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Hi Earl,
Could you please elaborate on the point you are
making? I have never traded options due to the complex
mnath involved in valuing them. Given this fact is it
possible for someone like me who doesnt comprehend the
greeks to use options gainfully as you are suggesting
they can be used?
Rakesh
--- EarlA <earl.a@xxxxxxxxxx> wrote:
> Very true, and I generally strongly share your
> preference for the simple
> binary decision in futures. That said, deep in the
> money options, which most
> traders eschew for lack of leverage, offer the
> opportunity to do a binary
> trade at potential trend reversal points where both
> volatility expansion and
> delta work for you.
>
> Earl
>
> ----- Original Message -----
> From: "Norman Winski" <nwinski@xxxxxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Thursday, June 12, 2003 10:07 AM
> Subject: [RT] TO OPTION OR NOT TO OPTION
>
>
> Dom1,
>
> I hope you don't mind my jumping in. My thinking
> is that the more
> variables there
> are, the more variables there are with which you
> have to compete or beat
> professionals at. Options are a good example of a
> sophisticated vehicle
> which begs for the best state of the art computer
> and mathematical models.
> I was a market maker on the CBOE for 12 years. I
> know enough to know that
> it is very difficult to compete with the floor
> professional in options,
> which is why I now seldom trade options in favor of
> the more simplistic
> futures contracts. Futures represent mostly a
> binary decision, will it go
> up or down, to buy or to sell, whereas options
> represent a plethora of
> variables and required decisions. The greater the
> number of variables, the
> greater the chance that I will make a bad decision
> or judgement. So, unless
> you have a staff of people to run the computers, do
> the research, and the
> latest option theoretical math model, you are
> probably gonna get your butt
> kicked. It is hard enough to make money in the
> market via getting the
> underlying market right without having to worry
> about illiquid options
> causing wide bid - asks, implied volatility, the
> history of option
> valuation, deltas, thetas and the rest of the Greek
> alphabet. Bottomline, I
> am a strong believer in KEEP IT SIMPLE and options
> don't fit my KEEP IT
> SIMPLE model. That's my two cents.
>
> Regards,
>
> Norman
>
> ----- Original Message -----
> From: dom1_1998
> To: realtraders@xxxxxxxxxxxxxxx
> Sent: Thursday, June 12, 2003 11:42 AM
> Subject: Re: [RT] Minimum price increment
>
>
> On one hand I agree about calculating option
> prices via the BS method.
> On the other hand I wonder how much of a
> difference does it really make.
>
> The MM decides the B/A prices so they're going to
> be what they are
> regardless of what the BS model says. Like you
> said, over price for
> you, under price for me.
>
> To avoid this guessing game, I wonder if the best
> method is buy/sell
> deltas of one to mesh with the underlying.
>
> What do you think?
>
> Dominick
>
>
>
>
>
>
>
>
>
> --- In realtraders@xxxxxxxxxxxxxxx, "Ira"
> <mr.ira@xxxx> wrote:
> > I hope that your system includes the theoretical
> price of the
> options and a realistic way of acquiring the
> numbers to be used in the
> variables in option pricing. Based upon your
> reply you are basing
> your bid/offer upon someone else's information,
> bid/offer. The
> greatest risk outside of price movement in trading
> options is
> volatility risk. So you had better have a handle
> on finding the
> volatility of the underlying and being able to
> compare it with the
> implied volatility of the options. To know
> whether the bids and
> offers are over or under valued is imperative in
> trading options. One
> thing to remember is that your overvalued options
> might be my under
> valued option. It is all in the numbers used in
> the option pricing
> variables. Good luck in your search. Ira.
> > ----- Original Message -----
> > From: Brendan B. Boerner
> > To: realtraders@xxxxxxxxxxxxxxx
> > Sent: Thursday, June 12, 2003 7:27 AM
> > Subject: RE: [RT] Minimum price increment
> >
> >
> > Ira, thanks for the explanation.
> >
> > I'm asking because I'm developing a system to
> remain on the inside
> bid / offer. I want to ensure that if I raise /
> lower the bid / offer
> that I do so in such a way the honors the minm
> price increment rules.
> >
> > Regards,
> > Brendan
> > -----Original Message-----
> > From: Ira [mailto:mr.ira@x...]
> > Sent: Thursday, June 12, 2003 9:10 AM
> > To: realtraders@xxxxxxxxxxxxxxx
> > Subject: Re: [RT] Minimum price increment
> >
> >
> > The minimum bid is for market makers
> standing in the crowd and
> has nothing to do with you, other then the
> increments of bid and
> offer. There is also a maximum spread between bid
> and offer that can
> be made in the crowd. If the bid is $3 then the
> minimum offer in the
> crowd, by a market maker is $3 and $3.10. That
> doesn't stop you from
> putting in an offer or bid at $3.00 or $3.10. If
> you put in your offer
> at $3.10 you are competing with market makers and
> floor brokers that
> are holding offers. It used to be, that if you
> tell your broker that
> you want your offer in the book, that book orders
> were filled before
> floor orders and they were filled in the order
> booked. What if the
> bid/offer in the crowd was $3.00 at $3.50? You
> can put a bid or offer
> anywhere in the middle in $.10 increments.
> Whether you would get
> filled or not is another matter, but if your offer
> was at $3.30 it
> could read $3.00 at $3.30 or a market maker could
> rest upon your offer
> and offer at $3.20 knowing that your offer was
> there if the price of
> the underlying starts to rise. When you cancel
> your offer the market
> might very well go back to $3.00 at $3.50. Your
> offer was the market
> makers stop loss.
> >
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