" <omega-list@xxxxxxxxxx>
Subject: RE: Jon Schiller's book "The 100% Return Options Strategy"
Date: Thu, 18 Jun 1998 18:35:00 -0600
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I agree with Tom. I also bought Schiller's first book a few years ago and
was one of those beginners baptized by fire into what a "90%-winner" naked
strangle was all about! I didn't appreciate that lesson.
I hope his new book lays a little more reality out. The idea seems sound
though.
Neil
>From omega-list-request@xxxxxxxxxx Sat Jun 20 07:22:30 1998
Date: Sat, 20 Jun 1998 00:26:49 -0700
From: Lamont Cranston <mulligan@xxxxxxxx>
Reply-To: mulligan@xxxxxxxx
MIME-Version: 1.0
To: Mark Johnson <janitor@xxxxxxxxxxxx>
CC: omega-list@xxxxxxxxxx
Subject: Re: Jon Schiller's book "The 100% Return Options Strategy"
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This is exactly what a friend of mine is doing and he averages about
$18000 per month. He very conservative, so with a little bit more
aggression he could really score.
Lamont Cranston
"who knows what evil lurks"
>From omega-list-request@xxxxxxxxxx Wed Jul 8 15:48:20 1998
From: "Tom Teitsworth" <teits@xxxxxxxxx>
To: "Omega-List" <omega-list@xxxxxxxxxx>
Subject: FW: Jon Schiller's book "The 100% Return Options Strategy"
Date: Wed, 8 Jul 1998 11:45:35 -0400
MIME-Version: 1.0
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Recall this post from June 18th about Schiller's
100% strategy? At that time the July 560 calls were
a long way away, now they are in the money. Of course,
there is still time and they might expire worthless.
I do feel this approach has potential and I have traded
it in the past, but it is not easy and the heat is
often on.
Tom T.
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