[Option_BWBs_and_Collars] Peter Achs & Collars
usilliwabbit8
Hi all,
I just completed my Optionetics repeat of the 2-day intermediate
seminar. The instructors were Peter Achs and Alex Mendoza. Looks
like they are slowly re-vamping their cirriculum and teasing the
students with these strategies to be taught only at advanced
classes. Alex discussed short term straddles is in an earnings play
for volitility play and stock move and also mentioned gamma scalping.
In regards to the collar, Peter showed his trade on AZO from 2002 to
mid June 2007. He initially sold 20 $65/60 put spreads and was
eventually assigned. From the $130,000 stock position, he showed the
results using end of day data for all his hypothectical adjustments
with the resulting value to be $900,000. He then show his actual
results to be $1.3M doing his adjustments intra-day. He confirm my
question that he does his collars adjustments intra-day. He declined
to give anymore info on rolling up/down and/or out. He said that you
can learn the basic strategy in the ICT course and the dynamic
hedging is now taught in the MICT course. He casually mentioned to
another student when at break that he was chastised for recommending
non-Optionetics books and materials.
Steu
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John Pinkowski
Nice update Steu, thanks.
I have personally found some excellent courses out there and books that are non-optionetics.
One thing that gets old after a while is all the optionetics upselling. I know they are a business, but.....I always feel they are holding back something.
I personally have come across one course where there are live classes every week lifetime (I guess the lifetime of the instructor!).
John
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Ganapathi Bhat
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John Pinkowski
I don’t want to mention names on the
board since it would be considered spamming. Those interested can email me
privately.
John
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chadkur
Dan Sheridan now says you are a student for life, as long as he's not
in a nursing home. You have access to all of his one-on-one sessions,
hosted every weekday, forever. You can read more at his new website,
http://www.sheridanmentoring.com/ as he's recently separated from
OptionVue just so he can give the students what they need regardless
of the time involved, and not "up-sell" like others.
Feel free to privately email me for other details. If you sign up,
tell Dan that Chad K referred you.
Chad
--- In Option_BWBs_and_Collars@yahoogroups.com, Ganapathi Bhat
<gbhat2002@...> wrote:
>
> Please give us the names of specific books and the specific
course/class.
>
> Thanks.
>
> John Pinkowski <jlpinkowski@...> wrote:
> Nice update Steu, thanks.
> I have personally found some excellent courses out there and books
that are non-optionetics.
> One thing that gets old after a while is all the optionetics
upselling. I know they are a business, but.....I always feel they are
holding back something.
> I personally have come across one course where there are live
classes every week lifetime (I guess the lifetime of the instructor!).
> John
>
>
>
> ---------------------------------
> ---------------------------------
Neal Chabot
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John Pinkowski
Right, most peoples opinions are just that, opinions.
I don’t know much about Dan Sheridan’s course but I do have the OptionVue Software, and that is the company that promotes Dan Sheridan. And I don’t get anything from OptionVue or Dan Sheridan!
I have looked at his course info many times but never purchased.
John
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Al
Hi all,
I just completed my Optionetics repeat of the 2-day intermediate
seminar. The instructors were Peter Achs and Alex Mendoza. Looks
like they are slowly re-vamping their cirriculum and teasing the
students with these strategies to be taught only at advanced
classes. Alex discussed short term straddles is in an earnings play
for volitility play and stock move and also mentioned gamma scalping.
In regards to the collar, Peter showed his trade on AZO from 2002 to
mid June 2007. He initially sold 20 $65/60 put spreads and was
eventually assigned. From the $130,000 stock position, he showed the
results using end of day data for all his hypothectical adjustments
with the resulting value to be $900,000. He then show his actual
results to be $1.3M doing his adjustments intra-day. He confirm my
question that he does his collars adjustments intra-day. He declined
to give anymore info on rolling up/down and/or out. He said that you
can learn the basic strategy in the ICT course and the dynamic
hedging is now taught in the MICT course. He casually mentioned to
another student when at break that he was chastised for recommending
non-Optionetics books and materials.
Steu
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and favorite meals
w/ Real Food lovers.
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chadkur
I do not profit from Dan Sheridan. Just a VERY satisfied customer for
a product that isn't here to take your money and run, or ask for more
money for the next seminar, or give you a teaser at a $4000 2-day
seminar for you to take the next $4000 2-day seminar, etc. It's a
very refreshing concept...someone who really wishes to teach and make
sure he spends enough time with you to make sure you can handle
trading on your own.
Dan is no longer affiliated (or is marketed by) OptionVue, although
signing up for his class gives you 6 months of free OptionVue usage
for a common teaching platform. He's also completely improving the
course, complete with a syllabus, a trading manual, newsletters, a
live $10,000 portfolio that the class trades "together". This
information is so new it's not even published on the website yet.
It's an amazing program.
If you are an income trader routinely making more than 10% ROI per
month, month after month, then maybe Dan isn't advanced enough for
you. Or if you wish to specialize in speculation trades, then it
might not be suited for your trading style.
Again, I'm just an ecstatic customer.
Chad K
--- In Option_BWBs_and_Collars@yahoogroups.com, "John Pinkowski"
<jlpinkowski@...> wrote:
>
> Right, most peoples opinions are just that, opinions.
>
> I don't know much about Dan Sheridan's course but I do have the
OptionVue
> Software, and that is the company that promotes Dan Sheridan. And I
don't
> get anything from OptionVue or Dan Sheridan!
> I have looked at his course info many times but never purchased.
> John
>
>
> _____
>
> John Pinkowski <jlpinkowski@...> wrote:
> Nice update Steu, thanks.
> I have personally found some excellent courses out there and books
that are
> non-optionetics.
> One thing that gets old after a while is all the optionetics
upselling. I
> know they are a business, but.....I always feel they are holding back
> something.
> I personally have come across one course where there are live
classes every
> week lifetime (I guess the lifetime of the instructor!).
> John
>
>
> _____
>
> Need a vacation? Get
>
<http://us.rd.yahoo.com/evt=48256/*http:/travel.yahoo.com/;_ylc=X3oDMTFhN2hu
> cjlpBF9TAzk3NDA3NTg5BHBvcwM1BHNlYwNncm91cHMEc2xrA2VtYWlsLW5jbQ--> great
> deals to amazing places on Yahoo! Travel.
>
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Ganapathi Bhat
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rkellites
Interesting. The origional story was that he turned $30k into $1.3mm
in 3.5 years, now it is $130k into $1.3mm in ~5 years. Great return
but just one more piece of mis-information surrounding JLLord,
Optionetics, Scott and Peter. I just backtested AZO for the year
2006. The strategy shows a 31% return with no slippage or
transaction costs factored in. Buy-and-hold shows a 30% return.
Maybe I'll test 2002 to 2007 for kicks, but the more I learn about
this area, the less impressed I become. Sounds like a bunch of
leprechans trying to get us to chase rainbows...
Russ
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Lindsay Ward
From: rkellites <rkellites@yahoo.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Monday, July 9, 2007 9:23:04 PM
Subject: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
Interesting. The origional story was that he turned $30k into $1.3mm
in 3.5 years, now it is $130k into $1.3mm in ~5 years. Great return
but just one more piece of mis-information surrounding JLLord,
Optionetics, Scott and Peter. I just backtested AZO for the year
2006. The strategy shows a 31% return with no slippage or
transaction costs factored in. Buy-and-hold shows a 30% return.
Maybe I'll test 2002 to 2007 for kicks, but the more I learn about
this area, the less impressed I become. Sounds like a bunch of
leprechans trying to get us to chase rainbows...
Russ
--- In Option_BWBs_ and_Collars@ yahoogroups. com, "usilliwabbit8"
__,_._,___
rkellites
I thought it was BBBY. So now is the story that he made $1.3 on BBBY
and another $1.3 (coincidently the same amount) on AZO? That's
great, he made $2.6 was he trading any other stocks? But if he is so
successful, why did Scott lose so much $ and wind up in jail when he
has the same ability/knowledge? Also on the JLL tag-along last I
heard they were losing $, and I've been doing this for about 1 year
and I'm down about 5%. I wish I could get this to make sense.
Russ
--- In Option_BWBs_and_Collars@yahoogroups.com, Lindsay Ward
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Lindsay Ward
From: rkellites <rkellites@yahoo.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Monday, July 9, 2007 9:44:42 PM
Subject: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
I thought it was BBBY. So now is the story that he made $1.3 on BBBY
and another $1.3 (coincidently the same amount) on AZO? That's
great, he made $2.6 was he trading any other stocks? But if he is so
successful, why did Scott lose so much $ and wind up in jail when he
has the same ability/knowledge? Also on the JLL tag-along last I
heard they were losing $, and I've been doing this for about 1 year
and I'm down about 5%. I wish I could get this to make sense.
Russ
--- In Option_BWBs_ and_Collars@ yahoogroups. com, Lindsay Ward
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Neal Chabot
----- Original Message -----From: Lindsay WardSent: Tuesday, July 10, 2007 12:48 AMSubject: Re: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
I hope this stirs up a healthy debate on how to trade collars correctly. Personally I have no faith in them (synthetic BCS and I have no reason to trade a real BCS) and consider the capital too high (before new margin rules anyway) but that may be cos I specialize in something else so have not tried hard enough with collars. Specialization does make a very big difference; I have a friend who does nothing but straddles. He makes some money, I didn't and gave up. Horses for courses.
Lindsay
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Neal Chabot
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borabog1983
i understand one's scepticism facing a $6000 upfront fee for another
options educational course. i will second chad k's opinion regarding
dan sheridan here. dan tries hard to give the student as much as he
possibly can for a protracted period of time. there is a sense of
commitment,fairness and decency that becomes obvious after a short
while of training with him. so far,to the best of my knowledge, he
never asked for additional payments and continuously keeps adding
value to his program. the level of commitment among his former
students in helping him run the business is so overwhelming that it
speaks for itself.
boris
--- In Option_BWBs_and_Collars@yahoogroups.com, "chadkur"
__,_._,___
Michael Catolico
i trade verticals frequently. the adjustment strategy primer i posted
here (i think) and on other lists is basically a rudimentary way to
trade these positions. they are of course very simple ways to play a
directional lean cheaply and devoid of many of the risks associated
with greeks other than gamma. doing them synthetically with stock (aka
collars) is not necessary unless you've already had stock appreciation
and you're seeking to lock in some gains or looking for a pause in the
trend.
what aspect of verticals (bull or bear) would be of interest to folks
here? since this is a bwb forum, i could discuss how the vertical can
be used as a building block of a bwb.
michael
Neal Chabot wrote:
According to Lindsay, BCS = Bull Call Spread (as opposed to Bear Call Spread). Evidently someone at Optionetics starting using this abbreviation to be cute, but here uncommon abbreviations need to be explained when you use them so that everyone knows what you are talking about.For those who have not had the class in advanced synthetics, the collar is synthetically equivalent to a long call vertical. How that works is this: the combination of the long stock and the long put equal a synthetic long call. The synthetic long call and the short call create a long call vertical.We've tried previously to get something going on the correct way to trade collars, but the discussion seems to bog down when we come to what the rules should be. Evidently some members have gone ahead on their own and are not able to backtest collars according to their own set of rules.Neal----- Original Message -----From: Lindsay WardSent: Tuesday, July 10, 2007 12:48 AMSubject: Re: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
I hope this stirs up a healthy debate on how to trade collars correctly. Personally I have no faith in them (synthetic BCS and I have no reason to trade a real BCS) and consider the capital too high (before new margin rules anyway) but that may be cos I specialize in something else so have not tried hard enough with collars. Specialization does make a very big difference; I have a friend who does nothing but straddles. He makes some money, I didn't and gave up. Horses for courses.
