I'm just reading this thread. I am not a scalper. However, no one has considered selling deep out of money calls.(Collect premium vs paying for it)
My advice is to constantly monitor the number and size of resting orders on each side of the book across all correlated instruments. Ex: You are a fixed income scalper with short resting orders on 10-year, 30 year, Eurodollar, Bund, Euribor, just imagine a news will fill all your orders at once, will you have the margin on your account? Can it be a career ending?...Just imagine the worst scenario and act within your risk parameters. Fat fingers and huge moves are just a cost of doing business, you must overcome it with your regular trading and protect you against extreme scenarios. Black swans will happen to your trading over the long-term.
Victor8 - Selling naked options ties up margin so that has to be taken into consideration. Whenever I hear about selling calls and buying puts (or the opposite) I think about Eric Bolling talking about a "texas hedge" because instead of reducing risk you're increasing it. Businessman - You are correct there is less risk going flat EOD however just b/c 9/11 happened outside market hours doesn't mean the next black swan will too. Please don't take any of this as criticism as I don't want this thread (or any one for that matter) to turn into a flame war especially since it's such an important topic.
BTW when 9/11 happened markets was closed yeah but futures was open , what was the instant effect then ? ( i didnt start trading yet back then ) ...
Surprise - On the morning of 9/11, futures immediately went locked limit down and the stock market closed soon after.
We traders are really at the mercy of the SEC. We are forced to depend on them to maintain an orderly market. And, as we learned from the recent "flash crash", in an age of computer generated orders, or brokers allowing orders to go directly to the exchange with no screening, a very disruptive event is possible. The SEC has done a very poor job of protecting traders from these events, but recently, i believe, they introduced new regs requiring that all orders going through brokers be screened electronically before being sent to an exchange for execution. (Apparently some brokers were allowing orders from some clients to go directly to exchanges without any screening.) This is certainly a step in the right direction, but wouldn't it make more sense for the screening to be at the exchange level rather than the broker level? Who is looking out for us hapless retail traders? We traders need a lobbyist to lobby the SEC on our behalf. Will one of you young, ambitious guys please volunteer to start a retail traders association that has lobbying the SEC as its primary function? I have no problem paying $100 bucks a year or so to support such an organization, and I think there are easily enough retail traders out there to finance a strong lobbying effort. I'm serious! We need someone looking out for our interests. As we all know, we can not trust a highly politicized SEC to do this, even though that is one of the things they are supposed to do.
In the equities futures and commodities the view was a lot clearer. Major resistance levels failed to move higher and collapsed two weeks before Sept. 11th, 2001. On the shorter term charts, major support levels failed to hold on the Friday before, Sept. 7th, 2001. If anyone, especially retail investors were long the equities futures on September 11th, IMHO they were asleep at the wheel. Both planes hit before the market opened as well. I remember Maria Bartiromo, the week following 9/11 made the statement that those holding major short positions on 9/11 were going to be investigated. What a bimbo statement, anyone holding major long positions on 9/11 should have stopped trading and gotten re-educated to find a job in the service industry.
+1 Proflogic. The SPX was below the 10, 20, 50 and 200 DMA BEFORE 9/11. No one can predict a black swan like a terrorist attack but trading with the trend would have meant you were short already or in cash. Here's some interesting info re that "suspicious" put activity in UAUA and AMR shortly before 9/11. It turns out it wasn't someone w/ inside knowledge profiting from the attack - it was just newsletter subscribers following a rec. Everyone who bought those puts b/c of that newsletter were interviewed by the feds. Here's what the convo would look like after the CIA renditions an ETer to an algerian prison: CIA: We can do this the easy way or the hard. Tell us where the other members of the cell are... ETer: I swear I'm not a terrorist...I was just following a trading rec from a newsletter...please you have to believe me...the worst thing I've done in my life is try to pass off a paper trading account as real on ET. CIA: Ok, pal. I'll bite. What's the name of the newsletter? ETer: It's from a website...www.doublemymoneyeveryday.com CIA: (trying to suppress laughter) Let's try this again. We've moved on from waterboarding to a more effective interrogation technique...You will tell us everything or we'll force you to read jack hershey's posts 24/7 until you break.