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Perhaps a cheaper way is to buy either the put or the call and take an equal
and opposite position in the relevant futures contract (eg buy a call and
short the future). I think this would be less sensitive to any (likely) fall
in implied vols after the tension is released by the news coming out while
still having the same fundamental characteristics as a straddle.
Perhaps an options guru can correct me though :)
Regards,
Robert
-----Original Message-----
From: Dom Perrino [mailto:domenick@xxxxxxxxxxxx]
Sent: 10 December 2000 20:03
To: realtraders@xxxxxxxxxxx
Subject: Re: [RT] Re: Trading Events
Don, I know exactly what you mean.One of the best ways to catch those big
short term moves would bring us back to your original thought regarding use
of options and other strategies some of which were mentioned by Ira.One of
the least complex strategies to catch a big move prior to release of
important economic figures ,cpi, ppi, employment etc. would be to buy a
straddle on the instrument we think is going to make a big move but we want
to limit risk and be on the right side whether the big is up or down .
If the move is substantial we would exit the put or the call at a profit
thus recovering the cost of both the call and the put. In, addition, we
would still have either the put or the call in our possession. This would be
a freebie and we could unload it if a quick reversal occurs. In any event
since we already recovered its cost we could just sell it since it served
its purpose. The major problem with the straddle is that it can be expensive
especially if you stick to the true definition of a straddle i.e. same
strike price A good way to reduce the cost would be to buy the call and put
5 points away from the current price of the instrument Hope this is more on
your point.
Regard,
Dom . .
----- Original Message -----
From: "Don Ewers" <dbewers@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxx>
Sent: Sunday, December 10, 2000 2:17 PM
Subject: Re: [RT] Re: Trading Events
> Dom,
> I think we are on the same page, because in your scenario there is no
"news
> reversal" the exist trend continues. The other thing to keep in mind is
the
> type of trades I am discussing are very short term in nature, a few hours
to
> a day at best. Kind of like a capitulation.
> don ewers
> ----- Original Message -----
> From: "Dom Perrino" <domenick@xxxxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxx>
> Sent: Sunday, December 10, 2000 11:08 AM
> Subject: Re: [RT] Re: Trading Events
>
>
> > Don, I basically agree that reaction to news is more important (or at
> least
> > as important ) than the news itself. However, I have noticed on many
> > occassions that looking at a chart prior to a major news event the
> > chart(whatever the entity) indicated that if it was on a sell negative
> news
> > came out and the news confirmed the chart. The reverse for positive
> > news.Even if this is not always the case, a glance at the chart of the
> > entity you are trading will be of help or at least increase the odds in
> your
> > favor when making a decision .The "Markets" seem to take on a mind of
> their
> > own . The participants individually don't know but when the crowd
becomes
> > one ,it forms the mind of the market , and this mind knows all that is"
> > knowable"
> > Dom
> > ----- Original Message -----
> > From: "Don Ewers" <dbewers@xxxxxxxxxxxxx>
> > To: <realtraders@xxxxxxxxxxx>
> > Sent: Sunday, December 10, 2000 11:07 AM
> > Subject: Re: [RT] Re: Trading Events
> >
> >
> > > Dan,
> > > Sure it really quite simple a simple trade to understand and not my
own
> (a
> > > fellow trader shared it with me). Basically it is the acknowledgement
> > that
> > > the "news or trading event" is already discounted in the price of the
> > > commodity. A reaction to the news occurs, but then the reaction
quickly
> > > fails. Grain traders use it frequently on a grain report day but the
> > bonds
> > > and SP's with the current volatility are other good places to watch
for
> "a
> > > news reversal trade".
> > >
> > > It is also discussed in the Raschke/Conners book "Street Smarts" I
> think,
> > > which may have been the trades origin, or at least documented.
> > >
> > > Basically when a market moving event is about to happen you note the
> price
> > > of the underlying commodity, then after the commodity reacts to the
> event
> > ,
> > > lets say up for example, you place a sell stop at the price the
> commodity
> > > was at "before the event". If the commodity trades back down to that
> price
> > > you go short. They actually happen quite frequently.
> > >
> > > Here is an example, it is widely expected (or maybe not) that the crop
> > > report might show less yield, smaller acreage, larger exports whatever
> for
> > > soybeans. The price prior to the report (the previous day because crop
> > > reports are at 7:30 am as I recall) had a range of $5.05 to $5.10
> closing
> > at
> > > $5.08. The report comes out and beans when they open at 9:30 am gap or
> > trade
> > > up to $5.21. At that point you would place a sell order at $5.10 and
if
> > > beans trade back into the previous days range you go short with a stop
> at
> > > the gap high or a money stop whichever works with the risk you wish to
> > take.
