more interesting discussion: Maverick74 Registered: Mar 2002 Posts: 3896 04-14-04 12:49 AM Quote from nitro: Although I agree with the spirit of what you are saying, I think it goes too far. IMO, the reason most quantitative models are meaningless to a certain extent is that most (all ?) models require that the statistical properties of whatever you are modeling evolve slowly over time so that estimates using past data can be indicative of the future. Obviously, as traders this is not what we observe, but that does not mean that greeks are _always_ meaningless, but _when_. nitro Maverick74 Registered: Mar 2002 Posts: 3896 04-14-04 10:51 PM I never said that greeks were meaningless. In fact, quite the opposite. I make a very good living trading off the greeks. I just think that if one focuses all of one's attention on the greeks as the key to making money you are doing yourself a disservice. If you can't trade the underlying, you won't make shit trading options. And if you are not a damn good trader overall, i.e. good discipline, patient, and willing to take risk then you are going to find options to be very challenging. As far as quantitative models go, I think most of them are worthless. I'm sure most people would disagree with me on this but I stand my ground on this topic. Every option is worth what someone is willing to buy or sell it for regardless of what the model says. Also, stocks do not trade in a vacuum. They jump around way too much. The key is to be able to calculate the value of the jump so to speak. I do this by pricing the ATM straddle vs the ability of the stock to jump and the magnitude of the jump. Then calculate what the skew should be based on those calculations. From there you can start to derive fair values. Anyway I digress, greeks are very important, but more important is one's ability to trade. I'll take a good trader over a great pricing model any day of the week. Maverick74 Registered: Mar 2002 Posts: 3896 04-14-04 10:51 PM Quote from nitro: I live this everyday, and I always find it funny when people use this "argument." If you can "read" the underlying and you are trading options in the very short term (not MarketMaking,) then the greeks mean almost zero and the only reason to trade options in this case as opposed to the underlying is to use leverage and/or because you have some other edge, e.g., execution edge or perhaps better comissions per leverage than on the underlying. In short, being able to read the underlying better than other traders would remove the need for the extra decision dimesions that options trading forces on you (given the exceptions noted above.) Why not just trade the underlying? If you are trading options in anything other than intraday time frame, then moving the time horizon to a "swing time frame" means the greeks become _even_more_ important. nitro Maverick74 Registered: Mar 2002 Posts: 3896 04-14-04 10:51 PM Well, the way I look at it Nitro is that first you need to be able to trade the underlying. Then options gives you an extra edge that reduces your risk variance. See look, I use to trade the underlying intraday right and I did pretty well. I've also done a little bit of longer term trading on the underlying, but I had no margin for error. I was either right or I was wrong. Kind of like flipping a coin right. You bet heads or tails, heads you win, tails you lose. There is no in between. But with options, you can get a heads and win, you can get a tails and win and you can even have an equal number of heads and tails and win. That is the edge my friend. It's not leverage. Hell, if you want leverage you can go to single stock futures. Options increase your risk variance and that is huge for a trader. Even a slight increase in your risk variance can make the difference between a trader that is flat for the year vs making a million dollars. But here is the catch 22. If you can't trade the underlying and you are trading options and lets say you have tons of edge. What does that edge really amount to? A nickel? A dime? I mean seriously quantify it. Now if you are a bad trader, a nickel or a dime is not going to save you. In fact it could kill you. That's the difference. It takes some guys so long to figure this out. I kind of figured it out intuitively. Now if your Metooxx and you are doing 500 trades a day. Then a nickel here and a dime there add up to something. But in those cases you are only risking a nickel or dime. OK, I've rambled long enough. That's my two cents.
always traded NDX in the 90s - at present MNX works better for me so far as options margining concerns -- After this expiry I am going to go back to trading NDX - and the NQ futures. p.s. I am still long MNX BN (mini-100 Feb 170 calls) in three accounts -- entered @ 1.45-4.10 -- and now mostly spead with Feb 17250 & 1750c - and have other MNX options strategies -- some of which will need repair. Oh yes-- and also short 8 mnx NN (Feb 170p) @ 2.75 avg in two accounts. So actually I am legging into the 180p to complete/construct a bear vertical. Its just too hard (and not productive to my goals for this Journal) to post every single trade - but I have tried to post so as to highlight the ones that represent my directional opinion on an underlying at a given time. Clearly my goal in this first month is to reduce # of positions and focus on much larger size. Thus I have not posted all open positions (most of which are from last year) in the 2006 Journal like I will be able (and intend) to do later in the year.
