My (JT) Index Options Trades

Discussion in 'Journals' started by torntech.com, Aug 1, 2002.

  1. I honored my temporary tradingplan with these (# 23 & 24) trades:

    Code:
    Trade #.....	22	23	24
    Status……	OPEN	closed	OPEN
    Security	OXBTT	OXBTJ	QAVTW
    Index…..	OEX	OEX	QQQ
    Call/Put	Put	Put	Put
    Strike…..	400	450	23
    Date buy	9-Aug	9-Aug	12-Aug
    Time buy	13:13	15:49	15:40
    Price buy	0.70	6.60	0.45
    Quantity	1	1	1
    Date sell		12-Aug	
    Time sell		15:54	
    Price sell		6.70	
    P/L……………		8	
    P/L %.....		1%	
    
    Trade 23:
    Closed this one with an astonishing 8 buck profit @ 6.60. Daily high was 9.20. I had my mind set to sell this one today in line with my temp plan.

    Trade 24:
    QQQ's still trading side-ways. Did not break resistance. Looking good for decline. The QQQ option was the only one I could afford with my $1 budget.

    Looking to add another rule to my temporary trading plan:
    - Minimum account size of 1,500$ before any change in temp plan.

    See ya tomorrow.
     
    #21     Aug 12, 2002
  2. Well, so much for discipline and temporary trading plans....

    Code:
    Trade #.....	22		24	25	26
    Status……	OPEN		OPEN	closed	OPEN
    Security	OXBTT		QAVTW	OXBHP	OXBUT
    Index…..	OEX		QQQ	OEX	OEX
    Call/Put	Put		Put	Call	Put
    Strike…..	400		23	480	400
    Date buy	9-Aug		12-Aug	13-Aug	13-Aug
    Time buy	13:13		15:40	14:40	15:22
    Price buy	0.70		0.45	0.95	5.30
    Quantity	1		1	1	1
    Date sell				13-Aug	
    Time sell				14:59	
    Price sell				0.50	
    P/L……………				-47	
    P/L %.....				-49%	
    
    Trade 24: Tried to follow the trend after the fomc "news".

    Todays lesson: Probably switch contract month early during option expiration week.

    Three open put contracts, 2 in august and 1 in september. Things looks bright for tomorrow.
     
    #22     Aug 13, 2002
  3. your guts and perseverance, much less your brains... sorry, but it's obvious that you are refusing to think... you have no strategy and hardly any knowledge of options.

    Get some book on options, observe the market and paper trade, then start again. Once you are finished with these basics, you will agree that I was right. This will also save you some money...

    I don't mean to be disrespectul, just plainly straighforward.
     
    #23     Aug 13, 2002
  4. You bought a 480 OEX call @0.95 only to sell it at a loss. I sold this call naked @1.25 and I am up $100. You know why I did it?
    Well, you need to know stuff like that in order to play options successfully. Take your time, study and observe the market. Then come back again. The market is here to stay, you may not be able to stay if you run out of the money.
     
    #24     Aug 13, 2002
  5. torntech,

    In general, I don't think you can make money with a strategy of only buying options, particularly short-dated out of the moneys. The exception would be if you have the patience to wait for the ideal setup for those explosive moves that typically occur three or four times a year. Of course, you still have to be able to catch them.

    There are several reasons why. Unlike in stocks or futures, you are usually buying from a marketmaker who will only sell at a favorable price. You wouldn't last long daytrading stocks either if you could only buy what Goldman was willing to sell. The spreads are brutal in options as a percentage of the total trade. As a long, you are getting ground down relentlessly by theta (time decay) if you hold for more than a day or two and the spread eats you up if you don't hold them.

    There was a thread here several weeks ago about Vic Neiderhofer that went into the philosophy of buying versus selling options. Bottom line is that a long only strategy requires a big bankroll and a long time horizon.

    For someone who wants to make short-term , leveraged directional plays, I believe the futures are much better vehicles. They are more liquid, and there is no delta to contend with.

    I would recommned you read Natenberg's book, "Option Volatilty and Pricing", and also Marty Schwartz's book "Pit Bull".
     
    #25     Aug 14, 2002
  6. nkhoi

    nkhoi


    wow! 4 truths in 1 post, underline part of MM will only sell at favorable price, you can't sell or buy until MM say so unless you know something MM don't know and how many times does that happen!:mad:
     
    #26     Aug 14, 2002
  7. Ooha! What a day.

