New options trader needs help.

Discussion in 'Options' started by sebastionay, Apr 16, 2010.

  1. An example of how I estimate risk of ruin.

    All the values shown are rounded to the nearest whole number so 100% does not mean absolute certainty just greater than 99.5%

    So for instance with a win rate of 60% we have a 17% chance of 6 consecutive losses within a 50 trade period.

    I think the values are likely to be even higher than the ones shown in the table using normal probability distribution.

    From my own experience I've found that sequences of wins or losses cluster together when the market condition is favorable or unfavorable to the system being traded.
     
    #41     Apr 18, 2010
  2. risky63

    risky63

    this pattern is documented in books 50 years old.
    it still means the same thing though.
    reading is time consuming, but sometimes worthwhile.
     
    #42     Apr 18, 2010
  3. I am aware of that Ive read Steve Nison's candlestick charting techniques, he was the first guy to introduce japanese candlesticks to the west.
     
    #43     Apr 19, 2010
  4. I cannot speak for a particular candle pattern, as that is not my cup of tea. Candlestick patterns have not done well under serious testing by more than a few individuals who have researched/published about them to see if any evidence supports them.

    And "performed well in testing" leaves out a lot of serious information. Mostly, how long, what were under market behaviors, when was test performed, how many trades in sample, what metrics, what markets and mostly, was that standalone, or as part of a larger test of other patterns (if so, then one must separate out the "luck" factor).
     
    #44     Apr 19, 2010
  5. Could you give me a screen shot example of shorting a share using options? or point me towards one.

    Something like a covered call.
     
    #45     Apr 19, 2010
  6. Would a share split effect the value of an existing option?
     
    #46     Apr 20, 2010
  7. Do yourself a favor and read a book on options because you haven't mastered the basics yet. You don't short stock with covered call. You are just begging to lose money if you trade options without even understanding the difference between option buyer/seller, long/short, covered/naked, etc.

    http://en.wikipedia.org/wiki/Covered_call
     
    #47     Apr 20, 2010
  8. spindr0

    spindr0

    Hate to split hairs but value is different from premium. To wit:

    Premium is linear so if you had a $50 that split 2:1, you'd end up with two $25 contracts at half the premium - all other factors remaining the same (IV, time, underlying price, etc). The premium changed but the value of your position did not since you now control twice as many shares at 1/2 the price.

    100*50 = 200*25
     
    #48     Apr 20, 2010