Options trading question

[w1rbelw1nd]

I think I can summarise the points that you make here as,

"To make money with options, you just need experience in making lots of money with options. The key is coming up with a strategy that is profitable! Only by learning from those who have a profitable strategy then you can make make high returns, and can be deemed a successful trader!"

You are not saying much to be honest... I hope you can see where I am coming from. Your statements are just going in circles...

I would like to share that does not mean being an investment trader in a bank, means you are a succesful and profitable trader. At times, you may lose money for the bank.. And bank would only allow you to trade those that are safe, i.e. blue chips stocks, fundamentally strong stocks.

Also by trading for the bank, you have little exposure to different investment instruments and many counters as they will not allow you to trade those risky one..

So knowledge does not equate to results, but of course helping others gain some theory is good, but for the sake of learning only, understand how it flows.

For live trading using real money, is a different ball game. You really need a specialised and perfect technique to ensure your probability of winning a trade is higher. Such requires many years of trial and error, trying out different instrument tools, counters, making and losing along the way. But, only the one strategy with its system and guidelines allows you to make the most out of it.

Practical skills really comes a long way. Good Knowledge is good, but some people can find their own shorcuts in trading by using their own system and guidelines. We just have to learn from these successful traders from their system, and gain from it, instead of doing the hard way, finding all the methods and strategies that works.. of course, you need to pay a premium first before learning from their succesful traders, some sort of an investment..

So knowledge and specialised method of trading is two different thing. Knowledge allows you to know more about something, but when comes to actual trading, sole knowledge does not give you an upperhand. You need to go through many cycles of highs and lows, and find the best method of trading, with a certain system, rules, boundaries and guidlelines.

That is why for investment, cannot solely read books, website, youtube, you really need a system and guidelines to follow. The knowledge are just facts, market is always evolving, this knowledge only serves as an understanding, not a fool-proof one. So, it really is up to an individual, providing guidance in trading to someone should be meant to explain some concepts which the person cannot understand but cannot be used to judge a person's method of trading unless the person can prove that he/she is a succesful trader.

 

[scholar88]

So why a covered call? Your index or equity already has a nice run up. You'll want to take profit, or you think its not gonna go up much further.

If it starts falling and a little, of cos you can keep the premium. If it drops and could fall even much further, close it. Don’t write covered calls as it won't be sufficient.

I might consider if a particular call payoff has a relative attractive edge relative vs cost at that point in time.

Your bear call is shorting 2 calls with the same expiration using two different strikes. Max gain net premium; max loss Strike1 - strike2 - net premium.

I am a fan of Spreads Trading in options and find it the best form of trading.
1. Spreads trading (Vertical Credit Spread) means buying or selling 2 or more options to hedge.
2. It is a best form of trading as this is the only options strategy that allows you to still make money even when the stock go the wrong direction.
3. Vertical credit spreads allow us to get money first, time decay works for us, make money even when you are wrong.

Covered call is too risky for me, prefer this vertical credit spread..

 

[scholar88]

I think I can summarise the points that you make here as,

"To make money with options, you just need experience in making lots of money with options. The key is coming up with a strategy that is profitable! Only by learning from those who have a profitable strategy then you can make make high returns, and can be deemed a successful trader!"

You are not saying much to be honest... I hope you can see where I am coming from. Your statements are just going in circles...

Isn't that a given fact? In the practical world, of course which method allows you to be profitable, you would employ that? A profitable strategy and a shortcut method of investing is the key, instead of having so much knowledge of everything?

 

[w1rbelw1nd]

But do you agree it is a fact that options has such benefits as shown below:
1. Low Capital (Using Leverage)
2. The time value works for you
3. When you are wrong, you still make money
4. Able to make money when market is bearish
5. Might be used as Hedging

Did not say it is a superior tool, but it has these above benefits. Just saying different tools has its pros and cons.

1. Works both ways.
2. Sorry I dont understand.
3. Well same can be said for other instruments
4. Well same can be said for other instruments
5. If you really have an adverse opinion of a current position, why not just sell the asset or short sell?

Anyway, I agree with Shiny Things that options can be used express more nuanced opinions of the underlying asset's value. I personally believe that options is particularly useful for institutional/ HNWI to make tactical asset allocations in a cost efficient manner, or because they have other tax/practical considerations when it comes to the sale of the underlying assets. I am never going to touch it as a retail investor that is investing long term, tyvm.

But if one is interested in taking a speculative/"calculated risk" position in whatever underlying, then go ahead. It is not unlike stock pickers who think they know better than the market, frankly, give it your best shot.

