[Option_BWBs_and_Collars] Reverse Collar or Married Call
James Leong
Has anyone discuss about Reverse Collar or Married call which is opposite to Married Put or Collar. If so,where can I find the threads? I am interest as how to manage the trade especially on how to sell more stocks by converting the ITM call and the interest element effecting the trade. RWT books and articles does not tell much. Thanks
James Leong
Joerg Hickman
From: "spoonsprts@aol.com" <spoonsprts@aol.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Tue, 29 June, 2010 10:42:40 PM
Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
Hi Neal and everybody,
Has anyone discuss about Reverse Collar or Married call which is opposite to Married Put or Collar. If so,where can I find the threads? I am interest as how to manage the trade especially on how to sell more stocks by converting the ITM call and the interest element effecting the trade. RWT books and articles does not tell much. Thanks
James Leong
Joerg Hickman
Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
Joerg Hickman
From: "spoonsprts@aol.com" <spoonsprts@aol.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Wed, 30 June, 2010 4:55:18 AM
Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
R D
You obviously know what you're doing. Good luck.
You obviously know what you're talking abouit.
From: "spoonsprts@aol.com" <spoonsprts@aol.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Wed, 30 June, 2010 4:55:18 AM
Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
joergI didn't say "Vertical" and if I buy stock at 25, sell a 26 call and buy a 24 put... 30 days later the stock is till at 25? how much was the collar (hint its called a no cost collar for a reason) thank you.RDIn a message dated 6/29/2010 6:15:03 A.M. Pacific Daylight Time, joerghickman@ yahoo.com. au writes:There is no such thing as a zero cost vertical unless one is legging with an edge. A vanilla collar is simply a bull call spread or a bull put spread.Thus a reverse collar is simply a bear put spread or bear call spread. Greeks are obviously the same for these synthetics. Iow if your vertical is an otm one then you're short theta, if it's itm then you're long theta and so on.Joerg
spoon...@aol.com
Tim.
Joerghickman
Sent from my iPhone
Let's look at it this way:The stock price is unchedIgnoring vol skew for sake of easy discussion. If the call sold was $1.00 credit. the put purchased was $1.00 debit. Given theta decay, (add the passage of time) then the call sold is $.50, .40, 30, 20 etc to zero. The exact opposite is happening to the put side. Net net effect of zero give or take a few cents for cents for the skew of the typically slightly higher priced puts. I am sure this was just a slight misunderstanding or rapid read of the other message, no worries.RDCONFIDENTIALITY NOTICE: This confidential electronic transmission, including any attachment, is governed by the Electronic Communications Privacy Act, 18 U.S.C. Sec. 2510-2521, and may contain confidential and/or privileged communications for the intended recipient. If you are not the intended recipient, you are hereby notified that any retention, dissemination, copying, or other use of the contents of this communication is strictly prohibited, may be unlawful and could subject the unlawful user to civil and criminal penalties. Any unintended receipt should be reported to this sender immediately by telephone or e-mail at the number and address listed above. You are further requested to permanently delete this message including any attachments hereto.You obviously know what you're doing. Good luck.
You obviously know what you're talking abouit.
From: "spoonsprts@aol.com" <spoonsprts@aol.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Wed, 30 June, 2010 4:55:18 AM
Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
joergI didn't say "Vertical" and if I buy stock at 25, sell a 26 call and buy a 24 put... 30 days later the stock is till at 25? how much was the collar (hint its called a no cost collar for a reason) thank you.RDIn a message dated 6/29/2010 6:15:03 A.M. Pacific Daylight Time, joerghickman@ yahoo.com. au writes:There is no such thing as a zero cost vertical unless one is legging with an edge. A vanilla collar is simply a bull call spread or a bull put spread.Thus a reverse collar is simply a bear put spread or bear call spread. Greeks are obviously the same for these synthetics. Iow if your vertical is an otm one then you're short theta, if it's itm then you're long theta and so on.Joerg
Captain Blue
But if you insisted on trading the Collar/Reverse Collar instead of the Long/Short vertical then, as I understand it, RWT are suggesting (briefly) the following:
1. Collar. If the underlying goes down below the strike of the put it is not making you a profit! It is only stopping you from losing more money on the underlying. By buying more underlying you are effectively 'doubling down' and adding more risk. You then reposition the collar.
Therefore if you had the
2. Reverse Collar, following the same strategy as above, if the underlying went against you and went up above the strike of the long call then this call is insuring against any further loses to the upside. At some point you would then short some more underlying at the new higher price and re-position the put and call to create a new reverse collar. As with the collar, by shorting more underlying you are effectively 'doubling down' and adding more risk.
Both strategies increase risk if the market goes against you.
Probably easier, imo, to stick with the verticals unless, for some reason, you HAD to be long/short the underlying.
Tim.
Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
Tim.
James Leong
Thanks for you comment. With verticle spreads, I can reduce my margin and known of maximum risk( when I do not have any stock.)
James Leong
From: Captain Blue <captainblue2002@yahoo.com>
To: Option_BWBs_and_Collars@yahoogroups.com
Sent: Thu, July 1, 2010 4:35:08 PM
Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
But if you insisted on trading the Collar/Reverse Collar instead of the Long/Short vertical then, as I understand it, RWT are suggesting (briefly) the following:
1. Collar. If the underlying goes down below the strike of the put it is not making you a profit! It is only stopping you from losing more money on the underlying. By buying more underlying you are effectively 'doubling down' and adding more risk. You then reposition the collar.
Therefore if you had the
2. Reverse Collar, following the same strategy as above, if the underlying went against you and went up above the strike of the long call then this call is insuring against any further loses to the upside. At some point you would then short some more underlying at the new higher price and re-position the put and call to create a new reverse collar. As with the collar, by shorting more underlying you are effectively 'doubling down' and adding more risk.
Both strategies increase risk if the market goes against you.
Probably easier, imo, to stick with the verticals unless, for some reason, you HAD to be long/short the underlying.
Tim.
From: "spoonsprts@ aol.com" <spoonsprts@aol. com>
To: Option_BWBs_ and_Collars@ yahoogroups. com
Sent: Wed, 30 June, 2010 23:46:38
Tim.
spoon...@aol.com
But if you insisted on
trading the Collar/Reverse Collar instead of the Long/Short vertical then, as
I understand it, RWT are suggesting (briefly) the following:
1. Collar.
If the underlying goes down below the strike of the put it is not making you a
profit! It is only stopping you from losing more money on the
underlying. By buying more underlying you are effectively 'doubling
down' and adding more risk. You then reposition the collar.
Therefore
if you had the
2. Reverse Collar, following the same strategy as
above, if the underlying went against you and went up above the strike of the
long call then this call is insuring against any further loses to the
upside. At some point you would then short some more underlying at the new
higher price and re-position the put and call to create a new reverse collar.
As with the collar, by shorting more underlying you are effectively 'doubling
down' and adding more risk.
Both strategies increase risk if the market
goes against you.
Probably easier, imo, to stick with the verticals
unless, for some reason, you HAD to be long/short the
underlying.
Tim.
From: "spoonsprts@aol.com"
<spoonsprts@aol.com>
To:
Option_BWBs_and_Collars@yahoogroups.com
Sent: Wed, 30 June, 2010
23:46:38
Subject: Re:
[Option_BWBs_and_Collars] Reverse Collar or Married
Call
Tim.
woodbridge0077
RD, I would like to thank-you for your post and followup. I definetly gain from your posts. I did understand what you meant by no cost. Please DONT "shut up". I have consumed myself in the past year or more gaining knowledge on collars. I attended an online RWT workshop (but no collar discussion) and have their books. As well as a lot of other education. I liked hearing about your most recent trade. I have wondered if you could make money by working a collar when it goes down while continuing to buy stock and actually make money if doesnt go back up to its original value. . I have many IBM shares and was thinking about doing a collar. Having said all that, are there a certain set of rules you use that are different than RWT or do you more or less follow their philosophy? Looking forward to hearing more regarding your experience.
