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Ira,
Thank you for something I can support wholeheartedly.
There is perhaps too much anger expressed and not enough support on the
forum.
The lesson I have learned is to support that to which my experience
suggests makes sense, and can build on, and not wait for total agreement
as here.
If you have integrity enough to overcome your anger, you will write most
negative comments that have little utility to others, directly to the
person who has invoked your ire. This is just
common courtesy and so that any possible misunderstanding can be possibly
resolved, and to stop you looking like a fool, and to stop generating
crowd-like copycats of any equally emotional colleagues, and God forbid,
to enable both to learn something constructive.
So if you must write angry emails in response to anything I write, please
write direct to me, I am happy for you to release your anger in this way
- it is a cathartic service I am happy to provide - just do not expect an
answer. Your privacy will be respected - so you will not look
like a fool in real need to others, just possibly to me.
Ira wrote:
Date: Tue, 19 Feb 2002 09:05:14 -0800
From: Ira Tunik <irat@xxxxxxxxx>
Subject: Re: Selling Covered Calls
Everyone seems to believe that if you know how to do something that
appears
to be riskless that you should be able to own the world. Number one,
there
are position limits on options, whether you are a market maker or an
individual, so you can only do something so many times.
How true.
The second point is
that one needs a degree of liquidity to be able to perform any
trade.
Definitely an issue in options even for a moderately sized
trader.
That
liquidity is distinctly lacking in many options, stocks and futures.
Putting
a million dollars to work is no problem, but putting a billion
dollars to
work is another story. To give you an idea of the difference. If you
were
to spend $1000 per day every day of the year you would run through
you
million dollars in about 3 years. If you did the same thing with a
billion
dollars it would take you about 3000 years to go to zero.
Well said. Extreme extrapolation, without thinking, can
be the basis for amusing jokes but rarely makes business sense.
As far as owning
the world, what does that mean? One has to decide for himself, how
much is
enough.
I agree, but unfortunately for many, greed knows no
bounds.
Rich Dad, Poor Dad is perhaps a good book on this topic.
When you have enough then you quit, sit back and enjoy
life.
Those who retire early often seem to have that mind-set.
That
is what I did 17 years ago.
Four years ago in my case - I can also recommend it.
No I don't own the world, but I can do what ever
I want to do, whenever I want to do it and that is the same thing as
owning
the world to me.
I am equally lucky too. But then I am not a seeker
of expensive cars or clothes or image or status - I like to go around in
clothes that are comfortable not clothes that stop me having to worry
about what others think of me. Think deeply about your
motivations is my advice, often my clients have conflicting motivations
and wonder why they achieve little. Maybe you
will get to retire early too, if that is what you want or write that book
or otherwise fulfil your dream.
I traded after I retired because I enjoyed it, not because
I had to.
Well said. I also trade because I have so much to learn,
love learning, and a traders coach benefits from being a trader.
I stopped trading on a regular basis because of a heart attach.
I
teach a little because I enjoy it, not to hustle bucks.
So many are looking for what I sell on my web-site and are
disappointed when they cannot find it, you must wonder about their
happiness levels - distrust can be a source of unhappiness.
So each individual
has his or her own agenda.
But many will not see that others can have a different agenda from
them.
For example when I mention one style of trading, I am not selling it or
saying it is a replacement for yours, just trying to open up
perceptions.
I use many trading styles integrated together and a different set of
integrated styles at each different time horizon while using different
parameters on different markets and instruments.
Only those with a something to sell mentality, a one time-horizon
viewpoint, a discard and replace approach to life see things as
simply:
- what are you
selling and for how much?
- for what time
horizon?
- what do I have
to give up?
What he claims to be able to do is doable. As
time runs out on his positions he has to be able to roll to the next
set of
months using time spreads or have a broker that is sophisticated
enough to
put the trade through with all four sides intact with the net credit
necessary. The minute one starts to leg the position there is risk.
Tell me about it.
The
other thing that no one seems to have brought up is that he doesn't
earn the
2.40 because there is still time left on the call when he has to make
the
roll. So how much he actually makes is strictly dependent upon the
value of
the call when he makes the roll.
All trading systems I am aware of are market path
dependent. But I am open enough to know that I might be
missing something, and someone else probably knows better.
That is what a forum is for - to share ideas - not to reject them on an
emotional basis and give your latest projection to be possibly used as a
whim or tip for others - that is potentially destructive to yourself and
others.
If the stock is at 60 the call is deep in
the money and there is little problem, he has to be able to sell that
call
and then put on the spread at the new strike prices. At 20 he either
exercises the put and buys in the call or rolls to the lower set of
strike
prices. This trade is far from riskless if you bother to think about
it and
what can go wrong.
I have yet to find a truly riskless trade - but someone might know
better.
All trades seem to have a capital requirement - and there is always the
risk of lost opportunity.
You are better off writing covered calls on leaps if that
is the way you want to go. You can get 40% to 50% returns there if
you
understand what you are doing. Hope that this helps you a little.
My experience is similar, at least for puts - and even better annual
returns using this style are possible on a regular basis if certain
parameters are optimised.
In summary, support and additional ideas, honest unemotional
disagreement, questions and argument are better than
vitriol.
Anger is paradoxically often an expression of some measure of agreement -
and sometimes a reflection of a self-defense mechanism protecting any
nerve that has been hit. It can be seen as sometimes being a
cry for help in overcoming the denial process - if a difficult one to
field.
So there is occasion when response to vitriol might be sensible - when
there is likely to be a lesson for many and/or any hidden assumptions can
be brought to the foreground.
But even vitriol is useful - it gets the emotion out and increases the
chances of the angered persons perceptions opening. And
for me, receiving some vitriol has made me more productive than I have
been in months. Thank you one and all.
Unconditional regards, Ric.
www.traderscalm.com
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