orion69 said:
Are you also in agreement that the options writers have the edge over the buyers?
http://www.trade2win.com/boards/showthread.php?t=17620
My opinion carries absolutely no weight whatsoever; because I don’t trade option’s and therefore wouldn’t under normal circumstances even dream of offering an opinion. However since you’ve asked me, I’ll respond.
Anyone reading this response should bear in mind that I have only a rudimentary knowledge of options, I’m aware of the basic mechanics and strategies, and I have a grasp of the statistical probabilities involved, but that’s all, I’ve never made or lost a penny trading options, nor am I likely too
However, from my limited knowledge, I am aware that most options expire worthless, which means that the writer is going to be right most of the time, but when they’re wrong, the consequences can potentially be disastrous. In simple terms the writer has become the insurance company, collecting premiums, hoping and praying they don’t get to experience that 1 in 1000 year storm next week.
What I will say however from a more practical perspective is that it’s exceedingly unlikely that either party has what I would term an inherent edge from either buying or selling. If that where the case, it would imply that I could profit from selling naked options tomorrow with absolutely no knowledge whatsoever, and make a killing. I really don’t think that I could do that, and I would also assume you would think that I couldn’t do that either, otherwise you wouldn’t have made your earlier statement about the need for brains and strategies. I certainly wouldnt want to me a member of a group who considered themselves "elite" simply on the basis of knowing one piece of information
I think Socrates probably comes closest to answering your particular question, when he made his statement about you mastering a niche. I think in order to be successful you also require trading skills and forecasting abilities, psychological control, I would actually argue that your edge is probably far more to do with minimisation and management of risk, knowledge of hedging strategies, negotiation of protocols with brokers with respect to margin requirements, and probably 1001 other tricks that you’ve picked up over the years that I couldn’t even begin to comprehend. It’s these edges that allow you to sell options profitably, the fact that your selling is of little consequence.
I would argue that a buyer, with similarly honed skills (one of the elite if you like) could also profit, and indeed they do. I trust you see and understand the argument that I’m trying to make. On another level, I am aware that some traders do develop a directional preference or bias, monitoring my own trade results clearly show this to be the case, and it’s a subject I’ve discussed many times previously in private with others who have experienced the same.
I think that the main reason that threads such as yours become a little infuriating for the general readership, and indeed become disruptive is due to the principal participants taking the position that that niche that they’re exploiting (either buying or selling) is the one and only definitive solution.
Its infuriating for 2 reasons, firstly it simply isn’t true, as there are clearly others who exploit diametrically opposing niches to that that you personally adopt, so arguing otherwise doesn’t make much sense.
The second reason its infuriating is the principal participants know that there can never be a satisfactory resolution to these arguments, and the more astute standing on the sidelines are also aware that there can never be a satisfactory resolution without one party letting cats out of bags, that need to remain in bags.
Some might say that it’s almost pointless starting such a thread at all. However I personally wouldn’t take this view, there is a certain educational benefit for members who attempt to follow the various arguments, and I personally must admit to spending a couple of interesting days reading information at both the thinkorswim and liffe websites. It didn’t make me an options trader, and it didn’t qualify me to referee on your argument, but it did expand my horizons and give me a few things to think about so not a complete waste of time.
It’s sad that your thread deteriorated in the way they did, and that your “style” makes you easy to spot on the odd occasion when you pop back in and pay a visits. However when members start calling other members Monkey’s and Morons and start getting hysterical the moderators have little option other than to ply their trade and step in, and in doing so, they provide yet a further example of my earlier comments regarding history repeating.
Perhaps not the answer you or other members of the elite where looking for, but the best I can do from my unfortunate position as intellectual pygmy and ,moron
regards and best wishes
zup