 

[scholar88]

1. Works both ways.
2. Sorry I dont understand.
3. Well same can be said for other instruments
4. Well same can be said for other instruments
5. If you really have an adverse opinion of a current position, why not just sell the asset or short sell?

Anyway, I agree with Shiny Things that options can be used express more nuanced opinions of the underlying asset's value. I personally believe that options is particularly useful for institutional/ HNWI to make tactical asset allocations in a cost efficient manner, or because they have other tax/practical considerations when it comes to the sale of the underlying assets. I am never going to touch it as a retail investor that is investing long term, tyvm.

But if one is interested in taking a speculative/"calculated risk" position in whatever underlying, then go ahead. It is not unlike stock pickers who think they know better than the market, frankly, give it your best shot.

Don't agree with your second paragraph. Options Is not meant for high net worth individual. Even a USD 3500 account, that is the minimum for TD Armeritrade is indeed sufficient to trade options.

I guess you have a poor understanding of options and fear of it, it should not be viewed so fearfully as it is not only meant for large instituitions. Even retail investors can invest in options, for instance Crude Oil, costs about 47.92, I can use only 330 USD to buy 1 lot using option, if I buy using normal stock trading, 1 lot costs 4792 USD, which is how many times greater?

Options is a contract that
- Gives you the *right*
- At a certain price
-At a certain time
-To buy the stock
-With no obligation

You are only a buyer of a contract (Pays premium) or a seller of a contract (Get Premium)

It is a contract, you don't literally own it. That is why with low capital, you can play options!!! (unlike normal stocks trading- Apple costs 153 USD, 1 lot costs 15,300 USD, normal trading u need > 10,000 USD account, with options, you buy the contract of it only at a low price..

Do not be fearful of this instrument tool.

 

[w1rbelw1nd]

Don't agree with your second paragraph. Options Is not meant for high net worth individual. Even a USD 3500 account, that is the minimum for TD Armeritrade is indeed sufficient to trade options.

I guess you have a poor understanding of options and fear of it, it should not be viewed so fearfully as it is not only meant for large instituitions. Even retail investors can invest in options, for instance Crude Oil, costs about 47.92, I can use only 330 USD to buy 1 lot using option, if I buy using normal stock trading, 1 lot costs 4792 USD, which is how many times greater?

I dont fear it, I just know what makes sense for me on a risk-adjusted, time/effort basis. I rather focus on what I enjoy in life and work rather than chase something that is not proven academically to have superior returns.

On the point of HNWI, my opinion is, it makes more sense for HNWI to use options because of their own trading restrictions/considerations.

I am a finance grad and a CFA level 3 candidate BTW. Probably mean nothing to you anyway

 

[scholar88]

Tony Fernandez bought Airasia with only 50 cents, HSR real estate company was sold at nominal fee of $1. All this will happen because of "options". See, what options has done in our world? It is a vital and essential one.

 

[scholar88]

I dont fear it, I just know what makes sense for me on a risk-adjusted, time/effort basis. I rather focus on what I enjoy in life and work rather than chase something that is not proven academically to have superior returns.

On the point of HNWI, my opinion is, it makes more sense for HNWI to use options because of their own trading restrictions/considerations.

I am a finance grad and a CFA level 3 candidate BTW. Probably mean nothing to you anyway

Had a great discussion with you about options, all the best in your investment. May I know which University are you currently studying at?

For your info, I am also studying uni with a finance-related course. But, options seems to intrigue me..

 

[w1rbelw1nd]

How is that relevant to our discussion here??

If you find the low capital outlay an enticing proposition, Singapore pools is also a viable "option" bro.

I don't think we can understand each other, anyway thanks for your sharing

Tony Fernandez bought Airasia with only 50 cents, HSR real estate company was sold at nominal fee of $1. All this will happen because of "options". See, what options has done in our world? It is a vital and essential one.

 

[scholar88]

I dont fear it, I just know what makes sense for me on a risk-adjusted, time/effort basis. I rather focus on what I enjoy in life and work rather than chase something that is not proven academically to have superior returns.

On the point of HNWI, my opinion is, it makes more sense for HNWI to use options because of their own trading restrictions/considerations.

I am a finance grad and a CFA level 3 candidate BTW. Probably mean nothing to you anyway

I don't think investment wise, can be proven academically. Lots of Knowledge, experience in investing, will not gurantee a success in trading. You need some form of special technique, system to follow, to succeed. Books, will not tell you that, otherwise everyone who pick up the book will get rich, they just merely serve as a guide to your understanding purposes and cannot be used to follow as a strategy to invest. Many of the methods in the book may not be applied in the real world, market is always changing, some of them cannot be proven academically.. But, a well succesful trader, a system to follow, and who have the shortcut to trading can be successful. It is through many years of trial and error which makes this particular method profitable..