> captainblue2002@... writes:
>
>
>
>
> I'm not sure I am following your argument. You are still using the words
> 'cost and costly' instead of the words 'risk and risky'.
>
> But if you insisted on trading the Collar/Reverse Collar instead of the
> Long/Short vertical then, as I understand it, RWT are suggesting (briefly)
> the following:
>
> 1. Collar. If the underlying goes down below the strike of the put it is
> not making you a profit! It is only stopping you from losing more money on
> the underlying. By buying more underlying you are effectively 'doubling
> down' and adding more risk. You then reposition the collar.
>
> Therefore if you had the
>
> 2. Reverse Collar, following the same strategy as above, if the underlying
> went against you and went up above the strike of the long call then this
> call is insuring against any further loses to the upside. At some point you
> would then short some more underlying at the new higher price and
> re-position the put and call to create a new reverse collar. As with the collar, by
> shorting more underlying you are effectively 'doubling down' and adding
> more risk.
>
> Both strategies increase risk if the market goes against you.
>
>
> Probably easier, imo, to stick with the verticals unless, for some reason,
> you HAD to be long/short the underlying.
>
> Tim.
>
>
>
>
>
> ____________________________________
> From: "spoonsprts@ "spoonsprts@<spoonsprts@...>
> To: Option_BWBs_ Option_ Option_
> Sent: Wed, 30 June, 2010 23:46:38
> Subject: Re: [Option_BWBs_ Re: [Option_BWBs_<WBR>and_Collars] Reverse
>
>
>
>
>
> In As far as I am concerned it would be easier to trade a bearish long put
> vertical that a reverse collar.
>
> Tim.
>
>
>
> Tim
>
> I would totally agree with you, I think the idea of a collar in a bear
> market is that someone/floor trader is taking the other side of the typical
> collar position, thus making a reverse collar, but as far as the randomwalk
> methodology of adding to the position with put profits, it will only work
> in a regular collar not a reverse, it would be increasing in cost as we
> moved up against the reverse collar, making the addition more costly each time,
> the exact opposite of the original collar advantage. making the whole
> strategic move, the long way around to accomplish the same goals from higher
> cost, then a simple put vertical.
>
> RD
>
spoon...@aol.com
RD, I would like to thank-you for your post and followup. I definetly gain
from your posts. I did understand what you meant by no cost. Please DONT "shut
up". I have consumed myself in the past year or more gaining knowledge on
collars. I attended an online RWT workshop (but no collar discussion) and have
their books. As well as a lot of other education. I liked hearing about your
most recent trade. I have wondered if you could make money by working a collar
when it goes down while continuing to buy stock and actually make money if
doesnt go back up to its original value. . I have many IBM shares and was
thinking about doing a collar. Having said all that, are there a certain set
of rules you use that are different than RWT or do you more or less follow
their philosophy? Looking forward to hearing more regarding your experience.
hlp
| Hi RD, Could you help clarify a few points I don't quite understand. |
|
|
|
|
Cedric Wynn
Sent from my iPad
Hi RD,
Could you help clarify a few points I don't quite understand.The beauty of the way RWT teaches the collar is, as the stock becomes cheaper on a notional value, you are positioned to have free cash in your account to acquire more.
If the stock becomes cheaper it means you've just made a (paper) loss on your original collar (if you don't close it out). How does this give you free cash in your account to acquire more?
"Both strategies increase risk if the market goes against you." only difference I would add is one is using its own self contained capital, the other is requiring additional capital, and that slight difference is massive in my opinion and something you lose with straight verticals.
Could you elaborate more on how one uses it's own self-contained capital, and the other additional capital? I don't quite follow. Could you give an example perhaps?
Also, what are the margin requirements of buying a collar vs. buying a vertical? The collar requires much more margins because of the need to pay for the stock (at least 50% of full price if you buy on margin), whereas for the vertical your margins are very little by comparison. So how do the two compare in this light?
Thank you.
Pang
hlp
| I'm sorry, when talking about "self-contained" capital was he referring to regular collar or reverse collar? For reverse collar I can understand that you use your gains to short more stock (if trading in large enough size initially to allow this) if the stock price dropped. However I suspect you're talking about regular collars because you said sell protective put and buy back sold call. For regular collars, selling your put and buying back the call will still result in a net loss if the stock price went down, so I'm not getting the "self-contained capital" concept. The only thing I can guess at what that means is that your losses are now offset by the lower stock price which allows you then to still trade approximately the same size. However this is only true if you're trading in large enough size because one option covers 100 lots of stock and the smallest incremental step in trade size has to be in 100 lots of stock. Thanks, Pang --- On Fri, 2/7/10, Cedric Wynn <cedric.wynn@gmail.com> wrote: |
|
To: "Option_BWBs_and_Collars@yahoogroups.com" <Option_BWBs_and_Collars@yahoogroups.com> |
|
|
Cedric Wynn
Sent from my iPad
Cedric Wynn
Cedric Wynn
--
Make it a great day!
Cedric Wynn
spoon...@aol.com
If the stock becomes cheaper it means you've just
made a (paper) loss on your original collar (if you don't close it out). How
does this give you free cash in your account to acquire more?
mcatolico
If your put gains 19 in your example, your stock lost 20. Long stock plus long put is the same thing as just a plain long call. If you instead bought a 99 call with the stock at 100 and the stock subsequently fell to 80 the call would have lost all it’s value. That is all this strategy is: a convoluted way to play a more basic synthetic option equivalent.
In a message dated 7/1/2010 6:51:06 P.M. Pacific Daylight Time, hlpsg@yahoo.com writes:
If the stock becomes cheaper it means you've just made a (paper) loss on your original collar (if you don't close it out). How does this give you free cash in your account to acquire more?
The collar has you Owning a put, as the stock goes down, and the put gains intrinsic value. this money is used to purchase more stock.
for example .. stock is at 100.00
you own a 99 dollar put.
as we move down yes you incurred a loss of one dollar .. but what happens as the stock continues to fall? if the stock is at 80 the put now contains at least 19 dollars (ignoring any value left over ) now that 19 dollars is used to purchase a stock that is now 80 a share not 100.
I believe this answers your second question as well.
As far as margins are concerned I am trading a portfolio margined account so this doesn't apply maybe someone else can walk you thru that part of your question.
But as others have already said, Reading the Random Walk Trading book on collars makes this rather straight forward, It would seem by your questions this is a new concept for you- and it would be best to start there. The book is a nice intro, its a shame its not hard cover.
RD.
hlp
| thank you. --- On Sat, 3/7/10, spoonsprts@aol.com <spoonsprts@aol.com> wrote: |
|
To: Option_BWBs_and_Collars@yahoogroups.com |
|
Rocco Dilucchio
Sent from my iPhone
If your put gains 19 in your example, your stock lost 20. Long stock plus long put is the same thing as just a plain long call. If you instead bought a 99 call with the stock at 100 and the stock subsequently fell to 80 the call would have lost all it’s value. That is all this strategy is: a convoluted way to play a more basic synthetic option equivalent.
In a message dated 7/1/2010 6:51:06 P.M. Pacific Daylight Time, hlpsg@yahoo.com writes:
If the stock becomes cheaper it means you've just made a (paper) loss on your original collar (if you don't close it out). How does this give you free cash in your account to acquire more?
