Best Thread The Options edge (Writing Vs Buying)

[A Dashing Blade]

CYOF

I can see I’m dealing with the educationally challenged here so let me give you a little example of how it can all go badly wrong….

19th April 2006 FTSE100 closed at 6089
20 day Historic Vol running at 10.3%
Lets be generous with the skew and say you could have got 13.5% IV for a 0.10 delta put
Strike 5825 written for a premium of 15
The options expired 1 month later on 19th May at 5684
Making a loss of (5825 – 5684 + 15) 156
That loss will have wiped out roughly (156 / 15) 10 months worth of premium received

No doubt CYOF/Bull's riposte would be that you can always roll the option back before expiry and that, as equity markets tend to rise in the long term, you'll always be ok . . . .

Hmmmmmmm

Perhaps CYOF/Bull could tell us under what conditions a deep in-the-money FTSE option will trade at a discount to it's intrinsic value (I know, I was trading them then) and what happens to this strategy then?

 

[Profitaker]

DB

Sure you could roll, but they would be two separate and independant trades and one is not dependant on the other. The unescapable fact remains that a major loss was made in the May option series. That you made a profit from the subsequent June series does not alter the fact that you made a loss on the May series.....and so on.

 

[grantx]

CYOF,

Why am I getting a feeling of deja vu? As usual, we're not going anyway fast. I'm not sure of the purpose anymore.

Ok, the writers have edge. Now what?

Grant.

 

[zupcon]

Zu, for someone who has clearly stated thier academic achievements (and you know what i think of that type of learning :cheesy: -remember Montaigne) you continue to show everyone your limited abilty to logically deduct - I know what I would like to call you here, but I do keep my word, as stated.

Socrates has told you, many times, in fact, so many times that even I can see how infuriated he is with your antics, and you still persist to keep it up.

Let me do a very simple bit of enlightening for those who may have any litkle doubt as to what I say is FACTUAL - if I have to write thisd word one more time I will expolde.

BULLDOZER is an expert at trading Options - FACT.

BULLDOZER has a site called www.citybulls.com, where, for his own reasons, and, may I add at this stage, many of which are indeed very horourable, the FACTS been there to see for all.

Now, why does one give money to charity - I will tell you why.

Because THEY CAN.

I am probably giving away a little too much here, but it is very relevant for the truth, so I will continue.

In order for one to be able to GIVE generously, one must first have.

In order for one to HAVE, one must first DO.

For one to DO and HAVE, one must KNOW WHAT ONE IS DOING.

In order for ONE TO KNOW WHAT ONE IS DOING, one must SPEAK WITH THOSE THAT KNOW.

Can I be any more clearer than this - or are you going to reply with more complete and utter rubbish.

Do we not all agree that the 95% figure that loose, is, in fact, very accurate.

Do we also not all agree that the 5% that win, is in fact, also very accurate.

So, if we all agree that these figures are indeed very accurate, does it not IMPLY that a very small few are in THE KNOW, and a very large majority are in the DARK.

Now, a child will tell you who you should be talking too, but as Socrates keeps telling you all, to be in THE KNOW is not for all, it is for very few indeed, and this is why he continues to say that, in his opinion, which I happen to agree with 100%, traders are born, not made.

Do you now GET IT - for I may well be banned for giving so much away -but I do not think so, for I always speak THE TRUTH, and that is why those in THE KNOW are now starting to speak with me. Do you really think this is all a game, for if you do, then you are indeed a "the word I said I would not say".

CYOF

Feel free to call me anything you wish, I wont take offence, although the moderators may not take kindly to your actions.

You know my opinion on “Academic achievement” its just one tiny part of the puzzle, but given the choice between receiving the benefits of an education, or being denied the benefits of an education, I certainly know which Id choose.

I'm sure that Socrates has far more important things to get infuriated about other than my posts. I've simply asked for clarification on the interpretation of some statistics, if that infuriates,so be it.

I think that its important to remember that one always has the ability to choose how one perceives a post on an internet forum. Socrates can laugh at my stupidity or naivety, he can get angry, he can get infuriated, he can remain indifferent,the choice is quite clearly his, and from what I've read from his posts, I'm pretty certain he know this to be the case. Furthermore, providing that he isn't irrationally moving billions around the markets on the basis of a loss of control over what I've written , his emotional state has no effect on my trading, and so it is of no concern. That said I don't deliberately wish to upset any member who provides valuable content.