    Todays trades:
    Code:
    Trade #.....	22	23	24		26	27	28	29	30	31	32
    Status……	closed	closed	closed		closed	closed	closed	closed	closed	closed	OPEN
    Security	OXBTT	OXBTJ	QAVTW		OXBUT	OXBHJ	OXBHK	OXBHK	OXBTI	OXBTL	QAVTY
    Index…..	OEX	OEX	QQQ		OEX	OEX	OEX	OEX	OEX	OEX	QQQ
    Call/Put	Put	Put	Put		Put	Call	Call	Call	Put	Put	Put
    Strike…..	400	450	23		400	450	455	455	445	460	25
    Date buy	9-Aug	9-Aug	12-Aug		13-Aug	14-Aug	14-Aug	14-Aug	14-Aug	14-Aug	14-Aug
    Time buy	13:13	15:49	15:40		15:22	13:47	14:02	14:23	14:33	15:43	16:04
    Price buy	0.70	6.60	0.45		5.30	5.50	3.90	5.10	1.80	3.20	1.10
    Quantity	1	1	1		1	1	1	1	1	2	1
    Date sell	14-Aug	12-Aug	14-Aug		14-Aug	14-Aug	14-Aug	14-Aug	14-Aug	14-Aug	
    Time sell	14:09	15:54	14:12		13:46	13:53	14:20	14:32	14:34	15:47	
    Price sell	0.10	6.70	0.30		5.60	5.90	4.50	5.50	2.10	3.50	
    P/L……………	-62	8	-17		28	38	58	38	28	56	
    P/L %.....	-87%	1%	-37%		5%	7%	15%	7%	15%	9%	
    
    Trade 27: which I would have kept this one. Bought @ 5.50 closed @ 15.20

    wally: I guess that's what you need sometimes: A big-slab-in-the-face-punch-in-the-guts-and-crotch-kick-combo.

    Quite frankly I appreciate your honesty, even though that it hurts.

    However opposite your belief I have been trading options for almost 10 years now (on and off). Doing so in Sweden, so I'm new to the US market. I do have a written trading plan and I do have a strategy, although It might be controversial. My strategy has worked in the past on the Swedish market. For example last October I turned about 4K$ into almost 50K$ in less than a month.

    It would be interesting if you would elaborate some more about your own trading style/strategy. I would be much interested to learn more. Also if you had some specific comments about mine that would also be appreciated.

    Hope you got out of those naked calls you sold :)

    AAA: Thanks for posting again. I sincerely enjoy your posts.

    As a regular day-time office worker I'm somewhat limited in my trading choices. Although i live in Europe this gives me the opportunity to trade the US market at night. However I rarely can start trading until after 12PM. My strategy so far has been to pick overnight reversals. Doing so using futures would require large cap and guts. However I will now start doing papertrades day-trading futures, and search for a system that fits me. I have hesitated to take the "step-up" to futures, but this might be the time to do so.

    Regarding MM's: There are a lot of players besides MM's that trades options! Also you are never forced to sell at bid and the other way round. After a while you can also learn the MM setup, and anticipate how they will move. But I agree - spreads and theta does make things more interesting & challenging.

    I which I could find Vic's thread. It's funny. I was always looking for a system that required a small bankroll and a short time horizon.

    I would like to recommend Martha Stewart's book "Greedy Pig"....:D


    Take care! /JT
     
    #27     Aug 14, 2002
  8. Code:
    Trade #.....	32	33	34
    Status……	closed	closed	OPEN
    Security	QAVTY	OXBTK	OXBHP
    Index…..	QQQ	OEX	OEX
    Call/Put	Put	Put	Call
    Strike…..	25	455	480
    Date buy	14-Aug	15-Aug	15-Aug
    Time buy	16:04	13:02	14:25
    Price buy	1.10	1.75	1.10
    Quantity	1	1	5
    Date sell	15-Aug	15-Aug	
    Time sell	14:18	14:21	
    Price sell	0.70	0.90	
    P/L……………	-42	-87	
    P/L %.....	-38%	-49%	
    
     
    #28     Aug 15, 2002
  9. My personal belief about the OEX is similar to what AAA said a few posts earlier...Position yourself carefully and do it with extremely good planning...You give up ALOT in terms of vega, theta, vig, etc, etc when trading the OEX because the spreads are so monkeyed around that you are almost always in the hole right from the get-go with these things...During expiration week, you have to be careful about whether we are in a volatility compression environment or whether we are trending higher...Look at today, these things are just bleeding dry...If you are trying to position into a spread, you should be looking into the deferred months at this point...

    If I were to trade the OEX exclusively, I would probably just trade the VIX and then really focus on which strikes to position myself in...I am also a fan of long premium, if only because I do not believe that in this long interest rate environment, you get the same premiums for the far OTM options that we saw in 1998-2000...I would position myself when volatility implodes and then look to get long...Perhaps do it on a scale and then start the Martingale until your reach a full sized position...This way you have increased your edge by using counter trend price action and compressing volatility to increase your odds and your cost basis...

    Something like trading into a strike by purchasing 2,2,3,3,5,5 or something along these lines...To make the options game work, I strongly believe you have to anticipate as opposed to react...If you are looking for trend trades, you are better off trading futures where you have very little fixed overhead per trade...With options and those spreads chasing price is just a recipe for disaster...

    Just my opinion and some limited previous experience in the OEX...I used to trade these things in a similar manner to yourself about 4 years ago, but I just got a bit sick of them especially when the volume and spreads became a bigger issue...WIthout a doubt, the OEX was a dream index in the 1990's...I just dont see the same opportunities anymore with all the competition from the equity options and the QQQ's...
     
    #29     Aug 15, 2002
  10. rmodasia

    rmodasia

    I'm just curious why the OEX seems popular as opposed to SPX options. Is this the case? If so, then why? (apologies for my ignorance)

    RM
     
    #30     Aug 16, 2002