The collar has you Owning a put, as the stock goes down, and the put gains intrinsic value. this money is used to purchase more stock.
for example .. stock is at 100.00
you own a 99 dollar put.
as we move down yes you incurred a loss of one dollar .. but what happens as the stock continues to fall? if the stock is at 80 the put now contains at least 19 dollars (ignoring any value left over ) now that 19 dollars is used to purchase a stock that is now 80 a share not 100.
I believe this answers your second question as well.
As far as margins are concerned I am trading a portfolio margined account so this doesn't apply maybe someone else can walk you thru that part of your question.
But as others have already said, Reading the Random Walk Trading book on collars makes this rather straight forward, It would seem by your questions this is a new concept for you- and it would be best to start there. The book is a nice intro, its a shame its not hard cover.
RD.
mcatolico
The fact that folks can get confused by synthetics is what keeps me in this game (i.e. I know there is someone I can take money from).
Your only dealing with 1/2 of the position. But yes option
positions have equliviants, this is nothing new but further confuses the
discussion for ones in my past experience.
Sent from my iPhone
On Jul 2, 2010, at 6:42 PM, "mcatolico" <mcatolico@mindspring.com> wrote:
If your put gains 19 in your example, your stock lost 20. Long stock plus long put is the same thing as just a plain long call. If you instead bought a 99 call with the stock at 100 and the stock subsequently fell to 80 the call would have lost all it’s value. That is all this strategy is: a convoluted way to play a more basic synthetic option equivalent.
In a message dated 7/1/2010 6:51:06 P.M. Pacific Daylight Time, hlpsg@yahoo.com writes:
If the stock becomes cheaper it means you've just made a (paper) loss on your original collar (if you don't close it out). How does this give you free cash in your account to acquire more?
The collar has you Owning a put, as the stock goes down, and the put gains intrinsic value. this money is used to purchase more stock.
for example .. stock is at 100.00
you own a 99 dollar put.
as we move down yes you incurred a loss of one dollar .. but what happens as the stock continues to fall? if the stock is at 80 the put now contains at least 19 dollars (ignoring any value left over ) now that 19 dollars is used to purchase a stock that is now 80 a share not 100.
I believe this answers your second question as well.
As far as margins are concerned I am trading a portfolio margined account so this doesn't apply maybe someone else can walk you thru that part of your question.
But as others have already said, Reading the Random Walk Trading book on collars makes this rather straight forward, It would seem by your questions this is a new concept for you- and it would be best to start there. The book is a nice intro, its a shame its not hard cover.
RD.
Shane Ravenhill
Michael,
What a classic comment !
I also like the view that the markets are the most efficient way to arbitrage money away from less educated traders to the smarter and more skilled trader
Cheers
Shane
Rocco Dilucchio
Sent from my iPhone
Rocco Dilucchio
Sent from my iPhone
JP
Rocco
I think you may have just gone to the head of the class for ignorant comments .... if you have followed Michael's comments in either this or other Option Group forums ... you will know that he has spent countless hours passing on his experience as a market maker / trader and running tag-along trades to illustrate these concepts ... I may be mistaken, and apologies if I am wrong, but I don't seem to remember many posts from yourself that offer any great insight into trading ....
Cheers
James
ps by the way, in my opinion you are wrong to dismiss the benefits of synthetics ... but each to their own ...
--- In Option_BWBs...@yahoogroups.com, Rocco Dilucchio <spoonsprts@...> wrote:
>
> That is the most ignorant comment I have read in a while, synthetics
> don't create EDGE, it's an alternative way to reach the same
> destination, before you attemp to wax intellectual supperority, it's
> like taking a bus or a car comarison. Traders that think knowing an
> alternative route at often the exact same price or often more makes
> more advantageous to pray on a simplistic approach often get a rude
> awakining- it's the fact that I have constantly made money since 2003
> when I first past my ser 7 that keeps me trading and I enjoy teaching
> others thinks I know- I don't take pride the ignorance of others -
> trading is difficult but I find a bond that pulls traders together -
> not apart- nuf said
>
> Sent from my iPhone
>
> On Jul 3, 2010, at 6:33 PM, "mcatolico" <mcatolico@...>
> wrote:
>
> > The fact that folks can get confused by synthetics is what keeps me
> > in this game (i.e. I know there is someone I can take money from).
> >
> >
> >
> > From: Option_BWBs...@yahoogroups.com
> > [mailto:Option_BWBs...@yahoogroups.com] On Behalf Of Rocco
> > Dilucchio
> > Sent: Saturday, July 03, 2010 6:50 PM
> > To: Option_BWBs...@yahoogroups.com
> > Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
> >
> >
> >
> >
> >
> >
> >
> > Your only dealing with 1/2 of the position. But yes option positions
> > have equliviants, this is nothing new but further confuses the
> > discussion for ones in my past experience.
> >
> > Sent from my iPhone
> >
> >
> > On Jul 2, 2010, at 6:42 PM, "mcatolico" <mcatolico@...>
> > wrote:
> >
> >
> >
> > If your put gains 19 in your example, your stock lost 20. Long
> > stock plus long put is the same thing as just a plain long call. If
> > you instead bought a 99 call with the stock at 100 and the stock
> > subsequently fell to 80 the call would have lost all it’s value. Tha
> > t is all this strategy is: a convoluted way to play a more basic syn
> > thetic option equivalent.
> >
> >
> >
> > From: Option_BWBs...@yahoogroups.com
> > [mailto:Option_BWBs...@yahoogroups.com] On Behalf Of spoonsprts@...
> > Sent: Friday, July 02, 2010 5:57 PM
> > To: Option_BWBs...@yahoogroups.com
> > Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married Call
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > In a message dated 7/1/2010 6:51:06 P.M. Pacific Daylight Time, hlpsg@...
Rocco Dilucchio
Sent from my iPhone
Rocco
I think you may have just gone to the head of the class for ignorant comments .... if you have followed Michael's comments in either this or other Option Group forums ... you will know that he has spent countless hours passing on his experience as a market maker / trader and running tag-along trades to illustrate these concepts ... I may be mistaken, and apologies if I am wrong, but I don't seem to remember many posts from yourself that offer any great insight into trading ....
Cheers
James
ps by the way, in my opinion you are wrong to dismiss the benefits of synthetics ... but each to their own ...
JP
Rocco ... how do you know what I wear on a Sunday :-)) ... James
--- In Option_BWBs...@yahoogroups.com, Rocco Dilucchio <spoonsprts@...> wrote:
>
> James you look great with that cheerleader outfit on, I am nit
> knocking him personally just conceptually as if synthetics pray on the
> unedjucted trader is simply wrong- I have only been here a brief time
> an I see I am already stepping on toes- call me stupid for wanting to
> help- and not trying to brag about praying on the unedjucted- if
> that's what this forum is about I am clearly in the wrong place- and
> thank you for bringing that to my attention. Well done.
>
> People have helped me along the line, and I enturn want to do that to
> others- if this out of line- you learn to live with yourself.
>
> Sent from my iPhone
>
> On Jul 4, 2010, at 10:16 AM, "JP" <jamesbparker999@...> wrote:
>
> > Rocco
> >
> > I think you may have just gone to the head of the class for ignorant
> > comments .... if you have followed Michael's comments in either this
> > or other Option Group forums ... you will know that he has spent
> > countless hours passing on his experience as a market maker / trader
> > and running tag-along trades to illustrate these concepts ... I may
> > be mistaken, and apologies if I am wrong, but I don't seem to
> > remember many posts from yourself that offer any great insight into
> > trading ....
> >
> > Cheers
> > James
> >
> > ps by the way, in my opinion you are wrong to dismiss the benefits
> > of synthetics ... but each to their own ...