Lindsay.
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paulcolford
--- In Option_BWBs_and_Collars@yahoogroups.com, "usilliwabbit8"
<tsunami.hobie@...> wrote:
>
>yes i always suspected optionetics of not being honest and only really
interested in getting as much money from people as possible.
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Jeff Birk
Lindsay,
What strategy has become your specialty?
Jeff
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Jim Miller
Michael Catolico wrote:
>
> i trade verticals frequently. the adjustment strategy primer i posted
> here (i think) and on other lists is basically a rudimentary way to
> trade these positions. they are of course very simple ways to play a
> directional lean cheaply and devoid of many of the risks associated
> with greeks other than gamma. doing them synthetically with stock (aka
> collars) is not necessary unless you've already had stock appreciation
> and you're seeking to lock in some gains or looking for a pause in the
> trend.
>
> what aspect of verticals (bull or bear) would be of interest to folks
> here? since this is a bwb forum, i could discuss how the vertical can
> be used as a building block of a bwb.
>
That sounds really interesting. Please go for it!
Jim
>
>
> michael
>
Selassie
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Lindsay Ward
1. Iron Condors
2. Double and Triple Calendars
3. BWB or its cousins, if only as hedges
4. Plain calls and puts on breakouts
And pretty much in that order of importance, though the order changes dependent on what the market looks like it might do next (move directionally versus sideways).
If I had the time and inclination to day trade I think gamma scalping would be appealing.
There has been a lot of Optionetics bashing here recently, some of it with some merit (I have been a vocal critic of "you guys" pushing Elliot wave so hard to beginners, I think it is ethically very questionable), some a bit extreme imho, but one Fontanills quote often pops up in my memory ... "no one can prove these strategies don't work, they all work". I believe that's true, and it's a matter of finding what suits your personality and where you will get the best ROI, or ROA perhaps (Return Over Anxiety).
Not that you asked but I have "pressed the flesh" with many of the well known names here ... Fontanills, McMillan, Headley, Bittman, Gentile, Jacobson**, Kramer etc etc but the most actionable, rewarding one, by a huge distance, is Dan Sheridan.
Neal was right, his little webinar of "BWB vs Condor" was lightweight, but a day with Dan is better than all the rest put together (and they all have their qualities). Best $475 you will ever spend.
** if you get the chance to chat with Alex J. , VP of Education at ISE, at one of his many "expo" type appearances, grab it!
A bit more than you asked for and I hope I don't sound like a windbag. I come here to learn (there are some very smart people posting in this group) and I hope these comments are of some help.
From: Jeff Birk <jeffbirk2003@yahoo.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Subject: Re: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
Lindsay,
What strategy has become your specialty?
Jeff
__,_._,___
Rama Kusnadi
Gary Cohen
Lindsay Ward <vineta4729@yahoo.com> wrote:
Moody friends. Drama queens. Your life? Nope! - their life, your story.
Play Sims Stories at Yahoo! Games.
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mun...@comcast.net
Michael
-------------- Original message --------------
From: "Neal Chabot" <sire@comcast.net>
According to Lindsay, BCS = Bull Call Spread (as opposed to Bear Call Spread). Evidently someone at Optionetics starting using this abbreviation to be cute, but here uncommon abbreviations need to be explained when you use them so that everyone knows what you are talking about.For those who have not had the class in advanced synthetics, the collar is synthetically equivalent to a long call vertical. How that works is this: the combination of the long stock and the long put equal a synthetic long call. The synthetic long call and the short call create a long call vertical.We've tried previously to get something going on the correct way to trade collars, but the discussion seems to bog down when we come to what the rules should be. Evidently some members have gone ahead on their own and are not able to backtest collars according to their own set of rules.Neal
----- Original Message -----From: Lindsay Ward
Sent: Tuesday, July 10, 2007 12:48 AMSubject: Re: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
I hope this stirs up a healthy debate on how to trade collars correctly. Personally I have no faith in them (synthetic BCS and I have no reason to trade a real BCS) and consider the capital too high (before new margin rules anyway) but that may be cos I specialize in something else so have not tried hard enough with collars. Specialization does make a very big difference; I have a friend who does nothing but straddles. He makes some money, I didn't and gave up. Horses for courses.
Lindsay
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Lindsay Ward
From: Gary Cohen <gary_cohen11@yahoo.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Tuesday, July 10, 2007 11:00:42 PM
Subject: Re: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
Jeff,
1. Iron Condors
2. Double and Triple Calendars
3. BWB or its cousins, if only as hedges
4. Plain calls and puts on breakouts
And pretty much in that order of importance, though the order changes dependent on what the market looks like it might do next (move directionally versus sideways).
If I had the time and inclination to day trade I think gamma scalping would be appealing.
There has been a lot of Optionetics bashing here recently, some of it with some merit (I have been a vocal critic of "you guys" pushing Elliot wave so hard to beginners, I think it is ethically very questionable) , some a bit extreme imho, but one Fontanills quote often pops up in my memory ... "no one can prove these strategies don't work, they all work". I believe that's true, and it's a matter of finding what suits your personality and where you will get the best ROI, or ROA perhaps (Return Over Anxiety).
Not that you asked but I have "pressed the flesh" with many of the well known names here ... Fontanills, McMillan, Headley, Bittman, Gentile, Jacobson**, Kramer etc etc but the most actionable, rewarding one, by a huge distance, is Dan Sheridan.
Neal was right, his little webinar of "BWB vs Condor" was lightweight, but a day with Dan is better than all the rest put together (and they all have their qualities). Best $475 you will ever spend.
** if you get the chance to chat with Alex J. , VP of Education at ISE, at one of his many "expo" type appearances, grab it!
A bit more than you asked for and I hope I don't sound like a windbag. I come here to learn (there are some very smart people posting in this group) and I hope these comments are of some help.
Lindsay
----- Original Message ----
From: Jeff Birk <jeffbirk2003@ yahoo.com>
To: Option_BWBs_ and_Collars@ yahoogroups. com
Sent: Tuesday, July 10, 2007 9:34:13 PM
Subject: Re: [Option_BWBs_ and_Collars] Re: Peter Achs & Collars
Lindsay,
What strategy has become your specialty?
Jeff
Lindsay Ward <vineta4729@yahoo. com> wrote:
I hope this stirs up a healthy debate on how to trade collars correctly. Personally I have no faith in them (synthetic BCS and I have no reason to trade a real BCS) and consider the capital too high (before new margin rules anyway) but that may be cos I specialize in something else so have not tried hard enough with collars. Specialization does make a very big difference; I have a friend who does nothing but straddles. He makes some money, I didn't and gave up. Horses for courses.
Lindsay
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Lindsay Ward
My target is 10% to 20% in two to four weeks. I have not done enough of them "for real" to give you a statistically significant answer to your question. My results are definitely better when markets are rangebound (on most of my strategies) which is why I am making an effort to find a directional strategy that works for me, so I have more of a portfolio.
If it helps, I'm more likely to start out with a double or triple and then "reduce" it to a single or double as we get further into the short month.
I much prefer them on a basket product if possible, such as an ETF or HOLDR. I backtested doubles on GOOG expecting good results but was disappointed.
From: Rama Kusnadi <rkus...@cox.net>
To: Option_BWBs...@yahoogroups.com
Sent: Tuesday, July 10, 2007 11:00:08 PM
Subject: RE: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
To: Option_BWBs_ and_Collars@ yahoogroups. com
mun...@comcast.net
-------------- Original message --------------
From: "Neal Chabot" <sire@comcast.net>
According to Lindsay, BCS = Bull Call Spread (as opposed to Bear Call Spread). Evidently someone at Optionetics starting using this abbreviation to be cute, but here uncommon abbreviations need to be explained when you use them so that everyone knows what you are talking about.For those who have not had the class in advanced synthetics, the collar is synthetically equivalent to a long call vertical. How that works is this: the combination of the long stock and the long put equal a synthetic long call. The synthetic long call and the short call create a long call vertical.We've tried previously to get something going on the correct way to trade collars, but the discussion seems to bog down when we come to what the rules should be. Evidently some members have gone ahead on their own and are not able to backtest collars according to their own set of rules.Neal
----- Original Message -----From: Lindsay WardSent: Tuesday, July 10, 2007 12:48 AM
Subject: Re: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
I hope this stirs up a healthy debate on how to trade collars correctly. Personally I have no faith in them (synthetic BCS and I have no reason to trade a real BCS) and consider the capital too high (before new margin rules anyway) but that may be cos I specialize in something else so have not tried hard enough with collars. Specialization does make a very big difference; I have a friend who does nothing but straddles. He makes some money, I didn't and gave up. Horses for courses.
Lindsay
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Ali Pashaei
Hello All,
I'm still a student and I will always be, but I hope that some of my experience can be helpful to others. I had similar set of questions few years ago with regards to what is the right way to trade a strategy and what precise rules are the best to follow. There is so much out there, so many variables, and everyone seems to say something different. I hope the following will help:
I think everyone here wishes to be very successful in trading. I've not met anyone that has achieved long-term success by copying someone else. One trait of successful traders is that they each have some unique element in their approach. Even when they follow a particular approach, they have their own unique set of twists to them. For example, as many have mentioned, Peter Achs approach to collar is a little different that JL Lord approach.
So now the question becomes this: What do I need to do in order to get to the point were I can develop my own unique approach and set of rules to trading?
I'll use the dynamic collar as example here. Here are my specific recommendations:
1. Learn precisely how a vertical spread works. synthetics, consequences of placing the verticals at different strike levels, with different widths, at different months. How the greeks work for each of scenarios mentioned. Once you learn this, the you'll see that many of the questions melt away. I'm sorry that I'm not putting more meat here, since you can actually write a whole book on just this topic. We can have ongoing discussions about this. Also I would recommend reading the latest book by Charles Cottle ( www.riskdoctor.com). He has a chapter on verticals which covers lots of this stuff.
2. Learn precisely how the dynamic collar strategy described here makes money and how it loses money. This is different from point 1 made above. This application of this collar strategy makes money because it makes the following assumptions:
a. The stock you select will go higher over time - the ideal scenario
b. If not a. above, then the stock will at least make big swings up and down over time
c. If the stock falls, you're making a bet that it will eventually rise again. This is a key assumption, specially since your adding to the losing position. This point is a key assumption the strategy makes. And it has been generally true for many US stocks. And that's why it has worked. It fails during extended bear market, because the investor often gives up and exits, not being able to take the pain anymore.
If the stock does not do the above, even if you make the right adjustments, the strategy will lose money. So it will lose if:
a. stock goes on a long-term down trend. This will lose you a lot more money than what any one risk graph will show. BTW, you can also trade bear-collars in bear markets (with long stock, not short stock), but as far as I know, they don't teach that (JL / Achs).
b. stock sits still and you'll lose on time-decay by following the exact JL or Achs spread placement rules.
3. I know some don't like to hear this one but it's true: You need to develop a feel for the direction of the stock. Or have a system that with some level of accuracy (doesn't have to be perfect - and it will not be), tell you where the stock is going. This could be as simple as using some moving averages. The reason this is important, is because collar is a vertical, which is a directional bet. If you keep placing these bull verticals and it goes against you each time, well, you'll lose money.