I am perfectly aware of bulldozers site, I've been invited to join his forum on more than one occasion by the man himself, so you've not actually offered anything new or original by providing the URL. I really don't understand why you continue to post information that's common knowledge. People are capable of reading, and of working things out for themselves (or perhaps as I've always suspected, you aren't and therefore cant even begin to conceive that others might be)

I am generally in agreement with your analysis of “how stuff gets done”, right up until the point “In order for one to know what one is doing one must speak with those that know”

A key point here is that a person may not actually be qualified to determine who is, and who isn't capable of deciding who actually knows. This is a fundamental flaw in your thinking process. This happens much more than you might imagine.

Yes some of us have skills and knowledge, and some don't. The ones who do generally worked to gain those skills, the ones that don't, generally chose not to. You are of course completely free to select either option, the decision is entirely yours, understanding that concept really is the only enlightenment one ever needs

I'm not prepared to discuss the nature nurture argument, its an exercise for 1st year university students, however if I was asked to make a snap decision as to are traders born or made, Id have to agree with Socrates and say born

Thankfully I do GET IT, but what you don't fail to grasp, is the blatant manipulation that's occurring.

Now perhaps you'd be kind enough to actually address my concerns regarding the John Summa statistics. A couple of the options traders have stated both in public and by PM that my concerns regarding these statistics are valid, perhaps now you'd be kind enough to explain why they aren't valid. I genuinely would appreciate the opportunity to discuss this in a rational fashion. However might I make one plea to your better nature ? please don't come back with the usual argument “because X says so and its the TRUTH”, because that isn't a valid argument, its the actions of an unthinking zealot.

regards
zup

 

[SOCRATES]

CYOF,

Why am I getting a feeling of deja vu? As usual, we're not going anyway fast. I'm not sure of the purpose anymore.

Ok, the writers have edge. Now what?

Grant.

The writers have the edge...proven.

Q.E D.

 

[CYOF]

ok one and all, time to call a halt.

I've been hit with a deluge of reported posts - mainly objecting to those of CYOF - and I must say that the thread has deteriorated markedly into comments about the posters rather than the subject in hand.

Please keep to the topic - I'll be deleting anything else from hereon. Thanks

jon

Thank you Jon,

I keep my word, as said, and you are right to intervene.

This, as many now see, seems to be a habit.

I also want to clarify again, which you can back up as been a fact, if you so desire, but you do not have to, and that is, I have not made one report of a bad post since I joined this site.

The reason I do not do this, is because, as starspacer rightly says, discussion is the key to real knowledge.

You point is again noted, and I will try me best to adhere to the "rules", but it is hard at times, and I will now continue to share my thoughts with those who wan't to learn how it all really works.

One moment please, whilst I see if I can make any sense out of what is been posted - and I may need to post some additional FACTUAL information, so that some readers can read the FACTS for what they are, and this should help them in understanding what we are all discussing here, for in reality, it is really very very simple when you talk to those that KNOW what they are doing.

Remember, I am here to help others, for that is my purpose in life, in case it is not apparent to some.

Regards,

 

[zupcon]

Remember, I am here to help others, for that is my purpose in life, in case it is not apparent to some.

Regards,

On the basis of the information posted on Bulldozers forum, (copied below) it would appear that you are here not to help, but actually to make mischief on behalf of absent friends. Might it be that you arnt telling the whole TRUTH

If you want to help, try answering my question

Hi and good mrng everyone.

Plz check your PM's . you have messages waitng for you.

Today is the DAY when the Missiles will be launched at T2W.

Enjoy the show and the fireworks! CYOF is the man! Today he will show his TRUE powers that he learned from the ELITE 3.4S CLUB

Bull

missile No1 ,2 , 3 for 2moro to be fired at T2W

No1 http://www.trade2win.com/knowledge/articles/general_articles/the-cash-cow/?r

No2 http://www.investopedia.com/articles/optioninvestor/03/100103.asp

No3 http://www.investment-tools.com/options_reports_1.htm

Option Buyer wins in 1 out of 4 scenarios. Option Seller wins in 3 out of 4 scenarios.PERIOD!!