> >
> > --- In Option_BWBs...@yahoogroups.com, Rocco Dilucchio
> > <spoonsprts@> wrote:
> > >
> > > That is the most ignorant comment I have read in a while, synthetics
> > > don't create EDGE, it's an alternative way to reach the same
> > > destination, before you attemp to wax intellectual supperority, it's
> > > like taking a bus or a car comarison. Traders that think knowing an
> > > alternative route at often the exact same price or often more makes
> > > more advantageous to pray on a simplistic approach often get a rude
> > > awakining- it's the fact that I have constantly made money since
> > 2003
> > > when I first past my ser 7 that keeps me trading and I enjoy
> > teaching
> > > others thinks I know- I don't take pride the ignorance of others -
> > > trading is difficult but I find a bond that pulls traders together -
> > > not apart- nuf said
> > >
> > > Sent from my iPhone
> > >
> > > On Jul 3, 2010, at 6:33 PM, "mcatolico" <mcatolico@>
> > > wrote:
> > >
> > > > The fact that folks can get confused by synthetics is what keeps
> > me
> > > > in this game (i.e. I know there is someone I can take money from).
> > > >
> > > >
> > > >
> > > > From: Option_BWBs...@yahoogroups.com
> > > > [mailto:Option_BWBs...@yahoogroups.com] On Behalf Of
> > Rocco
> > > > Dilucchio
> > > > Sent: Saturday, July 03, 2010 6:50 PM
> > > > To: Option_BWBs...@yahoogroups.com
> > > > Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married
> > Call
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > > Your only dealing with 1/2 of the position. But yes option
> > positions
> > > > have equliviants, this is nothing new but further confuses the
> > > > discussion for ones in my past experience.
> > > >
> > > > Sent from my iPhone
> > > >
> > > >
> > > > On Jul 2, 2010, at 6:42 PM, "mcatolico" <mcatolico@>
> > > > wrote:
> > > >
> > > >
> > > >
> > > > If your put gains 19 in your example, your stock lost 20. Long
> > > > stock plus long put is the same thing as just a plain long call.
> > If
> > > > you instead bought a 99 call with the stock at 100 and the stock
> > > > subsequently fell to 80 the call would have lost all it’s
> > value. Tha
> > > > t is all this strategy is: a convoluted way to play a more basic
> > syn
> > > > thetic option equivalent.
> > > >
> > > >
> > > >
> > > > From: Option_BWBs...@yahoogroups.com
> > > > [mailto:Option_BWBs...@yahoogroups.com] On Behalf Of
> > spoonsprts@
> > > > Sent: Friday, July 02, 2010 5:57 PM
> > > > To: Option_BWBs...@yahoogroups.com
> > > > Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married
> > Call
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > > In a message dated 7/1/2010 6:51:06 P.M. Pacific Daylight Time,
> > hlpsg@
> > RECENT ACTIVITY:
> > Visit Your Group
> > MARKETPLACE
> > Stay on top of your group activity without leaving the page you're
> > on - Get the Yahoo! Toolbar now.
> >
> >
> > Get great advice about dogs and cats. Visit the Dog & Cat Answers
> > Center.
> >
> >
> > Get real-time World Cup coverage on the Yahoo! Toolbar. Download now
> > to win a signed team jersey!
> >
> >
> > Switch to: Text-Only, Daily Digest • Unsubscribe • Term
>
mcatolico
Rocco I stand by comment; it’s not “bragging,” it’s a warning – if you don’t understand what you are doing when trading options, it’s like walking into a casino and asking a croupier what looks like a good bet.
It also has nothing to do with synthetics imparting edge and the car/bus thing just plain keeps the confusion perpetuated. The better analogy is it’s a matter of choosing to ride the bus or to ride the bus; in other words there is no difference which is why they are called synthetic EQUIVALENTS. I entered this whole thread late anyway and all I was responding to was the goofy comment that somehow owning a married put on a stock that tanks 20 points below the strike somehow is a good thing. It just ain’t, period. If instead of the long stock plus long put the trader simply bought a long call the same economic result would be in place: namely the loss of the value of the purchase price of the long call. It doesn’t matter that there would be capital from the increased value of the put. You’d have that same “value” or reserved capital by doing the plain long call. And in either case you have to redeploy capital from a net losing position to try to get back to even. that’s not good trading advice in my opinion.
Vik
The General
bben1006
James--
You might be happy to also know that Rocco was not shy to put on the cheerleader outfit when he wrote a "testimonial" for the J. L. Lord' mystique and group—I might be smelling mole here– caveat emptor
Bben
--- In Option_BWBs...@yahoogroups.com, Rocco Dilucchio <spoonsprts@...> wrote:
>
> James you look great with that cheerleader outfit on, I am nit
> knocking him personally just conceptually as if synthetics pray on the
> unedjucted trader is simply wrong- I have only been here a brief time
> an I see I am already stepping on toes- call me stupid for wanting to
> help- and not trying to brag about praying on the unedjucted- if
> that's what this forum is about I am clearly in the wrong place- and
> thank you for bringing that to my attention. Well done.
>
> People have helped me along the line, and I enturn want to do that to
> others- if this out of line- you learn to live with yourself.
>
> Sent from my iPhone
>
> On Jul 4, 2010, at 10:16 AM, "JP" <jamesbparker999@...> wrote:
>
> > Rocco
> >
> > I think you may have just gone to the head of the class for ignorant
> > comments .... if you have followed Michael's comments in either this
> > or other Option Group forums ... you will know that he has spent
> > countless hours passing on his experience as a market maker / trader
> > and running tag-along trades to illustrate these concepts ... I may
> > be mistaken, and apologies if I am wrong, but I don't seem to
> > remember many posts from yourself that offer any great insight into
> > trading ....
> >
> > Cheers
> > James
> >
> > ps by the way, in my opinion you are wrong to dismiss the benefits
> > of synthetics ... but each to their own ...
> >
> > --- In Option_BWBs...@yahoogroups.com, Rocco Dilucchio
> > <spoonsprts@> wrote:
> > >
> > > That is the most ignorant comment I have read in a while, synthetics
> > > don't create EDGE, it's an alternative way to reach the same
> > > destination, before you attemp to wax intellectual supperority, it's
> > > like taking a bus or a car comarison. Traders that think knowing an
> > > alternative route at often the exact same price or often more makes
> > > more advantageous to pray on a simplistic approach often get a rude
> > > awakining- it's the fact that I have constantly made money since
> > 2003
> > > when I first past my ser 7 that keeps me trading and I enjoy
> > teaching
> > > others thinks I know- I don't take pride the ignorance of others -
> > > trading is difficult but I find a bond that pulls traders together -
> > > not apart- nuf said
> > >
> > > Sent from my iPhone
> > >
> > > On Jul 3, 2010, at 6:33 PM, "mcatolico" <mcatolico@>
> > > wrote:
> > >
> > > > The fact that folks can get confused by synthetics is what keeps
> > me
> > > > in this game (i.e. I know there is someone I can take money from).
> > > >
> > > >
> > > >
> > > > From: Option_BWBs...@yahoogroups.com
> > > > [mailto:Option_BWBs...@yahoogroups.com] On Behalf Of
> > Rocco
> > > > Dilucchio
> > > > Sent: Saturday, July 03, 2010 6:50 PM
> > > > To: Option_BWBs...@yahoogroups.com
> > > > Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married
> > Call
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > > Your only dealing with 1/2 of the position. But yes option
> > positions
> > > > have equliviants, this is nothing new but further confuses the
> > > > discussion for ones in my past experience.
> > > >
> > > > Sent from my iPhone
> > > >
> > > >
> > > > On Jul 2, 2010, at 6:42 PM, "mcatolico" <mcatolico@>
> > > > wrote:
> > > >
> > > >
> > > >
> > > > If your put gains 19 in your example, your stock lost 20. Long
> > > > stock plus long put is the same thing as just a plain long call.
