bulldozer said:=======================================================
If he buy's a call or put wiv low delta's even if he's got the CORRECT direction the positions may NOT move at all. an OTM does NOT move as good as an ATM or a ITM position. Cheap positions wiv low delta's are attractive to buy but they WILL LOSE you money in long run! :idea:
Whats yur view?
Bull
alen said:actually, during one of my numerous paper trading sessions, i bought call options that were slightly otm, whose underlying stocks were said to rise; since they were rather cheap (around $50 a piece), i bought 4 of each; all this took place in a four day period; after the 4th day, i had earned a total profit of $500 (i took away some $ per transaction as commission).
====================================================================alen said:actually, during one of my numerous paper trading sessions, i bought call options for Procter and Gamble (pg) and marvell (mrvl) that were slightly otm; these stocks were said to rise in the next few days. since they were rather cheap (around $50 a piece), i bought 4 of each; all this took place in a four day period; after the 4th day, i had earned a total profit of $500 (i took away some $ per transaction as commission).
bulldozer said:====================================================================
YES!, it can happen that you get one right in a numerous amont of trades. But in the long run buying options and paying all those prem's you WILL end up at a LOSS!
Ok ,so youve made 500 bucks! Now how many loses did u suffer b 4 you got that win?
=============================================================alen said:im not trying to brag or anything. im just making a point.
and if u must know, i started paper trading with $870; after the first week, i was down $70; now on day 11, my total $ is $1186.
again, i dont mean to brag; i probably have another loss in store for me somewhere down the road; wat im trying to say is that im not gonna act like im in vegas or sm. im gonna play it conservative.
===========================================================Rhody Trader said:bulldozer,
Do you trade options yourself? If so, in what fashion?
bulldozer said:===========================================================
Ive started on options in 1984. My style is totally dffrt to most on t2w. I'm a writer more than a buyer.
====================================================================Rhody Trader said:Right there you have expressed exactly why I don't think a "directional" trader (one looking to profit from a trend in the underlying) needs to think in terms of delta. If one understands the ideas of ATM/OTM/ITM (and I certainly hope every option trader does!), then throwing delta in to the mix just makes things more complex than need be. After all, delta is simply an approximation of the odds of the option expiring in the money. This is handy for hedging but that's about it.
Your point about OTMs is a good one. They seem very attractive for the risk/reward, but you have to get the timing and the price moves just right for them to work out. I personally stick to ATMs because they have a better risk/reward than ITMs and don't eat up as much of my capital. Sometimes you can find a "cheap" ITM, though. In that case you're talking about Implied Volatility, not Delta.
To my mind, the two big concepts for directional traders are Implied Volatility and Time Value. The latter is pretty obvious in it's implication. I have my ways of minimizing the impact of time, though. Volatility, on the other hand, cannot be avoided. As you noted about low delta options, high implied options can fail to gain if the underlying moves but implieds fall.
Saying that, though, one can simply think in terms of premium over intrinic value to see whether an option is too pricey rather than trying to determine implied volatility. If a trader has a system which provides a good idea of likely price move and move duration, then things can be kept quite simple.
bulldozer said:====================================================================
The "delta" has verry much to do wiv OTM,ATM,ITM, DITM, DOTM!
Plz tell us what delta is on a position that is DOTM or OTM.
I'm not talking about IV at all.
You sound that yur more of a buyer than a seller? Am i correct?
Bull
bulldozer said:RT,
Correct! It depends on many factors ie Which strat is employed, which strike, how far out in time/long term, which delta, number of contracts, which commodaty, and which style us /eu etc etc
For a buyer IV is very important yes! IV has very little effect on zero delta's/DOTM positions. Time for me and size of contracts is more important than IV.
Bull
