Plain Vanilla Options Trades.

[Profitaker]

Andy

This about about buyer - writer edge. Not about being correct when making a market call.

Let me put it another way......do you expect the writer of the Apr 5925 Calls to make a profit ? If not why not ? After all they are both written positions, but with opposing market views

 

[Splitlink]

Despite the arguments between Grey1 and myself a few months back whereas he posted his wins each day, his doing so came with screenshots of those trades. He was trying to prove a point, and show his success, and the accompanying screenshots did just that.

I think its totally fair and even pertinent that if someone starts a thread based on what he/she is doing, live, to prove something, they should post documentation requested to prove just that. Otherwise, he could just be making it all up. It wouldn't be expected of 99% members or yourself Split, but then your not the one trying to prove something to all T2W members.

Point taken.

 

[Crap Buddist]

Andy

This about about buyer - writer edge. Not about being correct when making a market call.

Let me put it another way......do you expect the writer of the Apr 5925 Calls to make a profit ? If not why not ? After all they are both written positions, but with opposing market views

Thats a good point, you wouldnt want to be a naked writer on the wrong side of the market.

Now I can see what people mean when they trade options looking for volatility either side.

It posted it before I finished typing. I mean is it typical for option writers to write either puts or calls based on a volatilty value being offered ? Say the market spike 300 points up, look to write calls @ say a strike 300 higher than that 300 point spike? And just base it on those spikes whether its a bull or a bear market?

 

[A Dashing Blade]

This was not a demonstration of how and why but the end result, certainly thats how i have interpreted this thread.
instead all i see is abuse and mockery with the typical heard mentality which will most likely discourage future practical demonstrations.

All I see is a failure by Socrates to engage in any meaningful dialog with regard to

1) the choice of option and strike
2) his rationale for the trade
3) alternative stratagies that may - given an answer to 1) and 2) - be a more efficiant use of capital

It is his failure to engage that is resulting in "abuse and mockery "

 

[andycan]

Andy

This about about buyer - writer edge. Not about being correct when making a market call.

Let me put it another way......do you expect the writer of the Apr 5925 Calls to make a profit ? If not why not ? After all they are both written positions, but with opposing market views

Profitaker

good point!
but im pretty sure Socc did say this was regarding writing puts.
also it may well be fair to say that the 'edge' between buyer and seller is regarding in this case the writer and its counterpart

 

[andycan]

All I see is a failure by Socrates to engage in any meaningful dialog with regard to

1) the choice of option and strike
2) his rationale for the trade
3) alternative stratagies that may - given an answer to 1) and 2) - be a more efficiant use of capital

It is his failure to engage that is resulting in "abuse and mockery "

maybe so
but you have to admit there is an air of personal digging going on!!
by all means ask questions but i suspect he has a criteria on the demonstration and wishes to stick to it

 

[Ras1974]

Ras

The statistically correct answer is "N".

Neither.

There is no edge in BUYING options over SELLING them. Maybe that's a better way to phrase it.

Thanks for your comments. - Is it? I would be interested in what statistics you are looking at?

 

[Crap Buddist]

Hmm would be interesting to follow a call option for say APR FTSE 6600, to campare any potentials for gains or returns on Cost. to an april Written Put 5925.

Can anyone post an example so we can follow both ? Whats an April FTSE 6600 Call option gonna cost ?

 

[Profitaker]

I mean is it typical for option writers to write either puts or calls based on a volatilty value being offered ?

Yes, or buy them, as the case may be.

Andy

I've no idea what Soc said. But I thought that the general gist of this thread was to prove that there is some inherent edge in writing rather than buying options. So far, I've not heard any logical argument to support this opinion, never mind proof positive.

If your assertion that Put sellers have an edge over Call buyers in a bullish market holds any truth, then it must logically follow that Call sellers have an edge over Put buyers in a bearish market. From those two statements it must logically follow that Put sellers and Call sellers always have an edge over buyers in any market.

 

[Profitaker]

Thanks for your comments. - Is it? I would be interested in what statistics you are looking at?