4. Learning how to adjust. This becomes a lot easier if you learn point 1 above. There are a handful ot adjustment techniques that can be learned and applied. Adjustments are not the holly grail, but they are a needed component.
If anyone goes through these steps here, I'll grantee that you'll get the answer to most, if not all the questions that have been listed with regards to what rules to follow for collars. And you'll end up with your own unique style, which is the critical component of a successful trader.
I know I've said a bunch of general stuff w/o specific answers to some specific questions. But hopefully this has been some help to some, with regards to providing a learning path to follow.
I'm seeing a lot of smart and motivated people here, and I'm learning new things along with everyone else. I hope for everyone that is making the effort, to become very successful.
- Ali
Neal,Thank you for focusing the discussion back to collar trading. Yes, I found it entertaining to discover that Peter Achs, Scott Kramer, Alex Gonzalez, and Peter Zamoya are involved with RWT and are more than likely collectively JL Lord. However, this discovery did not make me a better collar trader, it DID however, made me pay closer attention to Peter Achs board and some of his rules. In my mind, what will make us better traders is examing the collars book criteria, Peter Achs criteria, as well as our own experiences and discussing the decision we made and why some of them worked and others didn't work. In doing so, we can anticipate some of the decisions we'll have to make in the future. For example, Russ says he's down 5% from a collar he's been trading for a year. Russ would you be willing to share your trade with us, perhaps we can Monday Morning QB your trade.
Also I don't believe we'll ever come up with a set of "Collar Rules" b/c much of DH is based upon my/your opinion of the stock. For example, Peter Achs says that he doesn't sell the call until he becomes bearish on the stock. I interpret that to mean that while I'll enter the trade as a married put, expecting the stock to move, I won't sell the call until the stock has made a move and I think that move is over. Also this rule differs somewhat from the book ( p.153). Furthermore, if we did come up with a set of rules on when to sell the call some of us would sell a call, others might sell a call spread.
__,_._,___
Michael Catolico
okay here's a sketch about how to trade and manage a collar/vertical
with the intent to eventually own a bwb. collars and verticals are
synthetic equivalents so i'll discuss the strategy using straight
options only. also, to me, there is no difference between puts or calls
so i will only use calls to again make it simple(r).
as Ali mentions in his very insightful post, each trader, to be
successful, has to find her own path. so these notes are merely one
method that can be built on - or reacted against.
there are two ways, for me, to conceive of a bwb: one uses equal strikes
with staggered risk, the other uses staggered strikes with a basic
butterfly 1X2X1 profile.
example bwb1: +1 60c/-3 65c/ +2 70c
example bwb2: +1 60c/-2 70c/ +1 75c
the goal, in the vertical to bwb strategy is to try to own that bwb with
as little risk as possible.
let's start with the vertical +1 60c/ -1 65c.
clearly to get to either of the bwb examples above all you need do is
add additional legs to the trade.
vertical to bwb1 means simply adding two 65/70 short verticals
vertical to bwb2 means adding the 65/70/75 fly to the original 60/65
vertical
bwb1 is the position you wind up with if you are acting defensively
against your original 60/65 vertical (i.e. the market goes down or stays
flat). bwb2 is the position you wind up with when the trade goes your
way (i.e. the market rises).
here's how i trade it:
let's say the underlying is at 60, iv is at 30% and there are 30 days
until expiration. the 60/65 vertical should cost around $1.65.
the market can only do one of three things once you've drawn your line
in the sand and bought the position: go up, go down, go nowhere.
if it goes up, you're golden. you can either sell out for a profit or,
and this is to me where all the long term success in markets comes from,
you can capture some of that gain while leaving some room for more upside.
scenario one
so let's say a week passes and the underlying increases to 64. your
vertical is now worth about $3.05 (i'll assume iv goes unchanged for
this exercise). you could cash out or look to lock in gains. you've got
your bullish move that your original bet wanted - and there might be
more upside. so you decide to convert to the bwb2 by adding the 65/70/75
fly for $0.95 debit giving you a net position of +65/-2 70/+75 for a
total debit of $2.60. the bwb gives you lots of upside and the fact
that the market has moved smartly higher means that you can be more
comfortable with the extra debit. in classic market parlance you've
grown your winner and are letting it ride.
scenario two
same opening gambit as before: long 60/65 vertical for $1.65dr.
now a week later the stock has fallen to 58. your vertical is now worth
only about $0.85.
here you can either "cut your losses" or you can elect to adjust the
trade and prepare for a possible reversal.
one alternative here is to convert to bwb1 by selling two 65/70
verticals for (admittedly meager) $0.15 each to give you a net position
of +60/-3 65/+2 70 for a net debit of $1.35. you've still got that
downside risk but it's been blunted somewhat by the selling of the
additional premium. and the upside risk of the bwb is muted because of
where the underlying is now trading (i.e. that extra short vertical is
pretty far away to pose much of a threat).
obviously you can't turn losers into winners magically via an
adjustment. but this kind of thinking and decision process sets you up
for a better return on a rebound while reducing your max cost exposure
of further downward price movement.
scenario three
same opening - long 60/65 vertical for $1.65dr
a week later the stock is unchanged at 60. here you are again in a loser
but not due so much to adverse price movement but to dropping or
"failed" volatility. the vertical should now be worth about $1.50. you
could exit and cut your losses to a minimum. or you could elect to
again adjust to bwb1. here you could sell two 65/70 verticals for $0.35
each giving you the net +60/-3 65/+2 70 position this time for $0.95 net
debit.
the rationale here is that you still are hoping for some upside to the
underlying but, given the week of dormancy, you are less than likely to
get that big upmove originally hoped for. by adjusting to bwb2 you've
greatly reduced your downside cost exposure while adapting to current
market conditions. you've added the upside risk but the probability of
that risk undermining the position is dropping dramatically with the
passage of time.
m
>
>
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John Pinkowski
Hi group,
I used to have a futures account with Jack Carl.
I do have an optionsxpress account and you can trade futures but not options on futures/commodities.
Any suggestions on a
discount broker with a decent platform and cheap commissions?
I read an article on www.dtfutures.com but
don’t know much about them. Seems commissions are 7 bucks round trip, but
can’t figure out yet from their website commissions on options.
Thanks
John
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tastudent
Interactive Brokers (IB) allows you trade anything you want. Check
them out.
-E
--- In Option_BWBs_and_Collars@yahoogroups.com, "John Pinkowski"
<jlpinkowski@...> wrote:
>
> Hi group,
> I used to have a futures account with Jack Carl.
> I do have an optionsxpress account and you can trade futures but not
options
> on futures/commodities.
> Any suggestions on a discount broker with a decent platform and cheap
> commissions?
> I read an article on www.dtfutures.com <http://www.dtfutures.com/> but
Share recipes
and favorite meals.
__,_._,___
Lindsay Ward
From: tastudent <ipguru2003@yahoo.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Wednesday, July 11, 2007 7:24:40 PM
Subject: [Option_BWBs_and_Collars] Re: Options on Futures
Interactive Brokers (IB) allows you trade anything you want. Check
them out.
-E
--- In Option_BWBs_ and_Collars@ yahoogroups. com, "John Pinkowski"
<jlpinkowski@ ...> wrote:
>
> Hi group,
> I used to have a futures account with Jack Carl.
> I do have an optionsxpress account and you can trade futures but not
options
> on futures/commodities .
> Any suggestions on a discount broker with a decent platform and cheap
> commissions?
> I read an article on www.dtfutures. com <http://www.dtfuture s.com/> but
tastudent
Hi Lindsay,
Agree been there done that. Just make sure you know your risks if
you're trading with them. Better yet close position before expiration.
-E
--- In Option_BWBs_and_Collars@yahoogroups.com, Lindsay Ward
<vineta4729@...> wrote:
>
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__,_._,___
Murray Lindhout
Neal Chabot
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Neal Chabot
----- Original Message -----From: Lindsay Ward
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tastudent
Hi Neal,
May be this would help others curious about margining by IB.
http://www.interactivebrokers.com/en/trading/marginRequirements/fundamentals.php?ib_entity=llc
4x margining is for day traders and i would think day traders would
understand how their brokers margining work before using it.
I'm not here to promote IB in anyway, i was just responding to John
Pinkowski's email regarding which broker has options for futures. To
be honest my fav broker is TOS. =) They're going to roll out
algorithmic order entries next week or maybe after expiration. Some
cool stuff on the platform for conditional orders!
-E
--- In Option_BWBs_and_Collars@yahoogroups.com, "Neal Chabot"
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Neal Chabot
----- Original Message -----From: Murray Lindhout
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James Parker
Neal
It may be a question of differing strokes for differing folks.
It appears to me that a BWB is a combination of
- a standard 1x2x1 butterfly PLUS
- a short vertical credit spread
In your examples:
BWB1 is +1 60c/-2 65c/+1 75c which is a combination of
+1 60c/-2 65c/+1 70c standard Fly
-1 70c/+1 75c short vertical spread
BWB2 is +1 60c/-3 65c/+2 70c which is a combination of
+1 60c/-2 65c/+1 70c standard Fly
-1 65c/+1 70c short vertical spread
Each BWB has the same 60/65/70 Fly as its main component and
an 'embedded' short certical that reduces debit / increases risk.
The difference between the BWB's is which strikes you decide to
embed the short vertical spread.
Michael provides some valuable and thought provoking ideas that show
how you can build a BWB over time rather than start with a BWB from
the outset ..... some times start with a fly and adjust with
verticals, other times start with the vertical and adjust with the
Fly.
Michael can confirm, but I tend to think that his second BWB which
consisted of +1 60c/-2 70c/+1 70c would be normally recognised by
BWB afficiondos as a put BWB (+1 60p/-2 70p/+1 70p).
Both positions are synthetically equivalent.
Cheers
James
--- In Option_BWBs_and_Collars@yahoogroups.com, "Neal Chabot"
<sire@...> wrote:
>
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Murray Lindhout
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Neal Chabot
Neal Chabot
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9
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1
tastudent
Hi Neal,
Awesome information, i missed this because of a lunch meeting at work.
Will be looking at the pdf. I also have the presentation slide from
TradeKing (Oasis2007) don't know if you have it or not.
-E
--- In Option_BWBs_and_Collars@yahoogroups.com, "Neal Chabot"
<sire@...> wrote:
>
> Today Jim Bittman of the CBOE had an excellent presentation on
Christmas Tree spreads that was rescheduled from Monday. I don't
know when I have heard a better webinar. Dan Sheridan might be more
entertaining (as well as informative), but this was all meat. Some
of the variations are very close to what we are doing here with BWBs.
>
> It turns out that there are two versions of what a Christmas Tree
spread is, and these stem from the early days (say like the 70's or
80's) when a lot of these guys were just starting out on the floor.
One of the attendees said that Natenberg on page 159 has a version of
CT spreads similar to what Michael proposed here earlier (e.g. 1 DJX
135, -1 137, -1 138) which of course is a staggered ratio spread. I
only have Natenberg's 1st edition and don't find it in my copy. Jim
Bittman acknowledged that version but he said that he learned it
another way.
>
> Jim's version (and I assume CBOE) would be (with DJX at 135):
> Buy 1 DJX 135 Call
> Sell 3 DJX 137 Call
> Buy 2 DJX 138 Call
>
> There are at least several variations of this basic structure, but
all of them have an equal number of bought and sold options so the
risk is limited. I asked why it is called a Christmas Tree and no one
seemed to have a good answer other than turned on its side the risk
graph sort of looks like one. :)
>
> I have uploaded a pdf file of the slides used (Christmas Tree.pdf)
to our group files section and I am working on an audio copy also.