> > If
> > > > you instead bought a 99 call with the stock at 100 and the stock
> > > > subsequently fell to 80 the call would have lost all it’s
> > value. Tha
> > > > t is all this strategy is: a convoluted way to play a more basic
> > syn
> > > > thetic option equivalent.
> > > >
> > > >
> > > >
> > > > From: Option_BWBs...@yahoogroups.com
> > > > [mailto:Option_BWBs...@yahoogroups.com] On Behalf Of
> > spoonsprts@
> > > > Sent: Friday, July 02, 2010 5:57 PM
> > > > To: Option_BWBs...@yahoogroups.com
> > > > Subject: Re: [Option_BWBs_and_Collars] Reverse Collar or Married
> > Call
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > >
> > > > In a message dated 7/1/2010 6:51:06 P.M. Pacific Daylight Time,
> > hlpsg@
> > RECENT ACTIVITY:
> > Visit Your Group
> > MARKETPLACE
> > Stay on top of your group activity without leaving the page you're
> > on - Get the Yahoo! Toolbar now.
> >
> >
> > Get great advice about dogs and cats. Visit the Dog & Cat Answers
> > Center.
> >
> >
> > Get real-time World Cup coverage on the Yahoo! Toolbar. Download now
> > to win a signed team jersey!
> >
> >
> > Switch to: Text-Only, Daily Digest • Unsubscribe • Term
>
JP
Bben ... I saw his testimonial as well .... but thought better to comment given how sensitive the situation appeared to be ... James
--- In Option_BWBs...@yahoogroups.com, "bben1006" <bben1006@...> wrote:
>
>
>
>
>
>
> James--
>
> You might be happy to also know that Rocco was not shy to put on the cheerleader outfit when he wrote a "testimonial" for the J. L. Lord' mystique and group—I might be smelling mole here– caveat emptor
>
> Bben
>
Dennis Alverson
I agree. Michael's insights have been invaluable to a newbie like myself. He has spent many hours of his precious time helping many of us to understand the ins and outs of option trading. Thanks Michael for all your help. Sometimes we just need a swift kick in the pants to understand what it takes to make money in this game. I think Michael's main point is that one should not think that just because one has constructed a different looking position that it has any advantage over its synthetic equivalent and all analysis should be able to be applied to the synthetically equivalent position. It helps the trader to see a different perspective on the trade, and if all the same questions cannot be answered the same way with the synthetic position, as with the original position, then it causes the trader to pause and possibly rethink their conclusions.
Rocco
I think you may have just gone to the head of the class for ignorant comments .... if you have followed Michael's comments in either this or other Option Group forums ... you will know that he has spent countless hours passing on his experience as a market maker / trader and running tag-along trades to illustrate these concepts ... I may be mistaken, and apologies if I am wrong, but I don't seem to remember many posts from yourself that offer any great insight into trading ....
Cheers
James
ps by the way, in my opinion you are wrong to dismiss the benefits of synthetics ... but each to their own ...
spoon...@aol.com
JP
Rocky ... I didn't say that I wasn't offended .. just thought a bit of humour may diffuse the situation .. anyway ... back to the debate ... if options are a zero sum game ... then for one trader to make a profit ... another trader has to make a loss .... you may not want to acknowldege this explicitly as you are a nice guy ... but for every profit you are making .. some other guy is taking the loss .... yes, synthetics may be simple ... but very misunderstood by option traders ... and I have witnessed numerous traders who will make a different decision when managing a covered call as a naked put ... despite being equivalent positions ... the trader 'perceives' the risk to be different ... it is this inconsistency in decision making that will often lead to losses for the trader as they didn't understand the synthetics, or even if they did, lacked the discipline to manage the positions as such ... and consequently, profits for the trader that does ... James
> then after a little questioning says and admits: "The better analogy is it’
spoon...@aol.com
if
options are a zero sum game ... then for one trader to make a profit ...
another trader has to make a loss
John
John,
There is no regulation that prevents an IRA to either sell or buy vertical spreads. This is a problem with your broker. I suggest you find another broker that specializes in options. There are lots that will allow you to trade vertical spreads as well as other complex options positions in your IRA.
John
mcatolico
It’s obvious that you don’t understand options.
if options are a zero sum game ... then for one trader to make a profit ... another trader has to make a loss
This is not the case in a Naked put seller VS a Covered Call Writer, they are not against each other and this is the whole point, Synthetics are not ***Against*** but rather ***mimicking*** the same expected outcome. which makes his comment incorrect. both the naked put seller and the covered call writer both want the market to go higher. they both lose if we move down. I hope this is obvious.
R D
It’s obvious that you don’t understand options.
if options are a zero sum game ... then for one trader to make a profit ... another trader has to make a loss
This is not the case in a Naked put seller VS a Covered Call Writer, they are not against each other and this is the whole point, Synthetics are not ***Against*** but rather ***mimicking*** the same expected outcome. which makes his comment incorrect. both the naked put seller and the covered call writer both want the market to go higher. they both lose if we move down. I hope this is obvious.
mcatolico
Look, sorry to really belabor this and if I sound/read like an ass, so be it. my point for commenting at all was that I was sensing the all too often pitch for some guru with specialized knowledge about something that seems proprietary when it’s just gobbledygook. Maybe I didn’t even see the whole thread but my simple point was just that a collar is just the same as a plain bull call vertical or whatever basic equivalent is out there. Implying that this is some kind of magical play is just non-sense and making a core trade of it is at best a fifty/fifty proposition.
Which is just where my – take how you will – comment about how ignorant traders make the game playable for less-ignorant ones arose. (and ignorance has absolutely nothing to do with intelligence, lest I be misunderstood on this comment). I think James clearly pointed out that less experienced traders will invariably misunderstand the risks of synthetic equivalent positions (such as a naked call versus a buy/write or covered call [why doesn’t anyone ever call these “buy/writes” anymore, am I that old?]) and because of the false sense of security associated with stock margined variants versus cash margined equivalents, they are prone to make mistakes. And those mistakes mean that, on balance, they will lose more money or part with money they have faster than the averages would suggest. Honestly, I bet all of could point to someone (maybe in the mirror) who bought a stock at $50, sold a 50 call for a couple bucks and had the stock go to 45 at expiration and then thought all this was great because the opportunity to “generate a little more income” was there to sell the 45 strike for a couple bucks again the next month. But had the trader started out selling the 50 put at $2 and watched it go to $5, would the same kind of blissful acceptance be there when the chance to sell the 45 put at $2 next month presented itself?
Every single option trade is basically a coin flip and if you play the same strategy infinitely you will probably do nothing to your bankroll other than just churn commissions and slippage fees. But if you add in a dose of ignorance you will surely compound the losses. And those losses have to accrue to the pool of those that are either lucky or less ignorant of how options work. That’s zero sum.
James: First thank you for taking my cheerleader comment in stride as it was just meant as a joke, As soon as I typed that I thought, I might have been going too far, and I am glad it wasn't offensive.
Vikas asks: "If Michael is making money because most retail traders don't fully understand synthetics, then what's wrong? "
good question here's why
Mcatolico writes:
"The fact that folks can get confused by synthetics is what keeps me in this game (i.e. I know there is someone I can take money from)."
Lets break this down:
If I was to say: " I sell Naked puts, Because Covered Call Writers, are too stupid to understand they are the same, and get "Confused". And that's why I trade because I know someone I can take money from!
Instantly anyone will see, 1) A Naked put seller isn't taking money away from a Covered Call writer!
2) where would the EDGE come in doing one Vs. the Confusion of the Alternative?