Have lots of fun 2moro when you unleash those weapons of mass destruction on PT and his friends. Sorry i cant be with you guys but, I'll be WATCHING LIKE AN ATLANTIC GHOST!

Bull

 

[CYOF]

Firstly,

I started off with some questions, which all have not yet answered - which we will return to shortly - to try and see what the majority way of thinking was.

To get the majority, we need to compile the results, which we will do.

But, I am a little worried for those who may just be starting to think about Options, for they may see this a very complicated trading instrument indeed, when in relaity, like every other trading instrument, it is ONLY AS COMPLICATED AS YOU MAKE IT.

Now, so that the readers can get the basic FACTS, I am going to post the articles that Zu mentioned, and again Zu, I thank you for that information, as you have been very helpful to all of us today.

So, here are the very important links that Zu mentioned, that all new Option traders must read, if they wan't to truly get any real understanding of how it really works. I have taken the time to put them in a logical order, so that they may be read in the correct sequence - remember, we must always think before we do something, otherwise we will just waste our time, and I can assure you, I am not out to waste anyones time, especcially my own :idea:

Basics + Where The Balance of Power Lies

http://www.investment-tools.com/options_reports_1.htm

Who Really Has the Edge And What Is It?

http://www.investopedia.com/articles/optioninvestor/03/100103.asp

What Is The Cash Cow - Conservative Option Writing and thank you T2W for this.

http://www.trade2win.com/knowledge/articles/general_articles/the-cash-cow/?r


Forget about the texbooks for the moment, and just read these articles that Zu mentioned, for I can indeed tell you, that these are indeed FACTUAL - so they have merit. They are all you need to understand for the moment - but they are of the utmost importance, so important, that if you knew how really important they were, I guarantee you that you would pass out on the floor.

They are as follows, and I will post them to the bottom of my slogan, after this post, for the time been, just in case any people come along and may find this thread a little overwhelming, or hard to understand.

Remember, the whole ethos of the ELITE 3.4S CLUB is simplicity, but not simplicity in the normal sense of the word.

It is SIMPLICITY IN RELATION TO THE MARKET TRADED - many fail tio see that every market can be broken down to its most simple components, with some simple logical deductions, or, as I prefer to call them myself, COMMON SENSE.

Regards,

 

[ducati998]

I see that both Soccy & CYOF both quote the COW article.
This article should then become [along with the other two references] the basis of a discussion that should shed some light on the subject.

Starting with the first page;

In a sense, option buyers are throwing good money after bad in hunt of that one big market move that could return extraordinary profits. Given the fact that markets spend most of their time trading in a range, it is easy to see why few traders experience the abnormal returns that drew them to the markets in the first place.

Is this true?
Take the DJIA proxy, DIA as an example.
Is this the majority of the year time frame in a range?

 

[grantx]

Zupcon,

Is the Elite 3.4S Club actually membership of the Citybull.com Platinum forum?

No’s 1,2 and 3 hardly constitute profound knowledge or insight. No, he’s just teasing us. We will get revelations which will render my Hull, Cox and Rubinstein, Chance, Kolb, Taleb redundant.

Grant.

 

[ZEPPO]

CYOF,

Why am I getting a feeling of deja vu? As usual, we're not going anyway fast. I'm not sure of the purpose anymore.

Ok, the writers have edge. Now what?

Grant.

"the writers have edge" - thanks, Grant, that was my point on the other thread, and that is my opinion on this one, for what it is worth.
Now Ladies and Gentlemen I shall stop participating on this thread and let you get on with the bashing.
It is fun to see grown ups behaving like children occasionally, but quite frankly, after a while it becomes tiresome.
Enjoy the bash.
Eduardo

 

[CYOF]

On the basis of the information posted on Bulldozers forum, (copied below) it would appear that you are here not to help, but actually to make mischief on behalf of absent friends. Might it be that you arnt telling the whole TRUTH

If you want to help, try answering my question

Hi and good mrng everyone.

Plz check your PM's . you have messages waitng for you.

Today is the DAY when the Missiles will be launched at T2W.