The complete video webinar should be available for viewing at the
OptionsXpress web site within the week.
>
> Neal
>
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Neal Chabot
----- Original Message -----
> Now with this context let's look at Michael's examples. Keep in mind that BWBs are properly done OTM, so in Michael's examples with calls starting at the 60 strike, we will assume that the underlying stock is less than or equal to 60. Michael's bwb1 (+1 60c/-3 65c/+2 70c) is thus an example of the second fly modification -- equal strike distances with a 1-3-2 ratio.
>
> However, what can we say about the bwb2 (+1 60c /-2 70c / +1 75c)? This is in the standard 1-2-1 ratio but something is
different about the strike distances. Did anyone catch that?
Instead of going further OTM with the far OTM strike, it is instead brought in closer making the wing shorter. This may be a typo but it has given us a good chance to clarify things. In any case is an easy mistake to make, since Michael has up to now seen the BWB as the product of adjustments rather than as most of us have viewed it -- an initial opening strategy. The BWB in this example using a standard 1-2-1 ratio would be +1 60c / -2 65c / +1 75c.
>
> The +1 60c / -2 70c / +1 75c would be an example of a Raised Wing Butterfly (RWB) because of the shape of the risk graph. I used to call this a Shortened Wing Butterfly (SWB). Some of you may have other names for it, and it would be fine if you wanted to propose such. It is not a BWB because the risk graph is noticeably different. If you go to the Yahoo home page of our group, the graphic will show you a comparison of the BWB, the standard fly, and the RWB.
>
> Neal
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John Pinkowski
Lindsay thanks,
I often trade options, and have done so in the past. When I buy futures, I am always protected with an option because of the dreaded limit down days that can happen.
It has been a few years since I have traded commodities and was looking to get back in it.
Thanks for the info.
John
Sent: Wednesday, July 11, 2007 10:56 PM
To:
Option_BWBs_and_Collars@yahoogroups.com
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10
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1
Dan B
Lindsay is on the money about the IB random liquidation of open positions.
Last week a trader shared with me a calendar he placed with IB for even.
He tried to explain how that can happen ... lo and behold, this week he found out that once his shorts were ITM he had other positions randomly liquidated in the same account with IB. Instead of looking at the leg he was long in his calendar trade, IB liquidated other positions and left open the long leg of the calendar.
He lost a nice % of his account.
Dan
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__,_._,___
Haichow Chen
Hi Neal:
Since I am the one who was referring to Natenberg on
CT, perhaps I should help you clarify the reference.
I was referring to "Option Volatility & Pricing," by
Sheldon Natenberg, Revised Edition, 1994. In Chapter
8 "Volatility Spreads," under a section called "Other
Variations" started in page 157 where he stated: "A
Christmas tree (also referred to as ladder) . . . can
be thought of as particular types of ratio vertical
spreads." The following example can be found in page
158 (opposing page to 159, my mistake during the
chat).
Long Christmas trees
long 10 March 95 calls
short 10 March 100 calls
short 10 March 105 calls
As Jim pointed out such spreads have unlimited risk,
at least in theory.
In addition to the fact that the same term "Christmas
trees" could mean two different positions, the same
position may also be referred to by different
terminologies. To illustrate this second point, it is
useful to look into the basic characteristics of
butterfly (fly).
To me, there are two basic characteristics for a
"normal" fly, the first is that of equal wing spans.
The second one is more important in that a normal fly
is "balanced" in the sense that when the fly is traded
at parity (say at expiration) and price is traded
beyond the wing tip, the debit from one wing is equal
to the credit form another. In case two wings are
both worthless, they are still equal. Consequently,
the fly became worthless, but no worse. I called this
normal fly as Type I butterfly.
There are two variations of normal fly I would like to
call them Type II and Type III flies.
Type II butterfly is balanced but with un-equal wing
spans. If you look at the examples provided by Jim,
all those Christmas trees can be classified as Type II
butterflies.
Type III butterfly is un-balanced and with either
equal or un-equal wing spans. Type III may be further
divided into Type III-a and III-b. III-a is
un-balanced with equal wing spans (Michael's bwb1
belongs here). III-b is un-balanced with un-equal
wing spans (bwb2 belongs here).
Disclosure: Before you ask, I would like to clarify
that I never work for Mr. Natenberg. I would not
receive any compensation if he sales more books.
Haichow Chen
--- Neal Chabot <sire@comcast.net> wrote:
> Today Jim Bittman of the CBOE had an excellent
> presentation on Christmas Tree spreads that was
> rescheduled from Monday. I don't know when I have
> heard a better webinar. Dan Sheridan might be more
> entertaining (as well as informative), but this was
> all meat. Some of the variations are very close to
> what we are doing here with BWBs.
>
> It turns out that there are two versions of what a
> Christmas Tree spread is, and these stem from the
> early days (say like the 70's or 80's) when a lot of
> these guys were just starting out on the floor.
> One of the attendees said that Natenberg on page 159
> has a version of CT spreads similar to what Michael
> proposed here earlier (e.g. 1 DJX 135, -1 137, -1
> 138) which of course is a staggered ratio spread.
> I only have Natenberg's 1st edition and don't find
> it in my copy. Jim Bittman acknowledged that
> version but he said that he learned it another way.
>
> Jim's version (and I assume CBOE) would be (with DJX
> at 135):
> Buy 1 DJX 135 Call
> Sell 3 DJX 137 Call
> Buy 2 DJX 138 Call
>
> There are at least several variations of this basic
> structure, but all of them have an equal number of
> bought and sold options so the risk is limited. I
> asked why it is called a Christmas Tree and no one
> seemed to have a good answer other than turned on
> its side the risk graph sort of looks like one. :)
>
> I have uploaded a pdf file of the slides used
> (Christmas Tree.pdf) to our group files section and
> I am working on an audio copy also. The complete
> video webinar should be available for viewing at the
> OptionsXpress web site within the week.
>
> Neal
>
HCC
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__,_._,___
Neal Chabot
----- Original Message -----From: Haichow Chen
__,_._,___
James Parker
Neal
The best explantion of Butterfly and other similar wingspreads that
I have come across is by Charles Cottle in Options Trading: The
Hidden Reallity.
The DJX 1 x 3 x 2 spread (+1 135c / -3 137c / +2 138c) that you
refer to would be referred to by Cottle as a Skip-Strike-Fly .....
skipping the 136 stike.
The position is the equivalent of combining the following 3 one-
point wide butterflies -
+1 135c / -2 136c / +1 137c
+1 136c / -2 137c / +2 138c
+1 136c / -2 137c / +2 138c
= +1 135c / -3 137c / +2 138c
The variations become infinite .... so if you skip 2 strikes, you
can end up with a +1 135c / -4 138c / +3 139c ..... each time you
skip a strike you increase the number of short / long contracts at
the next two strikes by one.
1 x 2 x 1
1 x 0 x 3 x 2
1 x 0 x 0 x 4 x 3
All limited risk wingspreads, just different risk graphs.
Cottle's book shares the same shelf in my bookcase as McMiilan,
Natenberg, Forchione and Lowenstein (When genius failed - the rise
and fall of LTCM)
I would also like to add my thanks to you for moderating this forum,
we all enjoy and learn a lot in the process.
Cheers
James
--- In Option_BWBs_and_Collars@yahoogroups.com, "Neal Chabot"
<sire@...> wrote:
>
> Today Jim Bittman of the CBOE had an excellent presentation on
Christmas Tree spreads that was rescheduled from Monday. I don't
know when I have heard a better webinar. Dan Sheridan might be
more entertaining (as well as informative), but this was all meat.
Some of the variations are very close to what we are doing here with
BWBs.
>
> It turns out that there are two versions of what a Christmas Tree
spread is, and these stem from the early days (say like the 70's or
80's) when a lot of these guys were just starting out on the
floor. One of the attendees said that Natenberg on page 159 has a
version of CT spreads similar to what Michael proposed here earlier
(e.g. 1 DJX 135, -1 137, -1 138) which of course is a staggered
ratio spread. I only have Natenberg's 1st edition and don't find
it in my copy. Jim Bittman acknowledged that version but he said
that he learned it another way.
>
> Jim's version (and I assume CBOE) would be (with DJX at 135):
> Buy 1 DJX 135 Call
> Sell 3 DJX 137 Call
> Buy 2 DJX 138 Call
>
> There are at least several variations of this basic structure, but
all of them have an equal number of bought and sold options so the
risk is limited. I asked why it is called a Christmas Tree and no
one seemed to have a good answer other than turned on its side the
risk graph sort of looks like one. :)
>
> I have uploaded a pdf file of the slides used (Christmas Tree.pdf)
to our group files section and I am working on an audio copy also.
The complete video webinar should be available for viewing at the
OptionsXpress web site within the week.
>
> Neal
>
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__,_._,___
Mike
Hi to all,
Michael certainly provides food for thought with his interesting
ideas on BWB, begining with a vertical and later transforming the
vertical to a 'BWB variant' as dictated by market movement.
I have a couple of 'practical' questions on that proccess as it was
layed out. The idea was to get to own the BWB with less risk, but I
am not clear how it is achieved in this exercise.
In Scenario One : Begin with a long 1 60/65C Vertical. Market goes to
64. Clearly when the market goes your way (to 64) is the best case.By
adding the 65/70/75 fly, indeed the 'upside' risk is eliminated from
that point on and if the market shoots up above the longs, the
position will lock in : $5.00 - $2.60 = + $2.40 as profit. But what
if the market drifts below 62 or it goes down sharply.The market
moved favorably to begin with but there isn't a profit 'locked in' at
that point and there isn't a certainty it will continue to move up.
In other words we have a new debit (0.95), added to the original one
(1.65) and, we still need to be right about market direction within
the next three weeks let's say, we have not reduced our 'exposure'
when the market was favorable, we increased it.
In Scenario Two : Begin with the 1 60/65 Vertical. Market goes to 58.
I have a bit of a problem with this scenario (converting to BWB1),
as we sell two verticals for just $0.30, increasing the upside risk
very substancially, while just reducing the debit from $1.65 to
$1.35, it may be hardly worth the risk, even if we don't consider
slippage. The downside risk remains realistically the same, while we
have just added substantial upside risk, in exchange of a very small
credit.
In Scenario Three : Begin with the 1 60/65 Vertical. Market stays at
60. I have the same thoughts as in 'scenario two', except for the
fact that at least in this case the credit received is more ($0.70),
for the sale of the two 65/70 verticals. But still we have an added
substancial 'upside' risk and the credit received although bigger
than scenario two, may not be worth the added upside risk.
It would seem that as compared to a regular BWB (1/2/ /1), in
scenario two and three there doesn't appear to be a benefit, but
rather an added problem of dealing with the initial long vertical
debit.This makes the situation not better under that light. In
scenario one, if everything works as desired it does have added
benefits, while at the same time we 'll "sweat" the extra debits,
getting to that benefit. In general I am not sure that we arrive at
ownership of a BWB with less risk in this way.
I do wonder, as Michael mentioned, if it would just be better to
just 'take the profit' in scenario one, or just 'cut the losses' in
scenario two and three. But then it would not be a play leading to
own a BWB.It would be trading just outright verticals, (which is
fine).
