Success in trading stocks a prerequisite for success in trading options?

Discussion in 'Options' started by turkeyneck, Dec 8, 2010.

  1. I can see your point for the most part. Thanks for all your responses.

    Are you willing to reveal your strategy of choice? I'm not baiting an argument, just curious.
     
    #71     Dec 17, 2010
  2. Maverick74

    Maverick74

    Well, anyone that knows me on here knows that I've always said there is no "strategy" for making money. One has to develop the "skill" to become a good trader. Just as one can not learn a magical way to throw a football to become like Tom Brady. One has to develop the "skill" of a Tom Brady.

    I'm more of a directional trader. I am biased to a very close cousin of the condor, flys. And a distant cousin of the flys, the backspread. Hell, it's all incestuous. They are all related. I guess that's why these reunions on the option forums get messy. It's like a redneck Christmas gathering. But flys and backspreads are ideal and I don't pretend I can model vol well. However I do take some pride in my directional trading and that gives me a decent de facto forecast on vol.
     
    #72     Dec 17, 2010
  3. Thanks, like I said just for curiosity. I agree there's no magic bullet, but I wanted to get an idea what you preferred since you stated earlier that neither method for playing mean reversion was your top choice.
     
    #73     Dec 17, 2010
  4. sonoma

    sonoma

    The index ETF options or liquid equities are pick 'em markets. That's not necessarily the case as expiration or earnings nears, but for the most part it's true. "Predicting" is a tough thing to do. If you're running strict replication, then shorting higher vol than realized results in positive replication error and if you short lower than realized, you lose. However, you're not locked into holding your inventory statically until expiration. Consider an alternative strategy that I'll characterize as "taking advantage of opportunities that present themselves." The idea is the same as flipping a fair coin but stopping the trial after 15 tosses if all of a sudden you get 5 heads consecutively. If you persist to a total of 100 tosses, then that run of 5 heads will be buried and your fair coin will show a 1:1 ratio. The odd run of direction or vol happens frequently enough in the markets that if you're attentive, you trade to a positive p/l.
     
    #74     Dec 17, 2010
  5. mayhem28

    mayhem28

    Is it tougher to find a successful daytrader or options trader amongst the greater trading population? I think the later. I'm not talking about those that say buy leaps or use options to hedge their stock positions. You just don't really "hear" about them that much (outside Market Wizards books) Could be my imagination tho
     
    #75     Dec 18, 2010
  6. You could be right in that he lost money at Paloma. The point I wanted to make was that he had made money trading his theories.

    It's not as if he came up with his views and then tried to apply them to the markets - his views are a direct result of his experience in the markets. That's the key takeaway.

    ...and I do think he traded for a variety of banks (CSFB, BNP, UBS, etc.):p :) You're also right that he worked as a local.
     
    #76     Dec 18, 2010
  7. To raise and allocate capital as well as to transfer risk - often with the intention that markets are fairly priced.

    I was trying to point out that if options (or any other asset) are fairly priced, that doesn't invalidate the purpose of markets. If anything it might enhance their credibility.

    Putting a price on uncertainty, in my view, is a function of markets (and perhaps the purpose of speculators) - in this context I agree someone may not want to participate in the markets if they believe the markets are fairly priced.:)
     
    #77     Dec 18, 2010
  8. option trading is way harder.You can't baghold an option position. And averaging down punishes you way harder.
     
    #78     Dec 18, 2010
  9. I didn't want to be that rude.
    My point is pretty simple :
    - Jim Simons is famous 'cause Renaissance's returns
    - Empirica/Universa are known 'cause Taleb's TV shows
    I'm sure you see what I mean.
    It doesn't mean his ideas are wrong. But, as a matter of fact...
    And 2008 may be the best year his fund ever had because the return was positive.
     
    #79     Dec 21, 2010