Plain Vanilla Options Trades.

[dc2000]

Good Morning Everyone,

Trade number 11 closed a few minutes ago.

Bought 3 FTSE100 Mar 6175 puts @ 86

(14 X10 X 3) = £420 profit, less costs.

Writer wins............Buyers lose again, dear oh dear, oh dear !...

thought you were going to hold for 2 weeks
If I had bought options instead of futures I would have still closed them 10 mins ago

 

[Profitaker]

Yet another demonstration of how the Put writer has made less money than the Call buyers, despite taking on massive risk. Hmm, writers make less than buyers, again.

 

[dc2000]

I guess one way of proving the theory would be to post a graph of Socs trades and the equivalent Call buy for the same period

 

[Profitaker]

I guess one way of proving the theory would be to post a graph of Socs trades and the equivalent Call buy for the same period

Now that would be embarrassing !

 

[Jack o'Clubs]

I guess one way of proving the theory would be to post a graph of Socs trades and the equivalent Call buy for the same period

Exactly. Not sure why Socrates hasn't thought of that himself as he's so keen to demonstrate his thesis. At the moment he's just showing his ability to call market direction, which is impressive in itself, but not advancing us to prove his point about writing vs. buying. Sure, logging a set of dummy call buys would be a nuisance, but then he started the thread, and he's the one who wants to prove something...

This thread reminds me of Wittgenstein's comment that philosophy died in the 20th century because all the big questions were now being answered by mathematics and physics. As a philosopher, Socrates is falling into the the trap: verbose commentary which takes us nowhere when a simple demonstration based on a few facts and some basic maths would suffice.

 

[CYOF]

Now that would be embarrassing !

Whilst we are away Mr Profitaker, you might want to place your winning trades here:

http://www.trade2win.com/boards/showthread.php?t=17561

We will be glad to review them for you over at the Elite 3.4S, and point out to all just how little you really know about Options.

I will check back to list your trades for analysis, and the analysis will bo done for you free of charge, that I guarantee.

 

[f_engineer]

I've never read such utter drivel in all my life. I'll never get back the twenty minutes I've spent reading this thread. The writer has the edge, as the reader loses in this case.

 

[laptop1]

Exactly.

This thread reminds me of Wittgenstein's comment that philosophy died in the 20th century because all the big questions were now being answered by mathematics and physics. As a philosopher, Socrates is falling into the the trap: verbose commentary which takes us nowhere when a simple demonstration based on a few facts and some basic maths would suffice.

I have said, more than once Scos like to talk in riddles in philosopher style of writing.

 

[ammo]

ditto. I will reply to you also tomorrow.

socs,if your going to scalp options ,and let them ride the best way is to sell a put or call spread,you have limited risk,premium erosion and you are taking advantage of your market bias when its right,smaller losses when your wrong

 

[Profitaker]

The Feb07 6325 Calls closed last night at 17.5 mid. They're currently 46.5-48.5 (47.5 mid). Now, those that are mathematically challenged on this thread may not know that this is a gain of 171%, but it's true. It's also true that a Put writer can never gain more than 100%.

Call buyers did phenomenally better than Put writers today. Period.

 

[SOCRATES]

Announccement:~

Trade number 8.

Closed 1 min ago.

bought at 48

( 17 X 3 X 10) = £510 profit,

Buyer loses again, dear oh dear oh dear.

I have no time to enter tit for tat discussion, sorry, very bizzi.

 

[ammo]

socs,if your going to scalp options ,and let them ride the best way is to sell a put or call spread,you have limited risk,premium erosion and you are taking advantage of your market bias when its right,smaller losses when your wrong

lets say you were short the mar spx 1435-1445 put spread yesterday ,a $10 put spread probably trading at $7,i dont know the prices so ill make some up,you sold the mar 1445 spx pts for 17 and you bought the mar spx put $10 if you did nothing that spread probably went to$3.if you sold out your long put in that rally at say$7 and let the market run and bought your short put at$7 you lost$3 and made $10 ,you Made seven total ,with the spread on you always have a stop in place

 

[ducati998]

et al

An article by John Succo

Although January expirations for equity options are always the largest of any (long term leaps traded over years always expire in January), this January's expiration may be one of the largest ever for the U.S. equity market. That is a function of several things, like the growth in stock capitalization and in the number of investors and traders.

But the main driver of this has been the absolutely huge amount of option selling done by lots of new closed end funds created to specifically sell option premium. This strategy is certainly not new and was almost as big in the mid 1980's. Most of those funds met their demise in the crash of 1987.

There are two problems with the strategy. First, investors in these funds may have a vague sense of the risk, but they don't really understand the magnitude of the potential risks. They earn moderate returns in normal markets, but when volatility picks up significantly they wind up shocked at the losses. This causes withdrawals and "forced selling at the bottom," the worst mistake investors can make. And it is in fact this mis-understanding of risk that can actually cause the pick up in volatility. The second is related. It is one thing to sell an option when it is high in price and the risks are known, but quite another to sell it cheap and not earn an appropriate return for the risk. Cheap options have higher gamma and that acts like leverage. Leverage increases not only return but risk, something people "forget." Funds with a strategy tend to do it systematically. It is hard for them to stop just because options get cheap, for if they do they don't get paid.