But if for example we begun with a standard BWB for even money or a
very small credit: we would not have the 'downside risk' issue in
scenario two, or the 'stay flat' issue in scenario three. We would
not have to face the issue of amortizing the debit from the original
vertical. In scenario one with the market at 64, we would be without
a problem too. The problem with the standard BWB would be far to the
upside, close to the far-out long. Would it perhaps be better to
think about how to adjust the BWB if and when the market threatened
to go above the far-out long? I wonder then, if it's better to just
start out with the BWB and think about converting/adjusting to
something else as the market dictates.
Just another thought on the issue...
Thanks to Neal, Michael and everyone for their insightful and
creative ideas.
Good Trading,
Mike
--- In Option_BWBs_and_Collars@yahoogroups.com, Murray Lindhout
<sailingbme@...> wrote:
>
> Michael,
>
> Well explained as always... just a quick edit. In scenario ONE,
when you add the butterfly, the net position would be +1 60c / -2
70c / +1 75C. I highlighted the error below in the message.
>
> Thanks again Michael for a well thought out explanation.
>
> Murray
>
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Michael Catolico
Mike, you've made many valid points. The issue for me is that i trade
from a certain perspective that assumes that i know very little about
the market. my trading is therefore based on reacting to whatever the
market does as opposed to making some prediction and trying to find the
best strategy to match that prediction. it's very easy in hindsight to
uncover what would have been an optimal position. the challenge is to
build as close to that position with the blind curtain of uncertainty in
front of you.
normally i do not ever have an intentional place i want to be with my
positions other than to own some curvature for next to nothing or for a
credit. (by curvature i basically refer to own extra long premium that
takes advantage of gamma - a butterfly with extra long units at the
wings would be a classic example). for this discussion (and because of
the theme of this group) i walked through how a collar/vertical could be
converted to a bwb. clearly there are times where an initial bwb beats
such an approach, but as i suggested above, a rearview mirror always can
show how one strategy beats another.
to add a little to this, i should say what my basic assumptions are:
1 - the markets - particularly options - are, at least, weakly
efficient. which i take to mean that all available public knowledge is
already reflected in prices.
2 - all options are essentially "priced to perfection" so that whether
you buy or sell or combine in ANY fashion whatsoever, over time you will
most likely wind up basically losing money due to slippage and
transaction costs.
3 - it is virtually impossible to predict the future price direction or
volatility movement of any option or underlying
4 - the best guess of where the market will be at some point in the
future is where it is today (adjusted for the cost of money)
all these assumptions together mean that any option trade is a random
guess much like betting on any casino game (with it's similar "house
edge" that will make most players losers).
so how do you make money trading then? well it comes down to either luck
or skill. and i believe luck is a much stronger factor than people want
to believe.
how does skill factor in? to me the only way skill comes into play is
through 1) proper understanding of risk and trade sizing and 2)
developing adjustment techniques or what others might refer to as "trade
management"
for me, any opening trade is a pure crap shoot. since i believe that any
option, long or short, is as good/bad as any other, i may as well start
with something cheap and risk limited. a vertical is a very nice
alternative. i particularly like otm verticals in volatile stocks since
they can be bought cheap (say around $1 for a 5 point vertical) yet the
movement means i will be able to do some mini-moves to whittle away the
cost of that initial trade.
with the scenarios i outlined, the key thing i'm looking at is how to
pull the local profit zone of the position in line with where the
underlying market is trading. all the while i'm trying to get the max
risk/reward based on where the current market and whatever position i
have in hand. i deliberately painted a couple typical loser type
scenarios to see what can be done to not necessarily turn that loser
into a winner (this is impossible) but to give myself a fighting chance
of recovery. its kind of irrelevant to me to compare a trade that
adjusts into a position that i could have done from the get go. i'm more
concerned with what kind of things i can do once i'm in a trade to
improve my chances of long term success.
it's all a matter of trading personality and comfort level. i am a very
active, though cautious, trader. i take a very skeptical approach to
both the markets and my own abilities so naturally my inclination is to
assume that whatever i trade is "wrong". this keeps me alert to what
actually happens in the market versus trying to outguess or outsmart the
market. if i am always expecting disaster, that means i will be quick to
react at the first sign of trouble. it also means that i look at profits
as an "unexpected" gift that i will quickly look to snatch. i'm also an
optimist when it comes to trading. by that i mean i'm always assuming
that some kind of opportunity will exist to alter my position for the
better. altogether that makes me a strong advocate of trade adjustment
as the approach that ultimately makes money.
hope this wasn't too long-winded but i also hope that it gives a bit of
flavor of how i trade and how i could recommend the kind of approach
outlined in this thread.
cheers,
m
Mike wrote:
>Hi to all,
>
>Michael certainly provides food for thought with his interesting
>ideas on BWB, begining with a vertical and later transforming the
>vertical to a 'BWB variant' as dictated by market movement.
>
>I have a couple of 'practical' questions on that proccess as it was
>layed out. The idea was to get to own the BWB with less risk, but I
>am not clear how it is achieved in this exercise.
>
>
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__,_._,___
Mike
Michael,
You 've made such good points in such a good way, that it would make
a very useful reading for any serious trader. Interestingly enough, I
almost thought I was reading my own views in most of what you 've
wrote. I happen to think you have described many of the fundamental
key elements that are needed for someone to be succesful consistently.
By the way, on the question of 'vertical to BWB' or
'BWB to "whatever"',
I very much agree that no particular market direction should be
predicted in advance and indeed we need to 'react' to market movement
rather than try to predict it. In that light, I am simply making the
point that perhaps if we are to assume the very same things and
follow the same "trading logic", before and after initiating the
trade, then it might be that begining with a BWB and
reacting/adjusting to market conditions thereafter might make for a
more favorable scenario overall.
So although I very much agree that trying to "find an optimal
position to match a particular market outlook" is not the most
efficient way to trade, trying to find an 'overall optimal basic
begining position' which would provide the ability to subsequently
favorably adjust/manage the position, is indeed desirable.
By the way what you said about: "owning some curvature, (a butterfly
with extra long units at the wings would be a classic example)".
Indeed it is a very good place to be and a favorite of mine as well,
though hard to initiate 'for next to nothing'.
The points you 've made about 'options, pricing and prediction', are
basically all true, at least as I view them. Someone trying to go
against these "axioms", would more than likely hit a wall sooner or
later.
I could not agree more with your conclusion, the practical answer of
what is someone to do -in order to succeed- under the stated
circumstances. It really does come down to that :
"1) proper understanding of risk and trade sizing and
2) developing adjustment techniques or what others might refer to
as "trade management"
Could not have been said better, as far as I am concerned.
As far as the 'opening trade' being a 'pure crap shoot', perhaps to
some extend, but perhaps not totally. In addition, I do find that at
the very least being familiar with a particular 'opening position'
and having a good working knowledge of that position and how to best
adjust/manage the trade further according to market movement, would
obviously be beneficial.
I think that probably the 'uncertainty principal' could well have
some application in trading, (the more we will try to accurately know
about one aspect of trading, the less we will end up accurately
knowing about another aspect of trading...). We see that manifesting
itself almost every day, when someone tries to accurately predict
something happening to a financial instrument based on
anyone "particular method", (ie. fundamental/technical/other
methodology). Thus trying to get into the 'prediction business' is a
short of utopia.
I should mention that your thinking of "always expecting disaster'
and, considering any profit as "an unexpected gift" from the market,
are words of wisdom, another essential 'building block' towards
consistency. I follow that same thinking and it never fails to make
me 'feel better'. Being alert and proactive, limiting risk from
the 'get go' and being 'thankful' for any profit from the market,
are very good traits to have for any good trader.
As far as your prefference for a place to open a position : "cheap
and limited risk" is a great place to start... I agree and I think
most prudent traders would agree with that premise too. From there
on, one could view a certain type of 'vertical' fitting into that
category and another could see a BWB or another kind of 'fly' fitting
into that category, or any other cheap/low risk variation. As long as
someone is enough familiar with what to do next, how to react, how to
adjust, under all kinds of different scenarios, then all is well, (as
you have also mentioned in essence).
Final Thought : You said that "you are a strong advocate of trade
adjustment as the approach that ultimately makes money".
If I may, I would simply like to second that statement strongly.
Thank you for well thought out and insightful views. Even if they may
seem "abstract", I think they could not be more "practical".
Regards and Good Trading,
Mike
--- In Option_BWBs_and_Collars@yahoogroups.com, Michael Catolico
__,_._,___
Neal Chabot
__,_._,___
Michael Catolico
Neal Chabot wrote:
here's the critical thing in my opinion. since any option position is equal to any other (from an expectancy perspective), to make money you have to be very good - or very lucky - at one of two things: 1) excelling as a fortune teller regarding future price/volatility or 2) excelling at trade adjustment. if you are the former, it really doesn't make much sense to do any kind of complex strategy - just buy or sell the directional options that best leverage your hunches. if, on the other hand, trade adjustment is where you succeed, then you actually will seek to start with very tentative positions that require eventual tweaking and changes.[...]The advantage of starting with the BWB is that it will need adjusting much less than a credit spread of an Iron Condor and less than any other strategy I can think of other than OTM flys or calendars. Usually you have an opportunity to take it off for a profit before any adjustment is needed. On the other hand, working into a BWB usually means you have locked in a profit.
the condor, because of its usually low reward to risk, is almost always a pure bet against volatility. because of the thin premium received, there is very little opportunity to adjust without chasing a loser. this is less so with a bwb but if it is placed otm some of the same limits to adjustment present themselves. an atm fly is much better in this regard since you will start with a stronger reward to risk potential (i.e. you receive a fatter credit than with the bwb or condor).
there is no right or wrong way to trade. i only pose the question of how folks tend to make money - prediction vs. reaction - as food for thought.
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__,_._,___
Al
Park yourself in front of a world of choices in alternative vehicles.
Visit the Yahoo! Auto Green Center.
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__,_._,___
borabog1983
i asked dan sheridan the same question last month. he knows the
parent company, they are the biggest player on the exchange, so
execution shouldnt be an issue.
i spoke with someone at optionshouse last month as well
the pro's: price, if one trades many contracts; only one side of the
iron condor margined.
the contras: no contingency orders can be placed online, one has to
phone them in; they margin both sides of the double diagonal,
software platform limited compared to tos
lets try to keep this tread open and try to get some first hand
experience, as these rates may make a huge difference, especially to
the calendar trades.
--- In Option_BWBs_and_Collars@yahoogroups.com, Al <optionshedge@...>
wrote:
>
> Hi,
>
> Is anyone currently using OptionHouse as their broker?
>
> http://www.optionhouse.com/
>
> They have a flat fee commission structure of $9.95 per leg,
regardless of the number of contracts.
>
> Although their commission structure is interesting, how is their
execution / margin / service compared to ToS?
>
>
>
>
> ---------------------------------
__,_._,___
rkellites
Today was a landmark event. I've been trading the collar strategy
with a mid-six figure account for about 9 months and today i broken
even. 0% over nine months. a little short of the claimed 50%+/year
that PA claims. anyone else have results worth mentioning. How is
random crawl doing?
Russ
--- In Option_BWBs_and_Collars@yahoogroups.com, Michael Catolico
<mcatolico@...> wrote:
>
on Yahoo! Groups
find out more.
__,_._,___
John Pinkowski
Hi Russ,
It appears that sometimes married put strategies can be more effective than collars in a bull market, because they don’t limit your upside.
