|
PureBytes Links
Trading Reference Links
|
Alexander,
don't know if this will help you, because there are so many ways to trade. I
personally do not establish option positions with big risk. No naked sales,
no short strangles, no sales of ratio spreads etc. Here we have all these
strategies available that give a measure of protection - let others take the
open-ended risks.
I try to establish positions with
(1) limited risk,
(2) a probability of profit greater than 50%,
(3) unlimited profit potential,
(4) a good volatility fit, and
(5) the underlying at a crossroads.
ad 1: this lets me sleep at night even in the face of moves such as we've
had in AAPL or PG.
ad 2: greater than 50% probability may not sound like much, but remember
this is the mathematical expectation based on the Bell-curve (or, rather, a
lognormal distribution). It doesn't take into account my (hopefully) expert
opinion on the market which, hopefully again, will raise the probability of
profit to an acceptable level.
ad 3: Now don't take this too literally. A position such as the diagonal
backspread Ben had suggested in this thread will do fine for me, even
though, strictly speaking, profits in this position are limited. A limit on
potential profits is OK as long as that limit is far enough away.
ad 4: this should be obvious. When volatility is expected to rise, I will
look for long straddles and strangles, vertical backspreads etc. With
volatility expected to fall, credit spreads, diagonal backspreads etc. will
be of interest. I will generally look for stocks which display extremes in
volatility, and then go the other way.
ad 5: most important for me. I want to see the underlying at a breakout
point, or at an important MA etc., so that I can make some assumption about
an impending move. I try to tailor my option position to match this
assumption as much as possible.
Well, Alexander, this is pretty much what I do. It's more work than selling
naked options where you don't have to do anything but rake in the money
while you still can, and pray a lot, but it gives dependable income and a
good sleep at night.
Best wishes,
Michael Suesserott
-----Ursprungliche Nachricht-----
Von: Alexander Levitin [mailto:alevitin@xxxxxxxx]
Gesendet: Tuesday, January 23, 2001 17:20
An: realtraders@xxxxxxxxxxx
Betreff: Re: [RT] conservative?
----- Original Message -----
From: <MikeSuesserott@xxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxx>
Sent: Tuesday, January 23, 2001 5:21 AM
Subject: [RT] conservative?
> In my years of trading options I have been there, done that, quite a few
> times, more often than I care to remember. But I learned, and have now
moved
> on to more sophisticated mistakes. <g>
>
> Michael Suesserott
>
Dear Michael,
Would you care to list that "sophisticated mistakes" you end up with? (Or
some of them you wish to make "public").
The only things that ever worked for me was selling "bull (bear) spreads" at
the tops (buttoms) of the trading range during the times of extrime
volatility (after the 1987 crash). Another sucsessful operation was selling
"collers" on gold stock at the top of the spikes (when we had those) taking
in anormous premium on calls that has enough profit to cover protective puts
and pay interest for the money spended on stocks. Recently (being older and
slower) I was selling naked puts in time of panics (you remember we had
panics daily: bad earning, bad everything). I was OK staying with old and/or
established stocks (IBM, INTC, NOK, QQQ and so on) but when I incorporate
new economy stocks it was desaster (did enybody knew where was the bottom on
dot.com stocks?).
Nowdays everybody recognized that we still need IBM and NOK despite horrible
situation with those companies (the rate of profit increase fall from 1000%
per year to 999%), puts premium are worsless and I am looking for new ideas
in options. (I read many books, but have hard time to distillate the
practical strategies, so do not tell me stories about selling naked calls or
covered call writing).
The main reason I am interested in option trading (especially selling
options) is that I do not have to decide when to take the profit. Every
month on 3rd Friday a paycheck (or a bill) is comming to me.
I would greatly appriciate your advise.
Bevildered Alex.
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxx
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxx
|