In the crash of 1987 mutual fund investors at least knew the risks and many didn't sell at the bottom. "Buy-write" fund investors didn't and almost all wanted out at the bottom, thus making the correction turn nasty.

Today these funds have learned only one lesson: they set the funds up as closed end funds so investors can only get out by selling the "stock" of the fund at their own peril. Managers of the fund don't have to liquidate the underlying assets of the fund.

They haven't learned not to sell options cheaply. This January's expiration is huge beyond comparison in open interest and options are as cheap as I have ever seen. Some individual stock options have implied volatilities around 10. These are not bonds folks.

Nothing may happen, but the probabilities are there for a pick up in volatility. The option sellers may get a call while they are on the golf course.

John Succo is the Chief Investment Officer and co-founder of a New York-based hedge fund concentrating in derivative strategies with approximately $300 million under management (the "Fund"). Prior to his current role, Mr. Succo was head of risk and a member of the investment allocation committee at Alpha Investment Management, a New York-based fund-of-funds. Prior to that, Mr. Succo was an options trader and head of derivatives at various Wall Street firms.

jog on peanut
d998

 

[Profitaker]

A sensible article from Mr.Summo. I wonder if Mr.Bolldozer is aware of his vega exposure. I wonder if he even knows what vega exposure is. Though they do say that ignorance is bliss, so best leave them in bliss.

 

[A Dashing Blade]

From an old April 1998 Bloomberg article on the guy . . .

New York, April 30 (Bloomberg) -- John Succo, Lehman
Brothers Holdings Inc.'s senior equity derivatives trader, left
the firm according to four people familiar with the situation.
Succo, who ran a $5 billion proprietary derivatives
portfolio using $850 million of capital, couldn't immediately be
reached for comment.
Succo spoke Tuesday at a conference sponsored by Grant's
Interest Rate Observer. His departure was related to comments he
made at the conference about Lehman management's understanding of
derivatives, according to a person familiar with the situation.
Lehman executives don't ``have any idea of the things that
we actually do,'' Succo said, when asked if the firm's managers
understood his department's need to hedge against risks.
``Management understands the risk that I take, because I've
had this conversation with them,'' Succo said. ``They don't
understand the mathematical background, the calculus, the rate of
change, the correlation between various assets that we have'' in
Lehman's portfolio, he said.
Succo joined Lehman from PaineWebber Inc. in December 1996,
where he was head of global equity derivatives. Prior to that,
the Indiana University graduate worked at Morgan Stanley & Co. as
a senior equity derivatives trader. He lives in Cincinnati.
Derivatives are securities who's value is based on other
securities. Because they can be bought for a fraction of face
value, investors can make riskier bets than if they bought the
underlying security.

 

[ammo]

A sensible article from Mr.Summo. I wonder if Mr.Bolldozer is aware of his vega exposure. I wonder if he even knows what vega exposure is. Though they do say that ignorance is bliss, so best leave them in bliss.

how much bad judgement do u need 2 experience before you start using good judgement?

 

[Profitaker]

how much bad judgement do u need 2 experience before you start using good judgement?

About the same amount as the length of a piece of string.

It is an expensive course.

 

[charliechan]

given that writing puts is essentially a long market perspective, maybe it would be an idea to compare the results of buying calls at the same strikes?

surely this would demonstrate and prove the edge on pnl basis alone?

when any edge has been established, the individuals can then decide for themselves if that edge is worth taking given the different risk exposures between writing and buying. just because writing options may (or may not) provide an edge, that edge may or maynot be significant enough when the individuals psychological tolerance is taken into account.

im sure it would help settle this daft squabble.

 

[atters88]

While Socrates and his lapdog are away writing fairy stories in their S Club 7 playroom, I suggest we all disengage from this thread. After all, it has served no useful puprose and never will.

Rather like watching Big Brother, a morbid curiosity drew me into this undignified spectacle, but in the end reason prevails and I look away.

 

[SOCRATES]

About the same amount as the length of a piece of string.

It is an expensive course.

Can someone please remind this creature above i am not talking about string or calls. This thread is not about string or calls or theta or gamma or rho or margin or whathaveyou.
This thread is about doing the right thing.

I am showing and proving conclusively how cash is being taken from the put buyers by the put writers only as a consequence of viewing this not from a consumer point of view but that of a provider.

I may do a thread on calls at a later date perhaps.

Please help to keep the thread on topic and prevent it from being derailed by creatures who ought to stay silent and not interfere with irrelevant nonsense.

Someone please tell him as he pretends to put me on ignore, but still insists on posting his offensive graffitti here. I jsut do not understand the obsession, he behaves like The Bramble used to do, following me around like a sort of thwarted mistress, and inventing all sorts of mad ideas.

I hold the view he would be better off using his motorbike to deliver pizzas to his neighbourhood because that would be more productive.

I can see clearly that he does not trade at all...and just makes a nuisance of himself and is a crushing bore with all these theories of his. I am not interested in theories, I am only interested in practicalities.

To me it is like water on a duck's back. What this creature posts only serves to misdirect and confuse those of you who are interested in this topic, and to judge by the hits on this thread there has got to be a lot of interest.