I too have been drawn in by the “book” and lectures on the subject. I do believe that there are several keys to the big successes with collars or married puts. 1) Picking the right stock. If the stock doesn’t have enough volatility in price, then you can’t seem to get enough premium on calls, make money on puts, and you don’t get the opportunity to accumulate stock that eventually rises. 2) Adjustments are the key. This is something that I don’t think you can backtest for easily or write rules about in a book. For instance, if a stock makes a large jump in one day, do you buy back your call? Do you move up the put to lock in profits in the stock? Do you wait to see if the stock retreats the next trading day? Do you buy back the call and see if the stock will run higher? This is where the money is made and is the most difficult to teach, learn, read about, etc. 3) Do you wait out each collared trade until expiration. If you don’t make any adjustments, just let the put and call expire each month, may not lead to substantial gains.
Since you have not made any money in 9 months, would you share with us the stocks that you have been collaring. I would be interested in looking at their charts to see why there has been no return, actually a negative return since there has been opportunity lost (risk free rate of return, the T-bill, or benchmark index return)
Thanks for reading,
John
__,_._,___
Ilyas Memon
rkellites <rkellites@yahoo.com> wrote:
__,_._,___
Michael Catolico
since a collar is nothing more than a synthetic bull call spread it
should be obvious that the circumstances in which it will do well are
when the underlying rises more than the premium you pay for it. there
is nothing magical about the strategy that makes it a winner (or
loser). if all that's done is to enter the trade and wait, you have to
be either very lucky or very good at predicting what the direction and
timing of the underlying will be.
otherwise, as mentioned by John P., it's all a matter of learning how
to trade and adjust these positions.
with regard to John's very pertinent comments, he poses these questions
about adjustment rules:
1 - "if a stock makes a large jump in one day, do you buy your call
back?"
the answer is usually "yes". why? because the collar/bull call spread
is entered as a directional trade that is also long implied volatility
at a certain level. if the stock gaps up you have attained payoff on
both these features of the trade and therefore the market is telling
you that you must take action to lock in your good fortune. you can of
course make another type of adjustment such as convert the vertical to
a butterfly if that makes sense, or roll the strikes higher, or
countless other things.
2 - "do you wait out each collared trade to expiration?"
the answer here is "it depends." if the underlying has not moved much
or gone down - and the decision point here is a reasonably quantifiable
thing - you have to either close or do some other type of adjustment.
if the underlying has moved higher you can either close to lock in
profits or adjust as in the gap up move scenario above. when i suggest
that it is "reasonably quantifiable" again i am referring to the nature
of the position. remember that you are not only long deltas but long
the position at a certain implied volatility level. when the market
demonstrably fails to move at the volatility level you locked in with
the trade, you are being told by the market that you are wrong and
again must make an adjustment to remedy the situation. in this case
your choices are almost unlimited but the typical reaction is to
convert your long vega, long delta position into a neutral delta and
neutral or short vega position. the easiest way to do this is to ratio
the trade by selling an additional call. there is of course often very
little otm premium available during expiration week in a flat market so
clearly this is something that should be monitored and acted upon
sooner in the trade. but even during expiration you can look to adjust
the position to get to the delta/vega profile that is appropriate -
often this means rolling into the next month's ratio.
Ilyas Memon wrote:
I hope everyone is doing well. I have been doing collar trades for last six months here are my results.AAPL 6 months return 30% with complete downside protection stock went up more than 50% in that time.CROX 2 months return 12% using collar stock is up 30%I have collars on RIMM and FSLR with some profit locked in but of course underperforming straight stock ownership,but I sleep better at night holding these volatile stocks with collars on.I think collars work best in high momentum stocks like the above names.Thanks.Ilyas
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Ali Pashaei
Michael,
With regards to question 1, it said "...would you buy your call back" and you said 'yes'. I think you meant to say that you would 'sell the vertical' to lock profit, not just buy back the short call. The other adjustment suggestions looked fine. I just wanted to clarify.
If you just buy back the short-call, you're adding more delta, gamma, & vega and making a bet that stock will even go higher & you're not locking any profits. It's possible that it will go higher, but the downside is you could give back all your gains, and then some.
- Ali
__,_._,___
Vincent Lai
__,_._,___
tastudent
I believe one of the key thing missing here is adjusting using
intraday time frame, this was mentioned by P.Achs during his Oasis
session. End of Day traders might have less opportunity to adjust
their position if stock close near their open but had good trading
range intraday.
Sometimes a bit of luck is need when you initially choose the stock
that you want to trade the collar on, typically you want to trade a
volatile stock that can move 2 to 3 strike within the month and keep
on doing it every month. There are times that after picking a
"qualified" stock it ends up not moving at all. =(
A possibility is to trade a reversal for your stock position if you
want to get rid of it or just get rid of it altogether and start over.
If stock is moving reasonably and the position is not making money,
you might be doing too much adjustments. I remembered P.Achs
mentioning that if he adjust his call twice and stock runs over it. He
will stop selling the call after buying it back and just adjust the
puts (buy lower strike) when stock moves over the middle of the the
next 2 strikes.
-E
--- In Option_BWBs_and_Collars@yahoogroups.com, "Vincent Lai"
Option_BWBs_and_Collars@yahoogroups.com<Option_BWBs_and_Collars%40yahoogroups.com>,
> > Michael Catolico
__,_._,___
rkellites
My point was that I've been doing this for 9 months, basically
following the random crawl strategy, with a decent sized account, and
i've managed to make 0%. My conclusion is that the strategy is pretty
worthless. If you've got a crystal ball that tells you when the stock
is going to go up or down, just buy puts or calls. the mental
gymnastics of the strategy don't seem to be worth it.
Russ
--- In Option_BWBs_and_Collars@yahoogroups.com, "tastudent"
<ipguru2003@...> wrote:
>
> I believe one of the key thing missing here is adjusting using
> intraday time frame, this was mentioned by P.Achs during his Oasis
> session. End of Day traders might have less opportunity to adjust
> their position if stock close near their open but had good trading
> range intraday.
>
> Sometimes a bit of luck is need when you initially choose the stock
> that you want to trade the collar on, typically you want to trade a
> volatile stock that can move 2 to 3 strike within the month and keep
> on doing it every month. There are times that after picking a
> "qualified" stock it ends up not moving at all. =(
>
> A possibility is to trade a reversal for your stock position if you
> want to get rid of it or just get rid of it altogether and start
over.
>
> If stock is moving reasonably and the position is not making money,
> you might be doing too much adjustments. I remembered P.Achs
> mentioning that if he adjust his call twice and stock runs over it.
He
> will stop selling the call after buying it back and just adjust the
> puts (buy lower strike) when stock moves over the middle of the the
> next 2 strikes.
>
> -E
>
> --- In Option_BWBs_and_Collars@yahoogroups.com, "Vincent Lai"
__,_._,___
Michael Catolico
correct. my point was that when a position does precisely what it was designed to do, you have to act. it may not always be the most profitable moment (who could ever discern that anyway) but it is clearly a clarion call to action when a the underlying gaps in your favor.
__,_._,___
John Pinkowski
Does anyone know what the Iron Cockroach
strategy is that is being taught in the Random Walk Trading Seminars?
Just curious.
John P
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Michael Ungoco
- as soon as you put a collar on, you're down 5% b/c of slippage
- RMBS pulled down the account, and to be up 17% ytd is very good.
- it was a gutsy move for RWT to dump ERTS and RMBS.
- tag-along is realistic look of trading collars with $30K
rkellites
I have no problem telling you what I have been trading. I currently
have positions in the following: AAPL BBBY ERTS LVS OXPS SBUX. I also
held FFIV and RMBS in the past. I use collars about 1/3 of the time,
otherwise I use the married put. The only reason I'm not currently
underwater is that I got very lucky w/ AAPL where I had mostly married
puts untill it started to make new highs then I sold the calls. I'd be
interested in seeing a case study on one of these or any other stock.
--- In Option_BWBs_and_Collars@yahoogroups.com, "Michael Ungoco"
<mungoco@...> wrote:
>
> Russ,
> let's not throw the baby out with the bath water. Without knowing the
> underlying its hard for any of us to comment one way or another. MY
> assumption is that if you didn't make any money its b/c the stock hasn't
> moved over that time frame. What would have been your return if you had
> just bought the stock and not hedged w/puts? On p.116 "if a stock has
> demonstrated through a long period of time to have little
volatility, then
> it is best to get rid of it." On his board Peter A has stated that
if the
> stocks not moving after 3 months, dump it.
>
> At the Seattle seminar I spoke to Alex Mendoza abou collars and RWT's
> tag-along (he bought all the books, he paid for the tag-along and
he's not a
> RWT employee). A couple of his points:
>
> - as soon as you put a collar on, you're down 5% b/c of slippage
> - RMBS pulled down the account, and to be up 17% ytd is very good.
> - it was a gutsy move for RWT to dump ERTS and RMBS.
> - tag-along is realistic look of trading collars with $30K
>
> Russ, if you're willing to share with us the underlying, perhaps we
can make
> a case study out of it. I know it will be difficult to put yourself
like
> that, but I think we all could learn from it, yourself included.
> Michael
>
>
> On 7/20/07, rkellites <rkellites@...> wrote:
>
> > My point was that I've been doing this for 9 months, basically
> > following the random crawl strategy, with a decent sized account, and
> > i've managed to make 0%. My conclusion is that the strategy is pretty
> > worthless. If you've got a crystal ball that tells you when the stock
> > is going to go up or down, just buy puts or calls. the mental
> > gymnastics of the strategy don't seem to be worth it.
> >
> > Russ
> >
> > --- In
Option_BWBs_and_Collars@yahoogroups.com<Option_BWBs_and_Collars%40yahoogroups.com>,
> > "tastudent"
> > <ipguru2003@> wrote:
> > >
> > > I believe one of the key thing missing here is adjusting using
> > > intraday time frame, this was mentioned by P.Achs during his Oasis
> > > session. End of Day traders might have less opportunity to adjust
> > > their position if stock close near their open but had good trading
> > > range intraday.
> > >
> > > Sometimes a bit of luck is need when you initially choose the stock
> > > that you want to trade the collar on, typically you want to trade a
> > > volatile stock that can move 2 to 3 strike within the month and keep
> > > on doing it every month. There are times that after picking a
> > > "qualified" stock it ends up not moving at all. =(
> > >
> > > A possibility is to trade a reversal for your stock position if you
> > > want to get rid of it or just get rid of it altogether and start
> > over.
> > >
> > > If stock is moving reasonably and the position is not making money,
> > > you might be doing too much adjustments. I remembered P.Achs
> > > mentioning that if he adjust his call twice and stock runs over it.
> > He
> > > will stop selling the call after buying it back and just adjust the
> > > puts (buy lower strike) when stock moves over the middle of the the
> > > next 2 strikes.
> > >
> > > -E
> > >
> > > --- In
Option_BWBs_and_Collars@yahoogroups.com<Option_BWBs_and_Collars%40yahoogroups.com>,
Jeff Birk
I initiated two small married puts/collars on April 10th:
AAPL (200 shares)
COP (500 shares)
My AAPL trade is up $9,990 and my COP trade is up $8,675 (total gain since April 10 of $18,665). The vast majority of the time I've been doing a married put on these and have not added any shares to the positions.
