Tuesday, February 27, 2007

Emergency Room service for newbies

Fast market condition today. Needless to say I get a steady flow of emails and chats today from folks with panicked positions seeking opinions on how to "remedy" the losses incurred.

Here is a very typical example, this was the main theme for no less than 5-7 emails today:

"I have -10 spreads of the ICE 145/140p spread for .55 credit each.
The stock closed at 144.58 today. I am concerned as I am down about $1500
at the moment. I don't want to take the loss, yet I can't afford to
take the max $4450 loss either. What's the best thing for me to do
?"

Helloooo??? As if I have the magic wand to wave the losses away???????

First and foremost, if you can't afford to take the max loss, don't trade so big.
Ok, so you are new, and have no regard for position sizing. Alright, thats fine.
Then trade what u can afford to lose per trade. Trade 2x instead of 10x, for example.

Second, choose an online broker that allows you to trade
smaller. Switch from the ones that favor trading 10 contracts or more at a time.
You are not really saving much dough by trading big.
You are still learning. Trade 1-5 contracts and learn to average them in. Many good traders trade on probabilities and steady averages, not all in and all out.

Third, flat (no position) IS a position.
The normally tame indices are basically behaving like the GOOG/CME/RIMM and moving like monsters. You don't need to be trading in this condition if you are new. Paper trade and observe the the ebb and flow of the implied volatilities at play. If you ABSOLUTELY MUST participate in the excitement, trade small.

I played emergency room staff today, but sadly, was not able to stop the bleeding for many.

Thursday, February 22, 2007

Where is the beef?

This from Stall Horn from AdvancedOptionsStragtegies group. I am posting it partly
because I am being plugged in the post ;-) :

----------------------------------------------------------------------------
Isn't it interesting the total number of members we have and how many new
members this group attracts a week, but how few members submit posts?

Wasn't it the old Wendy's commercial that queried: "Where's the beef?"

Well, the "beef" in this case is our willingness to share.

So why is it that we members are not asking questions and gorging ourselves
on the talent that exists in this group?

For those newbies to options my first guess goes back to our high school
mentality: We are afraid of sounding stupid in front of our peers. And it
sure is easy to sound stupid when it comes to options and the stock market.
I know this because I have been there, just like you.....

For the "oldies" to options my first guess is that your hard earned
knowledge has become, in your mind, proprietary, not unlike real estate,
which tends to appreciate in value as you build on it. I know this too
because the more I learn the fewer specifics I want to share.

Think about it, if I teach you all of my "secret ingredients" then I just
may lose my "edge." After all, the money I take from the market and put in
my pocket has to come from somewhere. So the more "stupid" traders there are
throwing their money at the market the better for me, right....? -
Absolutely.

So as far as a discussion group is concerned, we all are trapped in a Catch
22. People want to learn but those who can teach purport Theta, and Vega,
and the Flatulence theory...(?)

But these folks are not completely bad. They are simply indicating
indirectly to those asking question what I stated in the PS section of my
email to Sky. IT IS ALL UP TO YOU! You have to learn interpretation for
yourself.

Nobody is coming to your aid. The options world, just like the stock market
world, is the survival of the fittest. And by golly, my personal goal is to
be more fit than you so that I can out-run that "bear" before you do. My
concern is not with YOUR brokerage account, but with my own.

And this is not to diminish Sanjay. He comes in with his prognosis of things
and tells what he is doing. That is very respectable. But as a trader, you
are second a follower and first a leader. Do your indicators tell you the
same thing that Sanjay's are telling him? If so, then you have a
confirmation of sorts if you believe in Sanjay. If not, then best to let
Sanjay forage alone. I can assure you that Sanjay will not be offended.

And this is not to diminish Junky. He provides instruction on how tow to
read the TOS risk graph and whatever, which is a huge stepping stone
admittedly. But Junky is not your God. He is only a "tool" that you take
advantage of so that you can further your personal option trading intuition.
Nothing more. And he is happy to be as such.

Ironically the whole climax of this blather is that it doesn't matter how
much knowledge is shared. Statistics state that only 20% of the market
players actually make "real" money. This would seem to indicate that 80% of
you are not able to be inspired enough to follow through and make the $$$$$.

Again, this is not my problem. My goal is to be in the upper 20%.

If I don't see you there then, I guess I'll see you when I see you.... if
ever....

FSL

Friday, February 16, 2007

How much money can you make?

Saw this post on TheOptionClub absolute gem posted by Zia.

--------------------------------------------------------------------------------------------------------------------------------
It is very a fair and common question that novice traders asking all the time how much money you can generate in the market. My simple answer is if you can get to the point that you do not lose money then profit will be taken care of your account by itself. Always think about the market structure rather than $ amount; and more than important thing is your own degree of emotions in terms of stress, hope, greed, and fear. At last but not the least, remember the market doesn't beat a player; it merely gives a player opportunities to beat himself.

Happy Trading,

Zia Mostatbi

Sunday, February 04, 2007

Learning to paint master piece(s)

Jessica : Hello Danny

Jessica : How nice to be called 'young lady'....I'm probably older than you

Danny : so how are you today

Jessica : Great....Just deep dusted my whole room.

Danny : well that by be so,,,,

Danny : but i'm not spring chicken anymore

Jessica : So much to learn. so much to sift through, so many decisions to make. I just decided to take a break and dust.......

Jessica : Now, back to 'what to do next', which info to read.

Danny : i understand,

Jessica : which DVD to watch.

Danny : yes forever learning

Jessica : I need direction, which step to take next, etc.

Danny : well that might be a good thing

Jessica : I know SO MUCH about options, and strategies, etc, just don't know when and where to apply it.

Junky: unfortunately it takes........click here for the rest of the chat transcript.