Do books tell you which method is successful, which one is the risk-free, most profitable, having too much knowledge may be a bad thing. Too immersed into having so much theory knowledge will alllow you to be too restrictive in your trading. Hands on is the key, theory only serves as a guide to know what you are playing with, not as a strategy.

Meaning to say what you have learn in your finance course teaches you the rules and regulations of the game. How to play the game, you need a system.

 

[scholar88]

Options Trading- Buyer/Exercise Process

For options trader, we do not exercise options because
1. You make more profits from options than stocks
2. When you buy stocks, you can't maximise your return
3. No Leverage

Be a seller of options why?
1. When you sell options, you have 70-95% winning probability
2. When you buy options, you only have 10-30% winning probability

Statistics has shown that how many options become 0 at expiration? (As shown below)
1. 30% turns 0 on expiration Friday
2. 60% turned 0 before expiration Friday
Total: 90%

**Never ever sell naked option as there is unlimited risk.

Why options allows you a stable income every month as compared to normal stocks trading?
- Options expire every month
- 3rd Friday of every month
- You can pay your utility/telco bills

Options is so much better than stocks, mutual funds or other financial instruments.

 

[scholar88]

How is that relevant to our discussion here??

If you find the low capital outlay an enticing proposition, Singapore pools is also a viable "option" bro.

I don't think we can understand each other, anyway thanks for your sharing

Yup, no problem..

 

[Shiny Things]

By the way, are you a professional options trader because you attended some Options Course or you read it from a book?

So I hate getting into d*ck-measuring contests, but: I've been in the industry for 15 years now.

For my first two years, I was an FX options quant, building options pricing tools for the traders (in Excel/VBA, ugh).

Then I got hired onto the trading desk. I made markets in FX options for nearly a decade, working in a couple of fairly large banks: vanillas and exotics, mostly Commonwealth and Asian EM currencies.

Since you seem to be fixated on profitability: in 2008, my best year, I made a low-eight-figures profit for my bank, and my PnL in most years was mid-seven-figures positive.

After that I spent four years designing and building risk management software for options traders, and trading equity, rates, and FX options for my own account. I also run a markets and hedging consultancy business.

So yeah, I think it's fair to say I know what I'm on about when it comes to options.

How about you, mate? What's your background?

 

[Shiny Things]

I am a fan of Spreads Trading in options and find it the best form of trading.

Mate, two days ago you said you had "zero knowledge or experience in options trading".

Either you have no experience and you're getting way out over your skis, or you're a liar and you're trying to bump up your post count so you can start shilling some options training course.

 

[scholar88]

Mate, two days ago you said you had "zero knowledge or experience in options trading".

Either you have no experience and you're getting way out over your skis, or you're a liar and you're trying to bump up your post count so you can start shilling some options training course.

Nope, just wondering why would a millionares speak to us, poor peasants?

 

[Shiny Things]

Nope, just wondering why would a millionares speak to us, poor peasants?

Because I like helping out new traders and investors; and it's a nice, friendly community here on Hardwarezone.

Anyway, yeah, back to what I was saying.

You're coming across as either a newbie to options who is way out over your skis; or some sort of shill for an options training course who's spouting a bunch of buzzwords to build your Googlejuice. You've said in other threads that you're a uni student, so I'm going to give you the benefit of the doubt and assume it's the former.

So: why not chill out a bit and listen to the conversation? You've obviously got a lot of questions, so why not ask a few questions at a time and let us help you out?

 

[scholar88]

Because I like helping out new traders and investors; and it's a nice, friendly community here on Hardwarezone.

Anyway, yeah, back to what I was saying.

You're coming across as either a newbie to options who is way out over your skis; or some sort of shill for an options training course who's spouting a bunch of buzzwords to build your Googlejuice. You've said in other threads that you're a uni student, so I'm going to give you the benefit of the doubt and assume it's the former.

So: why not chill out a bit and listen to the conversation? You've obviously got a lot of questions, so why not ask a few questions at a time and let us help you out?

Ok lah. I admit I am new to options, but I have already started trading options quite recently. But I am still a newbie. Have opened a live account in thinkorswim and started trading only this year.. But there is still many things I do not know.. cannot compare to you..

 

[sAVaGEmP5]

I think u can make a career out from writing books.

 

[Optionstrader]

Shiny things is ang mo

Sent from Asus ASUS_Z00AD using GAGT

 

[iperiodic]

Shiny things is ang mo

Sent from Asus ASUS_Z00AD using GAGT

No sh*t Sherlock?

Recently a lot of trolls in MM. Isit some spam accounts.