Jeff
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Jeff Birk
In my opinion,
AAPL-good choice
BBBY-sideways to bearish for the last 10 months
ERTS-bearish then sideways for the last 9 months
LVS-started off very well since Oct06 and has been tanking since Feb07, might be a situation where you either dump it or just be patient for it to cycle back up to 110
OXPS-looks decent, moving a strike a month, generally bullish since the bottom fell out in Dec07 but isn't averaging at least a million shares a month in volume
SBUX-bearish bearish bearish for the last 10 months
Just my thoughts. Hope this gives you a little insight. If this were me 9-10 months ago looking at these candidates, I would have marked BBBY, ERTS and SBUX off my list due to my view that the stocks just weren't bullish enough for my tastes. I try to look for stocks in strong, bullish sectors that have been generally bullish for the last 1-2 years. OXPS didn't have 1-2 years of consistent million shares per month history
so I would have marked that one off my list as well. The problem you sometimes see with lower volume is that the bid/ask on the options is many times too wide. I like AAPL and LVS the best out of the bunch.
Jeff
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Michael Catolico
i take kind of an unorthodox perspective on this. for me, the
prospective direction of the underlying is basically meaningless. i
work from the assumption that every option is basically priced to
perfection in the sense that, over the long run, whether you buy or
sell you basically have less than zero expectancy (due to slippage and
commissions).
if you have a talent for predicting the future direction of a stock
you are almost always better off trading the stock itself. for
instance, when you look at Jeff's profits in aapl and cop, the returns
are totally due to the movement of the stock itself and have nothing to
do with the options. in fact he might have done slightly better simply
having bought the stock and never traded a single option against it.
the collar strategy (like any of its kindred positions that combine
stock and options such as buy/writes or married puts) is especially
deceptive to traders in that the assumption is that you are still in
the land of equity investment due to the ownership of stock. however,
when you convert a position by adding options you have traveled to the
land of pure speculation at the negative odds associated with option
trading (and gambling in general). that's why it is always best to
learn synthetics and understand any combo trade you make as a pure
options play. once you realize the nature of the options trade you are
in and you, if you accept my assumptions, recognize that ANY initial
position is doomed over time to whittle away your capital just like any
casino game with a house edge, you will then have to come to terms with
how (and perhaps why) you are going to trade.
the only way i know to escape the odds is to learn how to make
successful trade adjustments. with that in mind it really doesn't
matter if you do a vertical/collar on say a "stock with upward
momentum". because those options have already priced in the
probabilities of that upward potential. that Russ has broken even over
the last 9 months has nothing to do with the stock selection he made.
in fact he is probably ahead of the game statistically since he has no
losses. obviously hindsight is always better than 20/20 so dissecting
which stocks would have worked best in the past for any given strategy
is almost irrelevant to future prospects.
what's needed in my opinion is to build a repertoire of techniques that
can be used to work with a position once you enter it. that initial
trade is basically no better than throwing a dart. if the position
benefits from directional movement or whatever, you need to know this.
you need to know what you will do if by some miracle the trade actually
works out. and you need to be acutely aware of and prepared for
whatever actions you need to take if the trade does not work out. if
you enter with a bullish vertical trade and the market just sits there
or goes down, the market is giving you very clear information: you are
wrong, now do something about being wrong.
think of it this way. you can spend hours and days and weeks, charting
and researching and poring through 10K reports and whatnot all to find
the perfect candidate for your collar/vertical. you then go to your
option model and scour the available option prices to find just the
right combination to trade. you login to your brokerage and place the
order, careful to try and shave off a nickel here and there off your
bid on the whole spread. and what happens? some anonymous professional
on the other side of the world instantly fills your trade without
having dedicated a single thought to whether the stock it's related to
will go to heaven or hell. that pro has a house edge and trades
repeatedly on it. you are hoping your crystal ball somehow overcomes
that edge. the odds say your trade can't beat the edge repeatedly. so
you've got to find another path.
Jeff Birk wrote:
In my opinion,
AAPL-good choice
BBBY-sideways to bearish for the last 10 months
ERTS-bearish then sideways for the last 9 months
LVS-started off very well since Oct06 and has been tanking since Feb07, might be a situation where you either dump it or just be patient for it to cycle back up to 110
OXPS-looks decent, moving a strike a month, generally bullish since the bottom fell out in Dec07 but isn't averaging at least a million shares a month in volume
SBUX-bearish bearish bearish for the last 10 months
Just my thoughts. Hope this gives you a little insight. If this were me 9-10 months ago looking at these candidates, I would have marked BBBY, ERTS and SBUX off my list due to my view that the stocks just weren't bullish enough for my tastes. I try to look for stocks in strong, bullish sectors that have been generally bullish for the last 1-2 years. OXPS didn't have 1-2 years of consistent million shares per month history so I would have marked that one off my list as well. The problem you sometimes see with lower volume is that the bid/ask on the options is many times too wide. I like AAPL and LVS the best out of the bunch.
Jeff
rkellites <rkellites@yahoo.com> wrote:I have no problem telling you what I have been trading. I currently
have positions in the following: AAPL BBBY ERTS LVS OXPS SBUX. I also
held FFIV and RMBS in the past. I use collars about 1/3 of the time,
otherwise I use the married put. The only reason I'm not currently
underwater is that I got very lucky w/ AAPL where I had mostly married
puts untill it started to make new highs then I sold the calls. I'd be
interested in seeing a case study on one of these or any other stock.
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find out more.
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dot...@gmail.com
For collar, I believe it is a 3-5 year strategy trying to capture volatility and
__,_._,___
Jeff Birk
Excellent points, Michael. And I completely agree with you on your point of simply buying AAPL and COP shares would have probably made the most money. Bottom line is I guessed right and was lucky enough to get in to two stocks that have made a nice bullish run. We can try to use as much fundamental and technical analysis to make our selection (and I believe they are important to a point) but in the end it all comes down to guessing. That's why your point of learning how to adjust trades is so critical and important to understand. Thanks for your comments.
Jeff
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Jim Miller
I asked the group the same question on 7/11 and never got a reply.
Jim
John Pinkowski wrote:
>
> Does anyone know what the Iron Cockroach strategy is that is being
> taught in the Random Walk Trading Seminars?
> Just curious.
> John P
>
>
--
=
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Dan B
Jim,
My take on the silence:
Those who know they fell like they've paid a lot for this information.
Dan
Jim Miller <jim@actionbeatstalk.com> wrote:
I asked the group the same question on 7/11 and never got a reply.
Jim
John Pinkowski wrote:
>
> Does anyone know what the Iron Cockroach strategy is that is being
> taught in the Random Walk Trading Seminars?
> Just curious.
> John P
>
>
--
=
"An evil exists that threatens every man, woman, and child of this great country. We must take steps to insure our domestic security and protect our Homeland." - Adolf Hitler (1933)
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thatkhs70sshow
Hi Jeff,
CAn you tell us why you initiated these positions?
When did you apply the puts?
What is your exit strategy?
Manning
--- In Option_BWBs_and_Collars@yahoogroups.com, Jeff Birk
<jeffbirk2003@...> wrote:
>
> I initiated two small married puts/collars on April 10th:
>
> AAPL (200 shares)
> COP (500 shares)
>
> My AAPL trade is up $9,990 and my COP trade is up $8,675 (total
gain since April 10 of $18,665). The vast majority of the time I've
been doing a married put on these and have not added any shares to
the positions.
>
> Jeff
>
>
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Dan B
Russ,
If you use this type of account and with the new margin rules you should be able to put down only around 15% of the stock value and trade collars profitable, with more leverage. What was possible with the old rules should be at easily possible now, but we should expect a better performance from collars, IMHO.
Dan
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Jeff Birk
I initiated these positions primarily because I was bullish on both stocks and they moved at least one strike per month for the most part. AAPL I thought at the time was strong in its respective sector and COP I believed was also in a strong sector. Both stocks also had an above-average volume of 1 million shares traded per day going back at least a couple of years. I adjusted my puts when each stock would move the equivalent of a strike price (in this case, 5 points). My exit strategy will be if the stock goes comatose (sideways) for maybe 2-3 months as my put insurance will be wasting away. Then I'll simply close the position out and look for another candidate.
Jeff
thatkhs70sshow <mendrina@sbcglobal.net> wrote:
Hi Jeff,
CAn you tell us why you initiated these positions?
When did you apply the puts?
What is your exit strategy?
Manning
--- In Option_BWBs_and_Collars@yahoogroups.com, Jeff Birk
<jeffbirk2003@...> wrote:
>
> I initiated two small married puts/collars on April 10th:
>
> AAPL (200 shares)
> COP (500 shares)
>
> My AAPL trade is up $9,990 and my COP trade is up $8,675 (total
gain since April 10 of $18,665). The vast majority of the time I've
been doing a married put on these and have not added any shares to
the positions.
>
> Jeff
>
>
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Jeff Birk
Just talked with Don Roberts over at TOS yesterday (he's spearheading their portfolio margining compliance stuff) and he made it sound like it could be ready as early as this week. They went live with two accounts this week and so far all systems go. Said he has around 84 applicants waiting for when they're ready.
Jeff
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JACK SHEA
From: Jeff Birk <jeffbirk2003@yahoo.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Tuesday, July 24, 2007 3:24:45 PM
Subject: Re: [Option_BWBs_and_Collars] Re: Collar Strategy
Just talked with Don Roberts over at TOS yesterday (he's spearheading their portfolio margining compliance stuff) and he made it sound like it could be ready as early as this week. They went live with two accounts this week and so far all systems go. Said he has around 84 applicants waiting for when they're ready.
Jeff
Dan B <optiontrade2003@ yahoo.com> wrote:
Russ,
If you use this type of account and with the new margin rules you should be able to put down only around 15% of the stock value and trade collars profitable, with more leverage. What was possible with the old rules should be at easily possible now, but we should expect a better performance from collars, IMHO.
Dan
rkellites <rkellites@yahoo. com> wrote:
I have no problem telling you what I have been trading. I currently
have positions in the following: AAPL BBBY ERTS LVS OXPS SBUX. I also
held FFIV and RMBS in the past. I use collars about 1/3 of the time,
otherwise I use the married put. The only reason I'm not currently
underwater is that I got very lucky w/ AAPL where I had mostly married
puts untill it started to make new highs then I sold the calls. I'd be
interested in seeing a case study on one of these or any other stock.
--- In Option_BWBs_ and_Collars@ yahoogroups. com, "Michael Ungoco"
Option_BWBs_ and_Collars@ yahoogroups. com<Option_BWBs_ and_Collars% 40yahoogroups. com>,
> > "tastudent"
> > <ipguru2003@ > wrote:
> > >
> > > I believe one of the key thing missing here is adjusting using
> > > intraday time frame, this was mentioned by P.Achs during his Oasis
> > > session. End of Day traders might have less opportunity to adjust
> > > their position if stock close near their open but had good trading
> > > range intraday.
> > >
> > > Sometimes a bit of luck is need when you initially choose the stock
> > > that you want to trade the collar on, typically you want to trade a
> > > volatile stock that can move 2 to 3 strike within the month and keep
> > > on doing it every month. There are times that after picking a
> > > "qualified" stock it ends up not moving at all. =(
> > >
> > > A possibility is to trade a reversal for your stock position if you
> > > want to get rid of it or just get rid of it altogether and start
> > over.
> > >
> > > If stock is moving reasonably and the position is not making money,
> > > you might be doing too much adjustments. I remembered P.Achs
> > > mentioning that if he adjust his call twice and stock runs over it.
> > He
> > > will stop selling the call after buying it back and just adjust the
> > > puts (buy lower strike) when stock moves over the middle of the the
> > > next 2 strikes.