3) please explain how your "Taking Money" from the cover call writer, when your a naked put seller?
I hope the above example shows the unfounded ness of the comments. Synthetics are simple here is a list to help anyone getting confused by them. there are times when because of skew, or a large order at a certain strike- one might be priced slightly different then the other, but we are taking pennies, and for a short time.
1) +P = +C - S LONG SYN PUT
2) -C+P= -S SHORT SYN STOCK
3) -C= - S-P SHORT SYN CALL
4) +S - C= -P SHORT SYN PUT
5)+S= +C-P LONG SYN STOCK
6) +P+S=+C LONG SYN CALL
then after a little questioning says and admits: "The better analogy is it’s a matter of choosing to ride the bus or to ride the bus; in other words there is no difference which is why they are called synthetic EQUIVALENTS."
which makes the whole; " I know there is someone I can take money from" even more suspect.
I am sure Michael is an intelligent guy, and I am sure he has a lot to contribute, I am sure more then I do, Its just that its hitting a pet issue of mine, when I see comments about how confused others are and how he's attempting to capitalize on this, when the illustration provided doesn't seem to accomplish his goals, he then- a post later calls them "equivalents". So I am simple asking; WHERES THIS EDGE in where your taking money from the confused, that's keeping you in the game?
If he is saying he enjoys the complexity and versatility options provide and that's why he keeps trading great, but I read it as, him wanting to take advantage of the confused, and a mirror image position doesn't do that at all, that's simply my point, not to knock down Michael or anyone here. Online forums are notorious for mis understandings and mis communications. there is no Facial read, or tone, to know when someone is kidding, serious, angry, or joking. I feel like a guest here and don't want to soil my welcome but I hope the post above helps clarify why I was wanting to take Michael to task for what he said. What few posts I have made most were from an Iphone in the middle of a meeting, so I couldn't do the subject the needed explanations till now. I hope we are all on the same page now. Thank you
RD
R D
Lindsay Ward
From: R D <spoonsprts@aol.com>
To: "Option_BWBs_and_Collars@yahoogroups.com" <Option_BWBs_and_Collars@yahoogroups.com>
Sent: Wed, July 7, 2010 12:18:53 AM
Subject: Re: [Option_BWBs_and_Collars] Re: Synthetics
Summer Snow
Guys, just ignore him. He just want to have the last say. Let him have it. Otherwise, there'll be no end to this.
mcatolico
Rocco, Neal and group, I do apologize for veering into a bit of a flame here. somewhere in my rants I hope my (valid trade related) points were made and whether they have merit are up to anyone who’s bothered to read on.
Back to trading…
spoon...@aol.com
Rocco, Neal
and group, I do apologize for veering into a bit of a flame here. somewhere in
my rants I hope my (valid trade related) points were made and whether they
have merit are up to anyone who’s bothered to read on.
Back to
trading…
Manny
Rocco
You are a shame to this group. You have not fully appreciated the huge contribution Michael had make to this group. Cancel your membership to this group and find happiness somewhere else. You do not belong to this group.
That is my two cents.
Manny
MARKETPLACE
Error! Filename not specified.
Error! Filename not specified.
Error! Filename not specified.
Switch to: Text-Only, Daily Digest • Unsubscribe • Term
Eski Movsinuit
This is an interesting thread. I am trying to get a question straight:
Somewhere someone asked a question like this:
"where would the EDGE come in doing one Vs. the alternative synthetics"
I am just curious did Mike or anyone answer what really the edge is? I admit that I don't understand option trading even after 7 years of option trading, attending several trading seminars and a master degree in Math and several option books crunching. I might be able to understand option strategies inside out and use them. But I can never see where the edge is? Every time I thought I found the edge, it would turn out to be a mirage or, even worse, a disaster. So, I admit that I don't understand option. (That's why I am back to trade stocks.)
Could someone help me clear the doubt? Where is the edge?
Eski
-----Original Message-----
From: eejiofor@hotmail.com
Sent: Fri, 9 Jul 2010 07:43:51 -0400
To: option_bwbs_and_collars@yahoogroups.com
Subject: RE: [Option_BWBs_and_Collars] Re: Synthetics
Rocco
Try FREE IM ToolPack at www.imtoolpack.com Capture screenshots, upload images, edit and send them to your friends
through IMs, post on Twitter®, Facebook®, MySpace™, LinkedIn® – FAST!
mcatolico
Edge is that mystical thing that basically comes down to your long term p&l. if you make money, you have edge.
What I was referring to with the errors that come from ignorance about how to trade should be pretty easy to understand at least conceptually. If the average trader who has strong knowledge about how options works has about a 50/50 chance of making money (i.e. zero expectancy or in effect zero edge) then it stands to reason that someone that has very little knowledge will make large mistakes that make her odds of winning less than zero. On net that means her losses should be everyone else’s gain. If you sit down to a poker game would you rather play with someone who has played for years and has won consistently as a professional or would you rather play against a complete neophyte who happened to watch a casino video and wants to try his luck? In any single hand or game, you can’t be sure if you’d end up winning against the newbie, but over hundreds of games I think you get the point. That’s how it is with trading. Every day a thousand fresh (and sometimes not so fresh) faces enter this game with $5k or $10k and a lot enthusiasm and six months later they close their empty accounts and say that trading is just gambling. That $5k has to go somewhere and I’d like to be in line for a couple coins.
Brandon Spruill
Just off the top of my head:
mcatolico
Awesome examples
wallsttr...@yahoo.com
He should pay you for this education.
Sent from my Verizon Wireless BlackBerry
Vik
>> Every
day a thousand fresh (and sometimes not so fresh) faces enter this game
>> with
$5k or $10k and a lot enthusiasm and six months later they close their
>> empty accounts
and say that trading is just gambling. That $5k has to go
>> somewhere and
I’d
like to be in line for a couple coins.
Alright so now I know who moved my cheese a few years back:-)
Michael, I am sure you picked up more than a couple of coins out of my account.
Every single post of yours conveys something new - don't know how you do this?
Cheers Vikas
Eski Movsinuit
Thank you.
All the techniques you mentioned have been used by me for several years. So, if that's the edge you meant, I already have it. Still appreciate you for sharing the thought. Thank you.
However, I still don't get the "edge" which I thought is for trading options along. In other words, if I my stock positions are making money or not losing money, I can make money in trading option in the same underlying. However, if I don't make money or even lose money in trading that stock, I can hardly make risk-justified money in option trading on that stock. So, that's what I mean I don't get any extra "edge" in option trading.
After several years of searching and practice in option trading, I am back to stock trading which is more directional.
I guess someone could call me a "die-hard hopeless directional trader." I hope someday I can bring my directional experience back to option trading and make a kill. The bottom line is: option trading is multi-dimensional. Each dimension has its own direction to manage. I admitted that I could not manage the direction of the stubborn THETA and tricky VEGA well. So, I admit that I don't understand option and am now only focused on managing that cunning DELTA in the underlying stock.
Just my 2 cents in a Friday afternoon......
Receive Notifications of Incoming Messages
Easily monitor multiple email accounts & access them with a click. Visit www.inbox.com/notifier and check it out!
Lindsay Ward
this happens most of the time. when the opposite happens, you can lose your account quickly. hence risk management is important.
From: Eski Movsinuit <eskimovsinuit@inbox.com>
To: option_bwbs_and_collars@yahoogroups.com; option_bwbs_and_collars@yahoogroups.com
Sent: Fri, July 9, 2010 7:13:30 PM
Subject: Re: [Option_BWBs_and_Collars] Re: Synthetics
Thank you.
All the techniques you mentioned have been used by me for several years. So, if that's the edge you meant, I already have it. Still appreciate you for sharing the thought. Thank you.