Enjoy the show and the fireworks! CYOF is the man! Today he will show his TRUE powers that he learned from the ELITE 3.4S CLUB

Bull

missile No1 ,2 , 3 for 2moro to be fired at T2W

No1 http://www.trade2win.com/knowledge/articles/general_articles/the-cash-cow/?r

No2 http://www.investopedia.com/articles/optioninvestor/03/100103.asp

No3 http://www.investment-tools.com/options_reports_1.htm

Option Buyer wins in 1 out of 4 scenarios. Option Seller wins in 3 out of 4 scenarios.PERIOD!!

Have lots of fun 2moro when you unleash those weapons of mass destruction on PT and his friends. Sorry i cant be with you guys but, I'll be WATCHING LIKE AN ATLANTIC GHOST!

Bull

Zu, you really do amaze me!

Have I not stated that I am now a member of the ELITE 3.4S Club?

Have I not stated that I know John C BULLDOZER?

Have I not stated that I speak about FACTUAL information only, and always tell the truth?

Do you not think that we all know you can see this information which we have shown you?

Do you not see why we have shown you this information?

As BULLDOZER has no chance of speaking, I have indeed TOLD HIM that I will speak the truth. You will never GET IT, no matter how hard you try.

Lets re-cap here, so that all may know exactly what is going on.

The main question here is, and it is all that anyone should be interested in, is:

HOW DO I MAKE CONSISTENT PROFITS TRADING OPTIONS - WITH THE SMALLEST RISK POSSIBLE - AND THE BIGGEST RETURNS POSSIBLE.

Or, to re-state in terms that professional traders will understand, HOW DO I GET A GOOD POSITIVE EXPECTANCY FIGURE WHEN TRADING OPTIONS.

Now, you come along and start trying to make it look like this is some sort of game -BUT I AM NOW TELLING YOU AGAIN - FOR THE UMPTEEN TIME - THIS IS NO GAME - THIS IS SERIOUS STUFF - SO SERIOUS THAT - YOU AND MANY OTHERS WILL NEVER BE ABLE TO UNDERSTAND - BUT - JUST BECAUSE YE DO NOT UNDERSTAND - THIS SHOULD NOT PREVENT OTHERS FROM LEARNING ABOUT THE FACTS.

You are, again, INTERFERING, as usual.

I will answer any silly questions you like, but why do you not try and do something constructive, and try to add some real valuable information, oh, sorry, I forgot, you have already stated that you know nothing about options, but all you will do, as usual, is INTERFERE.

Remember, we are only still at the basic level here - I wonder what you will have to say when we start explaining to the normal people how the EXOTIC STRATEGIES are not at all as complicated as they look - maybe you will say that I am now living with John C BULLDOZER, the MASTER OPTION TRADER, who by the way, will not be the MASTER for very long, for he is such a good teacher, like Montaigne, he teaches students to learn for themselves, but then again, we all know how you have been educated, for you told us yourself :cheesy:

 

[zupcon]

Zupcon,

Is the Elite 3.4S Club actually membership of the Citybull.com Platinum forum?

No’s 1,2 and 3 hardly constitute profound knowledge or insight. No, he’s just teasing us. We will get revelations which will render my Hull, Cox and Rubinstein, Chance, Kolb, Taleb redundant.

Grant.

Hi Grant

I dont have much knowledge concerning 3.4S (other than driving my boxter ) but taking a quick look around bulldozers forum this morning, I did find quite a few links to an american site
http://www.isixsigma.com concerned with achieving improvements in quality.

3.4S apparently refers to a statistical quality control concept developed within the manufacturing divisions at Motorola in their quest for product perfection. They where striving for a defect rate of 3.4 defects per million which was achieved at 6 standard deviations from the mean. You'll see Bulldozer constantly refer to himself in the forum as a 6 sigma 3.4S time and time again

What I do find amusingly ironic, is CYOF's complete lack of understanding of statistics, yet he's a member of an elite club named after a statistical concept it made my day really. The exact phrase he used when the subject of standard deviation was raised on another thread was “Understanding standard deviation is about as much use as spitting in the wind”, I must admit it was a little trap Id set, but I couldnt resist it

Im sure CYOF, will give you further details, or correct any assumptions that I may have made.

regards
zup

 

[SOCRATES]

Zupcon,

Is the Elite 3.4S Club actually membership of the Citybull.com Platinum forum?