> > >
> > > -E
> > >
> > > --- In
Option_BWBs_ and_Collars@ yahoogroups. com<Option_BWBs_ and_Collars% 40yahoogroups. com>,
> > 40yahoogroups. com>,
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JACK SHEA
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Angela Dunbar
JACK SHEA <aehskcaj@yahoo.com> wrote:
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rkellites
Great Q. Peter A says to do it when the stock stops going down. Real
F ing helpful. After trying several alternatives, when the Ps2p
formula is about 150% past the point where it says to roll down, I
usually roll down and out. I got lucky with AAPL I rolled down (but
not out) in the recent sell off when it was about 2 below the point
where the formula said to roll down. If the stock stays up tomorrow
I'll roll back up. I'll have made some $ on trading the puts and
holding the stock. Of course losing a bit on the calls
Russ
--- In Option_BWBs_and_Collars@yahoogroups.com, Angela Dunbar
<angelaadunbar@...> wrote:
>
> For anyone who's been trading collars for a while... Have you
landed on any rules for when to take profits on the long puts when
stock pulls back?
>
> I'm sure this is a finesse issue, just looking for some
experienced thoughts...
>
> THanks!
>
> Angie
>
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Angela Dunbar
rkellites <rkellites@yahoo.com> wrote:
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-
1
rkellites
Angie, it is a formula that basically calculates 1/2 the expected
move of the underlying over the time period under consideration. If
you look at the spread sheet that I posted it has the formula coded.
--- In Option_BWBs_and_Collars@yahoogroups.com, Angela Dunbar
<angelaadunbar@...> wrote:
>
> Thanks, Russ, for your help. Please clarify what PS2p formula is..
>
> Angie
>
> rkellites <rkellites@...> wrote:
> Great Q. Peter A says to do it when the stock stops going
down. Real
> F ing helpful. After trying several alternatives, when the Ps2p
> formula is about 150% past the point where it says to roll down, I
> usually roll down and out. I got lucky with AAPL I rolled down (but
> not out) in the recent sell off when it was about 2 below the point
> where the formula said to roll down. If the stock stays up tomorrow
> I'll roll back up. I'll have made some $ on trading the puts and
> holding the stock. Of course losing a bit on the calls
>
> Russ
>
> --- In Option_BWBs_and_Collars@yahoogroups.com, Angela Dunbar
> ---------------------------------
> Ready for the edge of your seat? Check out tonight's top picks on
Yahoo! TV.
>
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Bill Harrington
rkellites <rkellites@yahoo.com> wrote:
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usilliwabbit8
Jeff,
Are adjusting intraday or end of day? Here follows Peter's
discussion on collar adjustments in today's Optionetics forum:
Steu
=================================================================
pachs
Posts: 2184
Registered: Apr 2004 9/7/07 8:41 AM
Most will agree that trading is an art and a science. The science can
be learned by reading proper materials and attending formal education
like seminars. The art comes from real life experience following the
formal introduction to any trading technique. Many years ago, I
learned to trade collars using the exact techniques now taught
in "the book". Since then, I have practiced and traded and added my
own personal style once the correct foundation has been established.
There is no shortcut available here!
I am noticing that too many people are spending far too much time
backtesting this technique and perhaps becoming underwhelmed with the
results. The dynamically hedged collar is a trade managed during
market hours. End of day data found while backtesting will not
present the opportunities for adjustments that you will find
intraday. How many times have you seen a stock (or index for that
matter) move huge during the day only to find it nearly unchanged for
the day?
My suggestion would be to add forward testing to your training
regimen so that you can practice and realize more of what you are
looking for. The effort and the patience will be worth it.
--- In Option_BWBs_and_Collars@yahoogroups.com, Jeff Birk
<jeffbirk2003@...> wrote:
>
> I initiated two small married puts/collars on April 10th:
>
> AAPL (200 shares)
> COP (500 shares)
>
> My AAPL trade is up $9,990 and my COP trade is up $8,675 (total
gain since April 10 of $18,665). The vast majority of the time I've
been doing a married put on these and have not added any shares to
the positions.
>
> Jeff
>
> rkellites <rkellites@...> wrote:
Today was a landmark event. I've been trading the collar strategy
> with a mid-six figure account for about 9 months and today i
broken
> even. 0% over nine months. a little short of the claimed 50%+/year
> that PA claims. anyone else have results worth mentioning. How is
> random crawl doing?
>
> Russ
>
> --- In Option_BWBs_and_Collars@yahoogroups.com, Michael Catolico
> ---------------------------------
> Boardwalk for $500? In 2007? Ha!
> Play Monopoly Here and Now (it's updated for today's economy) at
Yahoo! Games.
>
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Jeff Birk
I'm not the kind of trader who sits and looks at my screen all day. Just not my personality, so all I've been doing is checking these positions after market close. I will add, however, that I have alerts set up in TOS at certain price points in case the market has a wacky day and I need to adjust. I do feel that my profits could certainly be enhanced if I was trading intraday as Peter mentions.
Jeff
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RAGU SUDS
Hi Michael,
I was going through some of your posts. (I am trying to catch up with these posts). In this particular post you mention that you trade verticals frequently, and you have posted an adjustment strategy primer. For some reasons I am not able to find it. Do you mind reposting or pointing me to the right post..
Appreciate your time and efforts
Ragu
From: Option_BWBs_and_Collars@yahoogroups.com [mailto:Option_BWBs_and_Collars@yahoogroups.com] On Behalf Of Michael Catolico
Sent: Tuesday, July 10, 2007 6:54
PM
To: Option_BWBs_and_Collars@yahoogroups.com
Subject: Re:
[Option_BWBs_and_Collars] Collar Strategy
i trade
verticals frequently. the adjustment strategy primer i posted here (i think)
and on other lists is basically a rudimentary way to trade these
positions. they are of course very simple ways to play a directional lean
cheaply and devoid of many of the risks associated with greeks other than
gamma. doing them synthetically with stock (aka collars) is not necessary
unless you've already had stock appreciation and you're seeking to lock in some
gains or looking for a pause in the trend.
what aspect of verticals (bull or bear) would be of interest to folks here?
since this is a bwb forum, i could discuss how the vertical can be used as a
building block of a bwb.
michael
Neal Chabot wrote:
According to Lindsay, BCS = Bull Call Spread (as opposed to Bear Call Spread). Evidently someone at Optionetics starting using this abbreviation to be cute, but here uncommon abbreviations need to be explained when you use them so that everyone knows what you are talking about.
For those who have not had the class in advanced synthetics, the collar is synthetically equivalent to a long call vertical. How that works is this: the combination of the long stock and the long put equal a synthetic long call. The synthetic long call and the short call create a long call vertical.
We've tried previously to get something going on the correct way to trade collars, but the discussion seems to bog down when we come to what the rules should be. Evidently some members have gone ahead on their own and are not able to backtest collars according to their own set of rules.
Neal
----- Original Message -----
Sent: Tuesday, July 10, 2007 12:48 AM
Subject: Re: [Option_BWBs_and_Collars] Re: Peter Achs & Collars
I hope this stirs up a healthy debate on how to trade collars correctly. Personally I have no faith in them (synthetic BCS and I have no reason to trade a real BCS) and consider the capital too high (before new margin rules anyway) but that may be cos I specialize in something else so have not tried hard enough with collars. Specialization does make a very big difference; I have a friend who does nothing but straddles. He makes some money, I didn't and gave up. Horses for courses.
Lindsay
.
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Michael Catolico
i've added the adjustment paper to the files section. this is a basic version of the kind of decision making and tactics needed to actively manage an options position. i am working on a follow-up that will explore some more advanced topics but this is the fundamental version of what i do. it's based on what floor traders do and can easily be adapted to variants such as gamma/delta neutral trading.
RAGU SUDS wrote:
Hi Michael,
I was going through some of your posts. (I am trying to catch up with these posts). In this particular post you mention that you trade verticals frequently, and you have posted an adjustment strategy primer. For some reasons I am not able to find it. Do you mind reposting or pointing me to the right post..
Appreciate your time and efforts
Ragu
__
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RAGU SUDS
Thanks Michael.
Ragu Suds
From: Option_BWBs_and_Collars@yahoogroups.com [mailto:Option_BWBs_and_Collars@yahoogroups.com] On Behalf Of Michael Catolico
Sent: Sunday, December 02, 2007
6:55 PM
To: Option_BWBs_and_Collars@yahoogroups.com
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Al
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John
I don't believe so.
Retirement accounts have to be cash (not margin).
At least for IRAs they do.
John
Hi,Does anyone know how whether it is possible to trade using portfolio margin in a retirement account, such as a 401K or IRA?
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shawn share
i've added the adjustment paper to the files section. this is a basic version of the kind of decision making and tactics needed to actively manage an options position. i am working on a follow-up that will explore some more advanced topics but this is the fundamental version of what i do. it's based on what floor traders do and can easily be adapted to variants such as gamma/delta neutral trading.
RAGU SUDS wrote:
Hi Michael,I was going through some of your posts. (I am trying to catch up with these posts). In this particular post you mention that you trade verticals frequently, and you have posted an adjustment strategy primer. For some reasons I am not able to find it. Do you mind reposting or pointing me to the right post..Appreciate your time and effortsRagu__
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karensoich
Shawn, gamma scalping is a way of describing an adjustment technique
that has the goal of gradually chipping away either the cost of a
long premium position or the risk of a short premium position. in
it's most common form, the goal is to step in and adjust a position at
pre-set intervals and to neutralize the risk of accumulated deltas.
essentially at any point in a trade you have either net positive,
negative or zero deltas in a position. depending on whether you want
to lean the directionality or just stay neutral, you can adjust the
position by buying or selling deltas. you can do this by either
buying or selling options (or combinations of options) or simply trade
stock. obviously with each subsequent adjustment, you modify the
position and absorb a new set of risks.
the classic example is to gamma scalp an atm straddle. since this
position is long premium, the goal is to incrementally scalp numerous
zigzag movements in the underlying asset: if the underlying moves
higher, you sell some deltas. if the underlying moves lower, you buy
some deltas. the hope is that the underlying exhibits greater
volatility than what you paid for when buying the straddle. you can
also negative scalp a short premium position, and in fact, the spy
mock trade i have been tracing, is a variant of negative gamma scalping.
i don't necessarily think of this as a "strategy" per se. adjusting a
position is, to me, the only way to make money. but how you adjust and
the degree you adjust really is a complex decision process. simply
trying to neutralize deltas, will pretty much just churn your account
and result in certain losses for a retail trader. you have to take
numerous chances and risks along the way, sometimes overselling,
sometimes overbuying deltas while constantly watching the resulting
risk profile.
if you do want to practice gamma scalping a long (or short) premium
position, you basically have to make a bet on future volatility. that
is the whole key. if you buy premium (e.g. a long straddle), you are
guessing that the future underlying asset will have higher real
volatility than you've paid for in the implied volatility of the
spread. if you guess right, the best way to adjust this position is
with underlying stock. if , as usually happens, there is a churning
level of volatility after you enter the trade, you have to tweak the
position by selecting various option trades against the initial trade.
sometimes this will turn the whole thing upside and make a long
premium trade into a short premium trade and back again.
it is a very challenging exercise but probably one worth doing to get
to learn options better.
shawn share wrote:
> Hi Michael,
>
> I started getting interested in Gamma Scalping trade. How do you
think of this strategy? How to select a good candidate for this?
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shawn share
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