where is the edge in options trading?

Discussion in 'Options' started by daddy'sboy, Feb 24, 2007.

  1. Dear comrades
    Where is the edge?
    Can it be proven to exist?
    How does it differ from consistent luck?
    daddy's boy
  2. gg12


    Which options do you want to trade?

    Check out ivolatility.com or the options analyis section of this forum.
  3. FT79


    The market maker has the edge i'm afraid :D
  4. So why are the retail guys here?
    Charity, delusion ...?
  5. Umm, I know where to find data.
    My question is more of a philosophical nature, but thanks for your reply anyway.
  6. gg12


    Sorry not to answering concrete questions.

    Where is the edge?

    The edge is in undervalued options to buy and overvalued options to sell. Again check the option databases.

    You also need to apply moneymanagement and winning traders psychology.

    Can it be proven to exist?

    It exists at institutional level and at private trader level.
    It can't be proven, because not all will tell you.

    How does it differ from consistent luck?

    It differs from consistent luck due to repeating success on a huge number of sequential trades. The prob of continued luck decreases by the lenght of a positive track record.
  7. asap


    the retail traders have the edge of trading just when they want to whereas the market makers have to provide a bid and ask at all times. the ability of trading just when one feels to is a powerful edge. this is especially true with options because of their non linear nature.

    the best proof this is true is by looking at the front month options chain of any hi volume underlying during the course of the day and understand the complex dynamics of price movement across the different call and put strikes.

    consistent luck is a paradox. either is luck or consistency. the former is random, the latter isn't. can't have both in the long run.
  8. MTE


    The egde comes from your trading approach, i.e. your strategy, not from the instrument itself, although the type of instrument can play a important role in your trading edge.

    If an instrument itself had an edge then everyone would trade it and the edge would disappear.
  9. Errr , the forbidden "E" word :)
    You are a real trouble maker , DB
  10. I try :)
    #10     Feb 24, 2007