No’s 1,2 and 3 hardly constitute profound knowledge or insight. No, he’s just teasing us. We will get revelations which will render my Hull, Cox and Rubinstein, Chance, Kolb, Taleb redundant.

Grant.

The Elite 3.4S Club is composed of individuals who are personally known to each other and not cyberspace personalities. They meet behind locked doors at regular intervals to discuss matters of interest to them, and also meet in comittee as and when necessary to decide on the basis of personal knowledge or physical introduction which applicants can be admitted to the Platinum Lounge. The comittees decisions are final and there are no exceptions and no appeal.

Insofar as the books you mention are concerned, I recall clearly having comitted copies of all of them to the bonfire of Autumn 2004. This is because although written by respected authors who are no doubt well meaning, they were found not to be harmonious to my needs. They are very suitable for developing external viewpoints and in this respect, serve a useful purpose.

 

[Profitaker]

What I do find amusingly ironic, is CYOF's complete lack of understanding of statistics, yet he's a member of an elite club named after a statistical concept it made my day really. The exact phrase he used when the subject of standard deviation was raised on another thread was “Understanding standard deviation is about as much use as spitting in the wind”, I must admit it was a little trap Id set, but I couldnt resist it

Bulldozer wouldn't have a clue what Standard Deviation was all about either. I think these two went to the same school for people with learning difficulties.

No naked put seller could possibly survive a 6-sigma event. But a buyer would become a multi-millionaire overnight. That's one of the problem with pricing models - they cannot price in black swans.

 

[zupcon]

CYOF

I was just pointing out the silly games that you and John Bulldozer spend your time playing. You claim you are here of your own free will to teach, but the real truth is that behind the scenes others pull your strings. You are an amusing distraction, no more, and no less, but for that I do thank you.

I asked you a serious question regarding the John Summa article, and I note that you have completely refused to engage or discuss my questions, on a mature and grown up basis. This alone shows that you are simply a puppet, engaged to misbehave on behalf of a banned member.

There are numerous questions still outstanding, so why not spend your time productively and actually answer some of them. rather than stating the blindlingly obvious

regards
zu

 

[CYOF]

Bulldozer wouldn't have a clue what Standard Deviation was all about either. I think these two went to the same school for people with learning difficulties.

No naked put seller could possibly survive a 6-sigma event. But a buyer would become a multi-millionaire overnight. That's one of the problem with pricing models - they cannot price in black swans.

Pt,

You must first reply to my questions on the 4 categories of Risk/Reward and we will progress from there.

I will then be happy to show you your ERRORS and lack of KNOWLEDGE on OPTIONS.

John C Bulldozer proved you WRONG on this thread last year, and on "KEEPING TRACK OF DELTAS" thread:

http://www.trade2win.com/boards/showthread.php?t=16863

Maybe you might want to read the FACTS again :idea:

 

[Profitaker]

Pt,

You must first reply to my questions on the 4 categories of Risk/Reward and we will progress from there

I don't have to do anything.

For your information....Standard Deviation / Sigma is to options what petrol is to a car. I suggest you go and do some studying instead of spending all your time destroying yet another T2W thread. No shortage of books on the market and I suggest you start with "Options for Dummies".

 

[zupcon]

The main question here is, and it is all that anyone should be interested in, is:

HOW DO I MAKE CONSISTENT PROFITS TRADING OPTIONS - WITH THE SMALLEST RISK POSSIBLE - AND THE BIGGEST RETURNS POSSIBLE.

So which of you simplistic risk reward categories would that come under

Limited Loss / Limited gains.

Limited Loss / Unlimited gains.

Unlimited Loss / Limited gains.

Unlimited Loss / Unlimited gains

Lets see you Wriggle your way out of that one if you can.

 

[Profitaker]

but if you and the other interferers want to debate academic volatilities, then by all means go ahead -for that is what you do best, discuss pure rubbish...

Hmmm, I see. So volatilies are "pure rubbish" ? I think even you have now surpassed yourself in the stupidity league. but don't take my word for it, ask an option trader LOL