However, I still don't get the "edge" which I thought is for trading options along. In other words, if I my stock positions are making money or not losing money, I can make money in trading option in the same underlying. However, if I don't make money or even lose money in trading that stock, I can hardly make risk-justified money in option trading on that stock. So, that's what I mean I don't get any extra "edge" in option trading.
After several years of searching and practice in option trading, I am back to stock trading which is more directional.
I guess someone could call me a "die-hard hopeless directional trader." I hope someday I can bring my directional experience back to option trading and make a kill. The bottom line is: option trading is multi-dimensional. Each dimension has its own direction to manage. I admitted that I could not manage the direction of the stubborn THETA and tricky VEGA well. So, I admit that I don't understand option and am now only focused on managing that cunning DELTA in the underlying stock.
Just my 2 cents in a Friday afternoon... ...
-----Original Message-----
From: wallsttrader2001@ yahoo.com
Sent: Fri, 9 Jul 2010 22:47:21 +0000
To: option_bwbs_ and_collars@ yahoogroups. com
Subject: Re: [Option_BWBs_ and_Collars] Re: Synthetics
He should pay you for this education.
Sent from my Verizon Wireless BlackBerry
From: Brandon Spruill <besttraderalive@ gmail.com>Sender: Option_BWBs_ and_Collars@ yahoogroups. comDate: Fri, 9 Jul 2010 18:31:31 -0400To: <Option_BWBs_ and_Collars@ yahoogroups. com>
ReplyTo: Option_BWBs_ and_Collars@ yahoogroups. comSubject: Re: [Option_BWBs_ and_Collars] Re: Synthetics
To: Option_BWBs_ and_Collars@ yahoogroups. com
Subject: Re: [Option_BWBs_ and_Collars] Re: Synthetics
Rocco, if you take a step back & think about Michael's comment with an open mind, it really is a different way of saying that Options trading is a zero sum game.
If Michael is making money because most retail traders don't fully understand synthetics, then what's wrong?
Aren't we all there with the same objective of making money in the financial markets (even if the person on the other side of our trades has to lose the same amount of money)?
On the brighter side, if you go through Michael's posts over the last few years on different yahoo groups, you will see the huge contribution he has made to the retail options trading world (for free). To me that is far more important than worrying too much about any of his specific comments in isolation...
Cheers Vikas
> > [mailto:Option_BWBs_ and_Collars@ yahoogroups. com] On Behalf Of Rocco
> > Dilucchio
> > Sent: Saturday, July 03, 2010 6:50 PM
> > Subject: Re: [Option_BWBs_ and_Collars] Reverse Collar or Married Call
> >
> >
> >
> >
> >
> >
> >
> > Your only dealing with 1/2 of the position. But yes option positions
> > have equliviants, this is nothing new but further confuses the
> > discussion for ones in my past experience.
> >
> > Sent from my iPhone
> >
> >
> > On Jul 2, 2010, at 6:42 PM, "mcatolico" <mcatolico@.. .>
> > wrote:
> >
> >
> >
> > If your put gains 19 in your example, your stock lost 20. Long
> > stock plus long put is the same thing as just a plain long call. If
> > you instead bought a 99 call with the stock at 100 and the stock
> > subsequently fell to 80 the call would have lost all it’s value. Tha
> > t is all this strategy is: a convoluted way to play a more basic syn
> > thetic option equivalent.
> >
> >
> >
> > [mailto:Option_BWBs_ and_Collars@ yahoogroups. com] On Behalf Of spoonsprts@. ..
> > Sent: Friday, July 02, 2010 5:57 PM
spoon...@aol.com
spoon...@aol.com
Brandon Spruill
It doesn't matter what most people consider them to be, the fact is they are.
Just a small thought in addition to what's already been said:Its easier for me to think of synthetics as: "anytime you have a STOCK and OPTIONS position together you in essence have a "Synthetic" something or other(long/short/call/put).A directional play(stock) plus a time component (option) mimics another out right option be it long or short regardless.that's just one aspect to help the thought process but, you can also use options to = the stockfor example long call short put to equal stock.ThanxRocco DilucchioIn a message dated 7/10/2010 11:24:01 A.M. Pacific Daylight Time, spoonsprts@aol.com writes:BrandonMost don't consider boxes and Three Legged boxes synthetics, My question is what are they synthetic forms of? Thank you in advance.Nice example tho.
spoon...@aol.com
Knowledgeable traders use these techniques to create an edge that
someone earlier ignorantly claimed did not exist.
Brandon Spruill
In a message dated 7/10/2010 11:53:11 A.M. Pacific Daylight Time, besttraderalive@gmail.com writes:Knowledgeable traders use these techniques to create an edge that someone earlier ignorantly claimed did not exist.Just for correction, I stated the EDGE doesn't exist against the person doing the alternative to the synthetic position. because both traders ***wouldn't*** be AT ODDS with one another. But thank you for your examples.RD
spoon...@aol.com
Brandon Spruill
Continuing off the previous example take the following events:
BrandonI agree with everything you are saying, and here is where I was coming from. I do not want to belabor the point because we are all very close to the same page and I have the tendency to test peoples patience here it seems. And a lot of this has been discussed off forum as well to bridge the gap in the conversation and I don't want to appear to be "beating a dead horse but".....but........I guess when I read the term "EDGE" it was used in a context as someone on which you were taking money away from, and this is where the confusion comes in,- as you are correct to point out.I could say options traders have and edge on stock traders because we can virtually accomplish the same results for less money. But in reality the option trader is and odds with the person taking the other side of the trade, not the stock owner. I believe this is where the confusion comes in within this discussion. If price alone to accomplish something is compared to each other I would totally agree with everything you have presented, and you will note I have already commented that this happens in the brief example I cited on synthetics myself. I just part company when that is expressed with the backdrop of someone taking money from the other with a simply more frugal alternative. This confusion was/is compounded on a attempted clarification with assumed risk assumptions of both parties, as EDGE when, both positions would make or lose at the same rate!I hope that is clearThank you all for patienceRD
spoon...@aol.com
hlp
| I guess what I took away from all the discussion is this: If one thinks one has a winning formula trading a certain strategy a certain way, try looking at it from the synthetic point of view and see if we still feel the same way. E.g. in the collar example, one "advantage" cited was the ability to use the gains from the bought puts and sold calls to buy more stock the next month out, even if the stock moved down. This was cited as an advantage of the collar strategy when traded this way. Synthetically how would this look? Well you buy a bull vertical spread with a similar risk profile. If the stock moved down, you accumulate more vertical spreads. Looking at the synthetic equivalent, would doing this month after month give you a winning system? Well I guess it really depends on what the stock does. If over a long period of time the stock moves up more than it moves down, you might. If the stock moves all the way down and never recovers, you lose most of your capital. Perhaps I'm unfamiliar with all the intricacies of the Random Walk way of trading collars, but just looking at what has been revealed, by examining the synthetic equivalent, the cited advantages don't look so attractive (to me) after all. Pang --- On Sun, 11/7/10, spoonsprts@aol.com <spoonsprts@aol.com> wrote: |
|
spoon...@aol.com
Pang
Neal Chabot
Rocco, let's review some basics and see where this discussion is going.
You are right to point out that when someone does not wish to sell the stock, they may instead choose to collar it. Traders do have different reasons for doing a collar over its synthetic equivalent. When Kurt from Radioactive Trading first showed up in these groups with his married puts and collars, he did not know about their synthetic equivalents, but even after learning about them he still thought there were some "advantages" in doing the stock positions.
