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Ira:
Very well put. I agree with all that you say. And in fact, I believe,
trading in options can be more profitable than trading in any other vehicle,
commodities, stocks etc. But the main problem with trading options for the
average trader is just what you eluded to, knowledge. Most traders either
won't or don't want to put in the time it takes to understand all of the
strategies that go into trading options.
There are many books on the subject, and they explain these strategies very
well. As an example, there is Larry McMillan's book McMillan on Options
that probably expains most if not all of the strategies needed to trade
options successfully. However, getting through that book with a full
understanding, and then going out and implementing what you think you have
learned is another story. Most traders that I know migrate to what they
know to be the easiest to trade with least amount of effort. The old
addage, "keep it simple stupid", would be the watch phrase here.
I for one started out trading options, but as Gwenael said, most trading in
options lose, including me. In fact it was so bad that I stopped trading
for over one year. I couldn't pull the trigger after that. Once I got over
the loses and began to forgive myself, I looked for other vehicles to trade.
I settled on commodities, because of two things. One, the leverage, and
two, I could relate to them on a psychological level that didn't seem to be
there for me with options.
Just my two cents worth.
Lamont Cranston
"who knows what evil lurks"
----- Original Message -----
From: Ira Tunik <ist@xxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Cc: <realtraders@xxxxxxxxxxxxxxx>
Sent: Monday, May 29, 2000 7:43 AM
Subject: [RT] Re: Sector Rotation
> There seems to be a disagreement about who is making money in options who
isn't. If
> I am long the 50 call and short the stock at 48. I have limited risk. I
have
> created a synthetic put. I have the ability to trade the stock against
that option
> with a defined risk. If I am wrong, then I know exactly what I can lose.
If I am
> right, I will make the money on the short less the call cost. At 30 I
really don't
> care that the option went out worthless. Now someone will say, "you
reduced your
> profit by the cost of the option". I say, "I don't have to wait for my
house to
> burn down to consider fire insurance". Because an option goes out
worthless does
> not mean that the holder lost money. In options and option trading,
everyone can
> make money if they know what they are doing. Both option seller and
option buyer.
> The greater looser is often the option writer, the covered call. That
party has
> limited his/her profit and has unlimited loss (the value of the
underlying). I can
> name dozens of stocks that have gone to zero. I don't know of any that
have gone to
> infinity. Look at the current situation. There are many stocks that
traded between
> 100 and 360 that are now trading between 20 and 60 and the drop occurred
in a
> hurry, and not through a split. In my previous post you will note that I
used the
> terms, knowledge, professional and understanding. For those who believe
that all
> option buyers are losers, you need an education. For those who believe
that
> options sellers make the big profits, look at the strategy called for just
months
> ago. Sell the puts and generate a good income and great profits. I know
that at
> the time of sale you said that you would love to own the underlying at
that price,
> Now with many of those items far below the put strike price, it doesn't
look like
> such a good idea. Like any professional, whether it be a carpenter,
plumber,
> doctor, engineer or another trade, profession or discipline, you have to
know how to
> use the tools of that trade to be a success. Trading is no different.
Learn how to
> use options, futures, stock, indexes, technical and fundamental analysis
and any
> other derivatives or techniques that will assist you in becoming a
better trader.
> Ira
>
> Gwenael Gautier wrote:
>
> > I wouldn't advise options to anyone not trading full time profitably
since a
> > number of years. The number of people making money there in the long
run,
> > including professionals is amazingly small. Buying options is almost a
sure
> > receipe for bankrupcy medium term if you don't know how to trade the
cash first.
> > Selling options is a sure receipe for bankrupcy if you don't know how to
make
> > money buying them first...
> >
> > 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.
> >
> > Gwenn
> >
> > Ira Tunik wrote:
> >
> > > It is not pitting ones own belief and ego against the markets. It is
> > > utilizing ones skill and knowledge of the business of tradign that
counts.
> > > As I have said many times, knowledge is power, and the proper use of
it will
> > > give success. You can make more money, in a shorter period of time,
in a
> > > bear market or falling market then you can in a bull market. The key
is
> > > knowing how to do it with limited risk. Try utilizing options in your
> > > strategy and you will find that the risk is less then owning stock
alone in
> > > a bull market. Even with the disaster in the NASDAQ, you haven't made
a 2/3
> > > retracement of the 98 low. Therefore, technically, according to some
> > > theories, you are still in the bull phase. I have support at 3000 to
3030
> > > and we hit within 12 points during the week of the 26th of May. I am
not
> > > saying that we are in for another bull market, but if this is a bear,
bear
> > > market rallies can tear the shorts apart. These rallies are short,
they are
> > > violent, and they stop when least expected. So if you are short, CYA.
If
> > > 3000 doesn't hold, 2550 is next. Risk is a function of money
management.
> > > Understanding the tools that you have to manage risk and still allow
for
> > > unlimited profit is part of being a professional. Good luck in either
> > > market direction. Ira
> > >
> > > Gwenael Gautier wrote:
> > >
> > > > Investing in solid, well managed companies dominating their sector,
> > > > itself in a strong growing trend within a growing economy in a
peaceful
> > > > world may not be the absolute certainty for profits always, but long
> > > > term you will not lose much doing so, while trying to time a bear
market
> > > > in and as out is like trying to figure out how far a dog will run
back
> > > > and forth and how long before it comes back to you. YOU WILL NEVER
KNOW
> > > > BEFORE, AND THAT IS A TRULY LOSING AND EXPENSIVE METHOD. Besides,
> > > > selling short you may lose more than your equity, that is not a
prudent
> > > > thing to do....
> > > >
> > > > I can only warn anyone from trying to pit one's ego or own beliefs
> > > > against the markets. That is definitely a most effective way to get
> > > > seperated from one's money real fast and brutally.
> > > >
> > > > Gwenn
> > > >
> > > > James Taylor wrote:
> > > >
> > > > > When the water level falls, all boats go lower.
> > > > >
> > > > > Hunting and hoping to find stocks that will go up in the face of
> > > > > a bear market is a recipe for losses.
> > > > >
> > > > > You should be searching for the best short sale candidates.
> > > > >
> > > > > Best of luck buying in this market.
> > > > >
> > > > > JT
> > > > >
> > > > > ----- Original Message -----
> > > > > From: "John Corrion" <corrion@xxxxxxxx>
> > > > > To: <realtraders@xxxxxxxxxxxxxxx>; <AIQ-Trading@xxxxxxxxxxx>
> > > > > Sent: Friday, May 26, 2000 6:46 PM
> > > > > Subject: [RT] Sector Rotation
> > > > >
> > > > > > Hi Guys,
> > > > > >
> > > > > > Anybody having any success determining the sectors that
> > > > > > may be up in the next rally? I have heard that
> > > > > > Fidelity is concentrating on wireless companies, is
> > > > > > there a list of these companies?
> > > > > >
> > > > > > Everything I see basing tends to be defensive and not
> > > > > > prone to great price appreciation.
> > > > > >
> > > > > > Thanks,
> > > > > >
> > > > > > John
> > > > > >
> > > > > >
> > > > > >
> > > > > >
>
>
>
>
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