for the last time!

Discussion in 'Options' started by sle, Sep 4, 2012.

  1. sle


    All right, people, in response to a few private messages (I have replied, mostly), here is a public announcement. There is no miracle strategy out there that you can trade without understanding the pricing or the risks. You can't just "sell premium for a living" or do "iron fuck-knows-what" and believe that it will make you rich. Sooner or later you will get unlucky and the great evil market will catch up with you. There are two ways to make money with options:

    (a) You understand the underlying stock, index or futures contract well enough to predict where and/or well it will move. If you know when and why corn is used to feed the calf instead of soy, you can make tons of money trading conditional spreads on feeds. If you know what if some bio-tech company will pass or fail the FDA test, you can make a ton simply trading puts or calls.

    (b) Understand the pricing of risk premiums and be able to identify which risk premium is rich or cheap. This risk premium could be implied volatility, skewness of distribution, or even dynamics of implied volatility. But you have to understand the pricing, the dynamics and be aware of the risks (you know, for any risk premium, it's either a slow bleed or a bullet to the head).

    So... experienced people, please treat the newbies with some degree of respect for their money. Newbies, caveat emptor, be careful who you trust. It not only takes years to develop experience but also takes a lot of critical thinking to get through the theory and the practice. Be prepared for it. But there are coins in the fountain, you just have to be ready to dive for them!

    Thank you and have a good night!
  2. lol :)
  3. Nothing new ....... That's all been recently mentioned before.


    diaoptions has spoken
  4. A better title for your thread would have been WARNING... WARNING...WARNING!!!
    And it should be re-posted every time it drifts down to the bottom.

    Most strategies sound like excellent ways to generate income.... on paper.
    And most seem like high probability strategies.... on paper.
    And they seem relatively easy to execute successfully.... on paper.
    The potential risks of a trade usually seems pretty reasonably.... on paper
    And managing leverage intelligently is simple common sense.... on paper.
    Those "limited losses" via option trading sound terrific.... on paper.
    And there can't possibly be a downside to buying insurance.... on paper.
    Earning 2 - 3 % per month actually seems conservative.... on paper.
    Trade adjustments are fairly obvious as to when and how.... on paper.
    And paper trading is just like the real thing.... on paper.

  5. +1
    The above applies to all areas of Trading, not only options. Most Beginners, Newbies, Wannabee's all want the fast and easy road to riches.

    If one really wants to provide constructive advice, tell them the truth. Success only comes after years of hardwork, there are no shortcuts and not everyone possesses the skills and mindset required.
  6. kapw7


    sle has been really generous with contributing real gems to this forum. And always by keeping a decent profile. If I ever make money (pink swan event lol) I'll send you a cheque :p (not forgetting a few other posters who have been as fantastic)
  7. another great and honest post by sle.

    when you earn time decay, you pay in negative skewness. so if you have a large account bal buffer, and net sell vol for credit, you prob will come ahead over time. limiting losses to play the game for another day is the key. of course if you have a good feel and go long vol once in a while it is even better. but it is a net losing trade if you long vol all the time. you bleed to death.
  8. But it lacks any substance. :(
  9. +1
  10. substance is in the eyes of beholders. but it is hard to know what to look for if you do not have the expertise to judge. no one is going to bring a detailed profitable trading plan to you on a plate.
    #10     Sep 4, 2012