How Do Options Make Predictions?

John,

I would agree with this statement completely and as I said it could be used as an small edge.

I would add that a lot of floor traders use the options markets to make money as well and I would general class them into a group of the more in the know.

On a side note

I've seen Maestro's set up.

The guy has like $300,000 worth of computer software and hardware and I'm not joking !!

So for anyone hoping they can do this in a practical way, good luck.

 

Maestro's old set up

His new office is 3 times this.

 

How do you deal with the huge spread on options - bid vs ask? Seems like a fools game to me?

Good Luck.

 

The wider the bid/ask spread, the better it is for market makers and the worse it is for retail traders. The tighter the bid/ask spread, the worse for market makers and the better for retail traders. So you definitely want to trader options that are liquid and have a tight bid/ask spread.

 

MAESTRO, you have simulated enough thoughs here that a bunch of homework has been assigned...

 

Was the missing "t" in "simulated" intentional, or a Freudian slip?

 

For those who are still interested. Once you established the stable ratios between the strikes and premiums do the following. Create a drawing where you have 12 lines angled by 30 degrees to each other (much like the numbers on your clock face). Mark each end of the lines with the number that corresponds to a strike price. For example: if your strike prices are separated by 5 points you will have a “clock face” where the strikes will mark each hour. Keep on marking these lines for the entire length of the option chains. Now measure the distance on the “12 o’clock” line that is equal to the ATM Put premium. The line that is similar to “1 o’clock” which is 30 degrees to the right from the first line should be shorter than the first one as the put premium with the strike price that is 5 points OTM is less than ATM put premium. Next measure the put premium for the “2 o’clock” line that is 10 points away from the money. Keep on doing that until you get the spiral with all the strikes and premiums marked similar to the one that I have attached to this post. Notice that you will get a precise Fibonacci spiral and its shape will tell you a lot about upcoming move of the underlying. When the Volatility rises the spiral will “wind” it self up and when it drops it will “unwind” it self. That is the “swarm” behavior indicator I spoke about. The rest of it is Up to you. Enjoy! Mind you that you can also have similar spiral for Calls as well. I call this method “Option Spiral” rather than Option Chains. Of course, my analysis is a lot more complex than that, but this drawing should give you a good idea. The most fascinating part is that the spiral maintains all the Fibonacci ratios at all times (collective behavior).

 

Actually, its 8 times that, but thank you for bringing this old picture up. I have warm memories about my first set up.

 

Why do I have the feeling that this is an elaborate joke played on gullible ET members?

And will someone explain how a 30 monitor workstation is useful for algorithmic trading?

 

This is something I don't quite understand either. I have nothing against MAESTRO and I think his setup looks amazing, but that's about it - amazing, jaw-dropping...

As far as functionality goes, hmm, I don't know.

What is the purpose of 24 (as in the original pic) or 192? (if the new is 8 times that) monitors? Other than keeping Samsung or whoever is the manufacturer of those LCDs in business that is? Unless trading is done manually where a bunch of guys visually scan the monitors and look for singals rather than algoritmically!?

An interesting thread otherwise.