However, a synthetic equivalent means just that -- equivalence. It does not mean that one position only mimics the same results. They ARE the same results. As synthetic equivalents they have the same risk, the same reward, and they behave almost exactly the same. So once you say that you have a synthetic, you cannot then say that the greeks are different. If the greeks were different then the risk graph would be different which is not the case. Take some time and look at some examples with a risk graph.
Perhaps it would be good if you took Pang's suggestion and talked about the RWT way of doing collars versus the standard way of doing collars? In this group we have found done alot of analysis of the One Strategy book to find out that it is not well written and not worth the money, so perhaps their book on collars is better? That would make for a good discussion.
Neal
bma...@usa.net
I would DEFINITELY agree that the One Strategy book on BWBs is NOT well written, hard to follow, presents NOTHING new, and really advocates doing something that makes little sense (selling ratio spreads). In my mind, selling ratio spreads is dangerous because you are net naked short either a put or a call which requires a very large margin to be able to place the trade.
---- Original message ----
Date: Mon, 12 Jul 2010 08:18:20 +0000 (UTC)
From: Neal Chabot <sire@comcast.net>
Subject: Re: [Option_BWBs_and_Collars] Re: Synthetics
To: Option BWBs and Collars <Option_BWBs_and_Collars@yahoogroups.com>
Cedric Wynn
I would DEFINITELY agree that the One Strategy book on BWBs is NOT well written, hard to follow, presents NOTHING new, and really advocates doing something that makes little sense (selling ratio spreads). In my mind, selling ratio spreads is dangerous because you are net naked short either a put or a call which requires a very large margin to be able to place the trade.
---- Original message ----
Date: Mon, 12 Jul 2010 08:18:20 +0000 (UTC)
From: Neal Chabot <sire@comcast.net>
Subject: Re: [Option_BWBs_and_Collars] Re: Synthetics
To: Option BWBs and Collars <Option_BWBs_and_Collars@yahoogroups.com>
Rocco, let's review some basics and see where this discussion is going.
You are right to point out that when someone does not wish to sell the stock, they may instead choose to collar it. Traders do have different reasons for doing a collar over its synthetic equivalent. When Kurt from Radioactive Trading first showed up in these groups with his married puts and collars, he did not know about their synthetic equivalents, but even after learning about them he still thought there were some "advantages" in doing the stock positions.
However, a synthetic equivalent means just that -- equivalence. It does not mean that one position only mimics the same results. They ARE the same results. As synthetic equivalents they have the same risk, the same reward, and they behave almost exactly the same. So once you say that you have a synthetic, you cannot then say that the greeks are different. If the greeks were different then the risk graph would be different which is not the case. Take some time and look at some examples with a risk graph.
Perhaps it would be good if you took Pang's suggestion and talked about the RWT way of doing collars versus the standard way of doing collars? In this group we have found done alot of analysis of the One Strategy book to find out that it is not well written and not worth the money, so perhaps their book on collars is better? That would make for a good discussion.
Neal
----- Original Message -----
From: spoonsprts@aol.com
In a message dated 7/11/2010 6:53:19 P.M. Pacific Daylight Time, hlpsg@yahoo.com writes:Pang
Perhaps I'm unfamiliar with all the intricacies of the Random Walk way of trading collars, but just looking at what has been revealed, by examining the synthetic equivalent, the cited advantages don't look so attractive (to me) after all.
PangAlot of people would agree with your conclusion, I think the collar strategy might be better viewed not as one trading style verses a synthetic, but rather just another tool in your tool box for a very specific time. Someone simply might *not* want to SELL A STOCK but want some free downside disaster insurance. This stock might have already ran up, you might want to keep long term capital gains, You might be restricted to sell stock, etc etc..the list goes on, its not really an either or situation. While both strategies can on a single month p/l chart mimic the same results. If you buy a Vertical, the stock better move, you have Theta working against you,- where as the Collar- if it stays flat- you find yourself in a slightly different situation, your long an option, and short and option- the theta, as well as vega, is basically Net Net against each other as isolated greeks. These of course ar
e different sides of the same coin- There are positives and negatives about both- there are a number of factors that would come into play as to when to do what. They are also capital intensive- which for a lot of people are a negative opportunity cost lost in their mind when they can do a like vertical to begin with. It depends a lot on knowing your individual situation, and when you would opt. for one over the other. I don't see any downside to familiarizing oneself to as many choices and alternatives as possible when it comes to making trading decisions, but that's just me.RD
--
Make it a great day!
Cedric Wynn
Joerg Hickman
From: Neal Chabot <sire@comcast.net>
To: Option BWBs and Collars <Option_BWBs_and_Collars@yahoogroups.com>
Subject: Re: [Option_BWBs_and_Collars] Re: Synthetics
Rocco, let's review some basics and see where this discussion is going.
You are right to point out that when someone does not wish to sell the stock, they may instead choose to collar it. Traders do have different reasons for doing a collar over its synthetic equivalent. When Kurt from Radioactive Trading first showed up in these groups with his married puts and collars, he did not know about their synthetic equivalents, but even after learning about them he still thought there were some "advantages" in doing the stock positions.
However, a synthetic equivalent means just that -- equivalence. It does not mean that one position only mimics the same results. They ARE the same results. As synthetic equivalents they have the same risk, the same reward, and they behave almost exactly the same. So once you say that you have a synthetic, you cannot then say that the greeks are different. If the greeks were different then the risk graph would be different which is not the case. Take some time and look at some examples with a risk graph.
Perhaps it would be good if you took Pang's suggestion and talked about the RWT way of doing collars versus the standard way of doing collars? In this group we have found done alot of analysis of the One Strategy book to find out that it is not well written and not worth the money, so perhaps their book on collars is better? That would make for a good discussion.
Neal
----- Original Message -----
From: spoonsprts@aol. com
Pang
spoon...@aol.com
However,
a synthetic equivalent means just that -- equivalence. It does not
mean that one position only mimics the same results. They ARE the
same results. As synthetic equivalents they have
the same risk, the same reward, and they behave almost exactly the
same. So once you say that you have a synthetic, you cannot
then say that the greeks are different. If the greeks were
different then the risk graph would be different which is not the
case. Take some time and look at some examples with a risk
graph.
spoon...@aol.com
Summer Snow
Hi all,
I agree with Joerg - enough is enough. Please stop this discussion. I'm sure it's clear to everyone whose opinion is worth reading and whose is really worthless spam. I'm fed up with deleting emails on this topic on a daily basis. Looks like Rocco wants to have the last say in this topic. Can everyone please let him have it ? Please do not respond anymore.....
Many thanks.
Mystic Neal
Yes, it is time to move on. Rocco is sorry and will not be posting again on this topic. This is an advanced group and it is time we discussed something more challenging. I'm sorry that some of you have been frustrated, but you are also free to start your own topic. This is also a reminder, according to the group rules, to sign your posts with your real name.
Neal
--- In Option_BWBs_and_Collars@yahoogroups.com, Summer Snow <kevinmclee@...> wrote:
> Hi all,
> I agree with Joerg - enough is enough. Please stop this discussion. I'm
> sure it's clear to everyone whose opinion is worth reading and whose is
> really worthless spam. I'm fed up with deleting emails on this topic on a
> daily basis. Looks like Rocco wants to have the last say in this topic.
> Can everyone please let him have it ? Please do not respond anymore.....
> Many thanks.
>
>
>
>
> On Mon, Jul 12, 2010 at 10:10 AM, Joerg Hickman
> joerghickman@...wrote:
> > ------------------------------
> > *From:* Neal Chabot sire@...
> > *To:* Option BWBs and Collars Option_BWBs_and_Collars@yahoogroups.com
> > *Sent:* Mon, 12 July, 2010 6:18:20 PM
> >
> > *Subject:* Re: [Option_BWBs_and_Collars] Re: Synthetics
