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Gwenn wrote...
>> In a word, I can only advise the average trader investor to stick to his
cash positions, eventually write calls on these etc, but don't start trying
to time anything with puts, calls, warrants etc, this will bring lots of
sorrow and you won't even understand what happened.<<
I guess it depends on how much you want to understand it, and how long you
afford yourself (both time and size of trading account) to figure it out.
No question but what options trading ("investing" is a non sequitur with
options), both long and short, is a demanding undertaking. And having to do
it as a "private" does not simplify the task, although I would propose that
having only your own funds to speculate with does indeed drive home the
requirement for early progress in your trading. At least no one else is
there to yell at you.
But I think I feel more positive about the prospects (and value as a trading
vehicle) for options as a proxy for trading the underlying, than some others
here. Most importantly, the trader learns sooner or later the absolute
necessity for money management. This of course is true trading any vehicle,
but options (and of course futures) force it on you sooner than trading
stocks. And when trading options on the long side, your risk is most
certainly limited, making these instruments eminently useful for evaluating
(in real trading, with money at stake) the worth of your trading strategy on
the underlying. And another reality with options that exists nowhere else
in quite the same significance, is the importance of taking profits when
they materialize. The shorter-term nature of an option mandates different
treatment of it when the a profit is realized. Options are for trading.
It is most certainly true that derivatives usually have lives of their own,
and that the additional concepts of volatility and time-value must be
carefully studied in order to make much sense out of why options do what
they do. But for the trader with the curiosity and fortitude to stay with
it, the profit potential for options trading is unequaled anywhere else in
the trading universe.
That's why some of us hardheaded "privates" are still doing it.
Good (options) Trading!
Dick Crotinger
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