Ok, so you're legging into a Bear PUT vertical. You went naked short first...presumably that's why the Reg-T margining is a concern for you. Is your retracement prediction for NDX based on TA, fundamentals or something else? I hear what you're saying about consolidating positions, what kind of number are you looking at? I generally try to keep the number of instruments I trade in any given month to about 7 max, that seems like a good balance between diversity and manageability for my trading style. What basket are you looking at next month? CME, GOOG, AAPL, NDX, NTES - what else? Do you generally stick with what you know? Or screen for specific criteria month-to-month? MoMoney.
PD remember what I said about PD guys?? (I said PD would get hammered in 2006) Well judgment day has arrived! :eek: closing all my short calls- short 145/150c- for peanuts (entered @ approx 5-7) selling my long puts (135p) that were essentially worthless yesterday ! fortunately I closed all my short 140p & and 145 puts that were spread against the 135p - last week. Phewww!! Good timing - It demonstrates why you can't hold out for that LAST $$ drop of blood on the short leg of a spread. Keep that in mind - I know I will. YES! only regret ---- that I did not hold my LONG PUTS in my IRA. Why can't we be perfect?? Darn it anyway! But let's not be TOO GREEDY now? My condolences to the fish (uh - excuse me- I mean trend followers) who kept buying calls and stock on PD thinking it would go up forever. Sound familiar!!??? Yes it does-- it sounds kinda like that poster-child for the bubble of 2005-06: GOOG b.t.w I did sell short 3 PD 140 puts @ 3.4 and kept 4 of 15 long 135p -- then sold 2 PD Jan 140c @ 4.50 - since I am still long PD AK (entered @ 1.55). Who knows with this one- maybe it fills the huge gap - but I doubt it ! "Might" be worth looking at some calls. More likely it trades down to 135 which was my original downside target. But I'll let the market decide Also long PD 125p (short 130p also) but these (125p) most likely won't expire ITM. Or will they? MNX Feb 180 puts on MNX look to open higher today- timing not too bad so far - but gap will likely try to fill so I am not getting too "excited" yet. I suggest looking to enter shorts on NDX - we will be heading lower soon !! more later
AAPL long aapl Jan 80c (1.10) sold AAPL Feb 80c @ 3.30-340 bought AAPL Feb 7250 puts still short AAPL Jan 75p AAPL is going to get hammered
frustrating-- I was 'hopeful' maybe NDX would continue selling off - but after all I am scaling into long puts against a strong trend - However- the good news is --- day is not over yet !
got 'greedy' and didn't close January PD 140 puts for 1.80 since I am still long 135p and IF PD trades back to 136.80- the 135p will perform OK - and I can roll into Feb --- instead sold a couple PD 145c @4.40 (tight stop as I don't want to get caught if gap fills)
closed 3 PD MH (140p) @ 1.55 for quick $585 intra-day order to re-sell @ 2.40 (may look at selling 145p but I think PD pins <145 so don't want to eat stock. post January 20th expiry- am going to reduce # of positions for sure as this is absurd the # of opens I am managing-- then increase size significantly based upon a scale of 1-5 coinciding with my analysis of the r/r ratio and related factors. Of course will check with my psychic reader & astrological chart each time ---- as that seems to work as well as quants with advanced degrees at hedge funds who utilize mumble-jumble b.s. # crunching -- yet still can't outperform a good discretionary trader. :eek:
sold AAPL Jan 7250 puts @$147.50 covered Jan 75 puts@ 1.4 (waaayy too soon) sold Feb 75p @2.70 sold my long January 80c @ 2.90 however- when you are 'wrong' you gotta look back at things objectively- and acknowledge it. I have been trading against the tend in AAPl and not just "a trend" but a strong trend even though I stand by my comment that AAPL will get hammered on earnings release -- in hindsight I should have been long AAPL calls - not short puts/short stock. Essentially I'm breaking even on this. Now that's a waste of energy :eek: :eek: AND- aapl still hasn't release earnings - so who knows where the top is. However I am standing by my opinion that AAPL gets sold off at that time (Jan 18th). But by then who knows how much upside may have been missed when I saw Steve was going to speak - it was obvious (almost) that the stock could jump. HOWEVER we don't know for sure. IF he had said something even slightly negative it could have sold off to <72. And further anyone ever heard of "sell on good news".