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Rakesh,
In a nutshell, no! One should understand the greeks in order to use options
... would you want your surgeon slicing and dicing on your body without an
understanding of anatomy?
Earl
----- Original Message -----
From: "Rakesh Sahgal" <rakeshsahgal@xxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Friday, June 13, 2003 10:07 AM
Subject: Re: [RT] TO OPTION OR NOT TO OPTION
> 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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