OEX weekly options

pullbacks and retreats (not to talk about reversals) can be extremely fast. If you never experienced one, you may one to be ready to feel it.

The market may also break on the high side. It is a dangerous market, even if it goes not look so. Dull markets are very dangerous markets.

If it happens, vol should rise very fast, and price moves fast as well. I agree that if there is a sell-off it would be limited, but remember Falconview's rule: first rule: do not lose

 

Are you thinking this week? before expiration? Ihope we do get some rapid movements, want to see how they work as that is what scares me overall.

 

They do not call tops and bottoms-- They surprise people. Yes it could happen this week. As I said this is one the most dangerous market in my view. It can hit the range-bounder, the shorts, and the longs. Probably a better posture is to be on the sideline or in pure delta flat, and have wings. Like the 0.01 options expiring this week and out of the money. They can skyrocket.

Limited risk, long vol options strats could also be good.

If you have not seen this before, this would be a good week to watch.

 

TJ, if there is one of these movements, what percentage drop are we likely to see?

Just put in the order to sell some of the closer to the money put spreads (7% away), on second thought, should cancel those because I normally would not have had you tell me that. Should watch to see if I can adjust or not.

 

Around 5% is not impossible. Then revisit situation from there. The reason: market can accelerate on the way down.

The name of the game now is in earnings in my view, but a dollar rise would pull the market down. In this spirit, an alternative way that bears might play a down move is to long the dollar.

 

Yet the VIX is at the lowest since I have been looking at options. What does that mean, if anything?

 

Market tops are at the lowest area VIX, and market bottoms at the highest VIX. That is why (in part) puts are more expensive than calls (for equal distance from strike). Lower vix means people are getting less and less nervous. It is when the majority has confidence that the market strikes.

 

TJ my closest puts are 7.5% OTM, if it was real cash, I would be out. But for paper I want the learning experience.

 

Stanford

I have known traders doing 125% to 200% regularly. Only a few sure. They use the money earned to pay the bills and live on. So you don´t get ahead that way. It is sort of a small business with a nest egg capital, that you churn.

Before this gets out of hand, it is not possible to trade options I don´t think, to get in the hundreds of millions of dollars from a small start in a short time. The average trader is making less than a $100,000 a year.

Most make and lose. I got up to a million trading stocks twice and lost it again. That was decades ago.

I´d say GREED and OVERTRADING are the culprits from my experiences with stocks.

Fast forward to my new venture into options, after a decade and a half out of the market, then there is going to be a limit to what one can earn on an annual basis. Perhaps I´m wrong? I´m going on the theory based a bit on past experiences when a much younger man, that fewer trades are better. Selecting trades carefully the prime consideration. TJ explains it as to RISK quantification.
The philosphy is the easy part. The DOING it the harder part. Lots of articles on pyschology and emotions, letting profits run, close stops and so forth. Doesn´t help you though in real money trading. There is a euphoria feel when you start winning regularly and you quickly lose it all again. Your head swells and you feel like your feces doesn´t stink.

Can you make a $100,000 trading options. I think so, on a regular basis. Getting there psyched up and set up to do it on a mechanical basis, is the SOMETHING ELSE. Lots of people can talk the game, but few can play the game. You dont find GOLD MEDAL OLYMPIC WINNERS on every village soccer field, or College track field either.

Am I, or you going to turn $5000 into a hundred million dollars? I doubt that VERY MUCH. Can you beat the returns on BANK C.D. interest rates? You betcha!

Lets say there is a situation TWICE a YEAR, in which you can do better than 100% in options. Happens EVERY YEAR. Can you have the strength of WILL and CHARACTER to trade ONLY those TWO TIMES and leave the market alone in between? For most people that is impossible.

 

Stanford

More in the same vein. Would you be satisfied with a 15% gain for the year trading options?

Now think about that for a bit.