> > > Exit the trade (hopefully profitably) using any number of profit
taking
> > > techniques. The reversal in the commodity occurred because a majority
> of
> > > the news was already in the price prior to the news. When the news
came
> > out
> > > a few people/traders react to it only to find out that most people are
> > ready
> > > to take their profits after the initial reaction. This profit taking
is
> > the
> > > reason the price declines and if it trades back into the prior range
> > > increased selling occurs from those who were recently long hoping for
a
> > > positive reaction.
> > >
> > > Several other examples happened this past Friday. Some people were
long
> > the
> > > SP in the afternoon prior to the two court rulings around 1395 feeling
> it
> > > may go Bush's way. The ruling came out and the spoos rallied to 1404,
> if
> > a
> > > sell stop was placed at 1395 you would have gone short and they traded
> > back
> > > down to 1388 area. The bonds were another example opening at 7:20 at
> > 103-21
> > > and prior to the employment report they were around 103-25ish (a
bullish
> > > report was expected), the report came out the bonds traded to 103-31,
at
> > > that point place a sell order at 103-25 or slightly below since the
> range
> > > was tight. The report was not as bullish as expected, there was a
slight
> > > reaction up, then profit taking set in.
> > >
> > > The news reversal is simply buy the rumor sell the fact or sell the
> rumor
> > > buy the fact which may explain Intel's short term reaction to bad
news.
> > > "That warn" was already in the price of the stock, it was not a
surprise
> > to
> > > most. Hope this all helps. Like I said they happen all the time. Said
> > simply
> > > "it is not the news but the reaction to it that is important".
> > > don ewers
> > >
> > > ----- Original Message -----
> > > From: "Dan Cash" <dcash@xxxxxxxxxxxx>
> > > To: <realtraders@xxxxxxxxxxx>
> > > Sent: Saturday, December 09, 2000 9:17 PM
> > > Subject: Re: [RT] Re: Trading Events
> > >
> > >
> > > > Don,
> > > >
> > > > Do you mind expanding on your trading news reversal technique in any
> > > detail you
> > > > care to, I would appreciate the insight?
> > > >
> > > > Dan
> > > >
> > > > Don Ewers wrote:
> > > >
> > > > > Ira,
> > > > > Can you enlighten us with an example, since I only trade, "what
are
> > > billed
> > > > > as major event s" from the "news reversal trading technique".
> > Obviously
> > > your
> > > > > expertise utilizing options would be a welcome trading technique
> that
> > we
> > > may
> > > > > be able to learn from. I normally go flat ahead of these events
> > feeling
> > > it
> > > > > is gambling in lieu of trading, so I am anxious to hear your
reply.
> > > > > don ewers
> > > > > ----- Original Message -----
> > > > > From: "Ira Tunik" <ist@xxxxxx>
> > > > > To: <realtraders@xxxxxxxxxxx>
> > > > > Sent: Thursday, December 07, 2000 1:22 AM
> > > > > Subject: Re: [RT] Dow
> > > > >
> > > > > > If one is just trading the underlying, then a cardinal rule
should
> > be
> > > to
> > > > > be out
> > > > > > of the markets when major announcements are to be made. If you
> know
> > > how to
> > > > > > utilize options in volatility positions that are non
directional,
> > then
> > > you
> > > > > put
> > > > > > on these positions just before announcements are made and trade
> the
> > > > > volatile
> > > > > > swings with glee. The bonds are a classic example of where this
> > works
> > > > > > wonderfully. There is sufficient liquidity in both the options
and
> > > > > underlying
> > > > > > bonds to allow one to trade some of the huge swings the bonds
are
> > know
> > > to
> > > > > make.
> > > > > > Ira.
> > > > > >
> > > > > > Don Ewers wrote:
> > > > > >
> > > > > > > Dom, all-,
> > > > > > > True, but one should not neglect events that "make the
charts",
> > > meaning
> > > > > > > sometimes charts say one thing and an event and the price
> reaction
> > > to
> > > > > it,
> > > > > > > makes the chart say quite another and therefore a different
> story
> > > > > unfolds.
> > > > > > > We need to be flexible enough in our trading to accommodate
> this.
> > > Charts
> > > > > > > rule until they fail, one good reason depending on your
trading
> > > > > timeframe to
> > > > > > > avoid major events that have been built up to be market
movers.
> It
> > > is OK
> > > > > to
> > > > > > > stand aside at times and let the story be told?
> > > > > > > don ewers
> > > > > > >
> > > > > > > ----- Original Message -----
> > > > > > > From: "Dom Perrino" <domenick@xxxxxxxxxxxx>
> > > > > > > To: <realtraders@xxxxxxxxxxx>
> > > > > > > Sent: Wednesday, December 06, 2000 9:46 PM
> > > > > > > Subject: Re: [RT] Dow
> > > > > > >
> > > > > > > > My belief is that technical analysis already reflects
ALL,that
> > is
> > > > > known
> > > > > > > > about a stock including all fundamental factors. I believe
> that
> > is
> > > the
> > > > > > > > standard belief of technicians. It seems that is what you
are
> > also
> > > > > saying.
> > > > > > > > My original email to Bob may have been ambiguous.
> > > > > > > > Dom ----- Original
> > > Message -----
> > > > > > > > From: "Ira Tunik" <ist@xxxxxx>
> > > > > > > > To: <realtraders@xxxxxxxxxxx>
> > > > > > > > Sent: Wednesday, December 06, 2000 10:03 PM
> > > > > > > > Subject: Re: [RT] Dow
> > > > > > > >
> > > > > > > >
> > > > > > > > > Those factors would all have been factored in before you
> > > selected
> > > > > the
> > > > > > > > stock to
> > > > > > > > > trade. They would be terrible if you were looking for a
> short
> > > in a
> > > > > down
> > > > > > > > market
> > > > > > > > > and they would be wonderful if you were looking for a
stock
> to
> > > trade
> > > > > in
> > > > > > > an
> > > > > > > > up
> > > > > > > > > market. After the selection, you would trade it
> technically.
> > > Ira
> > > > > > > > >
> > > > > > > > > Dom Perrino wrote:
> > > > > > > > >
> > > > > > > > > > Bob,
> > > > > > > > > > In your opinion,what would you consider key differences
> > > between a
> > > > > > > > technician
> > > > > > > > > > and a fundamentalist ( like yourself ) if both let the
> > market
> > > tape
> > > > > > > call
> > > > > > > > the
> > > > > > > > > > shots on a day to day basis, and, as you well put it,
> > keeping
> > > the
> > > > > > > > account
> > > > > > > > > > healthy.
> > > > > > > > > > It would seem to me that the technician would have an
> easier
> > > job
> > > > > since
> > > > > > > > on a
> > > > > > > > > > short term basis p/e, book value,sales, balance sheet,
> > current
> > > > > ratio
> > > > > > > > > > etc.would not need to be factored into the trade .
> > > > > > > > > > Dom
> > > > > > > > > >
> > > > > > > > > > ----- Original Message -----
> > > > > > > > > > From: "Bob" <bobskc@xxxxxxxxxxxx>
> > > > > > > > > > To: <realtraders@xxxxxxxxxxx>
> > > > > > > > > > Sent: Wednesday, December 06, 2000 1:21 PM
> > > > > > > > > > Subject: Re: [RT] Dow
> > > > > > > > > >
> > > > > > > > > > > An elitist? I hope not and I certainly hope that you
> > detect
> > > a
> > > > > man
> > > > > > > who
> > > > > > > > > > > doesn't send insulting comments about someone he knows
> > > nothing
> > > > > > > about.
> > > > > > > > > > >
> > > > > > > > > > > As to the content of my mail, I was trying to state
that
> > as
> > > long
> > > > > as
> > > > > > > > > > > liquidity and beta are the principal drivers of the
nas
> > > while
> > > > > value
> > > > > > > > and
> > > > > > > > > > > common sense take a back seat, all gains should be
> viewed
> > as
> > > > > > > temporary
> > > > > > > > and
> > > > > > > > > > > unsustainable. As to "burning flesh", I don't care
> which
> > > way
> > > > > this
> > > > > > > > market
> > > > > > > > > > > goes as long as it goes .. I let the market tell me
what
> > to
> > > do
> > > > > on a
> > > > > > > > day to
> > > > > > > > > > > day basis and I don't fight the tape. My account is
> > healthy
> > > ..
> > > > > I
> > > > > > > hope
> > > > > > > > > > > yours is as well.
> > > > > > > > > > >
> > > > > > > > > > > Bob
> > > > > > > > > > >
> > > > > > > > > > > At 03:35 AM 12/6/2000 -0500, you wrote:
> > > > > > > > > > > >Bob,
> > > > > > > > > > > > I've been a student/investor for many years.
> > Sounds
> > > to
> > > > > me
> > > > > > > like
> > > > > > > > > > you've
> > > > > > > > > > > >become "insulted" that the mob out there doesn't have
> > your
> > > > > > > > intelligence
> > > > > > > > > > and
> > > > > > > > > > > >prescience.
> > > > > > > > > > > >
> > > > > > > > > > > > Do I detect the burning flesh of an elitist?
> > > > > > > > > > > >
> > > > > > > > > > > >
> > > > > > > > > > > >To unsubscribe from this group, send an email to:
> > > > > > > > > > > >realtraders-unsubscribe@xxxxxxxxxxx
> > > > > > > > > > >
> > > > > > > > > > >
> > > > > > > > > > >
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> > > > > > > > > > >
> > > > > > > > > > >
> > > > > > > > > > >
> > > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > > To unsubscribe from this group, send an email to:
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> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
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> > > > > > > >
> > > > > > > >
> > > > > > > >
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> > > > > > >
> > > > > > >
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