My own empirical studies are of the FTSE100 index, using data going back 23 years.

 

[Ras1974]

Not sure that anyone has stated that the buyers have the edge.

Those of us disagreeing that writers have the edge are coming form the angle that markets exhibit a leptokurtic price-change distribution ie that extreme events happen more often than the normal distribution curve would suggest..

Once in a while one of these events will come along and, if you're a writer, wipe you out.

Socrates has singularly failed to repond to this point in a meaningful, understandable way

Fair point, possibly reading this thread too fast.

Also, fair point with regards to the normal distribution, however, assuming the writer is hedged - why should he blow up? (I do know that Socs is doing this naked). Also, surely the buyer is leaking capital in premium payments. Therefore - premium is the edge? Please let me know if I have completely misunderstood this thread.........

 

[Splitlink]

maybe so
but you have to admit there is an air of personal digging going on!!
by all means ask questions but i suspect he has a criteria on the demonstration and wishes to stick to it

I don't think that anything has been said today that could be construed badly and we are not engaged in the usual insults mainly because he is not being drawn into them. Good for him! Criticism is on the cards. After all, he is the star of the show! What he is doing is being watched by lots of lurkers who might be lured into thinking that this is easy. It is, also, very risky. That's why his acts should be questioned. Perhaps, if he answered the pertinent questions he might have an easier life.

Split

 

[SOCRATES]

To the moderators:~

You see what I mean ?

Why should I have to put up with this persitent provocation from Profitaker ?

Why ?

I am too bizzi already to have to put up with this.

You should ban Profitaker for one month so we can all get some peace and progress with this thread, or at least if you do not want to ban him prvent him from posting here. He can post his abuses and grafitti elsewhere.
Thank You.

 

[PKFFW]

Socrates, surely you must see that from a scientific(and dare I say it logically clear thinking) view point, your demonstation, as is, will not and can not prove your assertion? All this demonstration can prove is that you personally have an edge in writing options. Even if you write a million profitable options in a row this is all you have proven.

Your demonstation does not account for all variables. For example, a trader of your asserted talent and knowledge may be able to do just as many profitable options trades in a row as a buyer. In order to prove the inherent edge is simply from writing and not from your own knowledge and talent you would have to concurrently run an honest demonstration where you buy options with the intent of being profitable.(though such a test would be essentially impossible due to your bias towards wanting to prove your idea to be the correct one) That would eliminate one variable at least, there are many more to consider as well. Hence the demonstation is not a valid test of your hypothesis.

As for which I think has the edge, I do not know, do not care and do not wish to make a guess.

Cheers,
PKFFW

 

[A Dashing Blade]

So, from what I can make out . . .

Socrates has the following trades still open . . .

2 March 5975 puts written for 57 . . . . . . . . . . . . . currently 44 offered (Time decay kicking in nicely
26 April 5925 puts written for an average of 60. .currently 62 offered
5 June 6025 puts written for 129.5 . . . . . . . . . . . .currently 126 offered

Furthermore, 5 June 6025 puts were written for 132 and bought to close for 122

Margin requirement we would conservatively estimate at around £50,000 (Socrates refuses to engage on this subject)

Maximum possible profit £22,075

"S**t hits the fan" scenario of market gapping 30% overnight (as it did in Oct 1987) would put the market at 4375 with a notional loss of £517,500

E&EO, pretty sure the numbers are corect.

 

[Splitlink]

To the moderators:~

You see what I mean ?

Why should I have to put up with this persitent provocation from Profitaker ?

Why ?

I am too bizzi already to have to put up with this.

You should ban Profitaker for one month so we can all get some peace and progress with this thread, or at least if you do not want to ban him prvent him from posting here. He can post his abuses and grafitti elsewhere.
Thank You.

Because it has always been your modus operandi and, therefore, you cannot deny anyone else the same rights. Besides, this morning has been a model of how a thread should be run. You should be proud of us all.

About those margin requirements..........?

Split

 

[A Dashing Blade]

Fair point, possibly reading this thread too fast.

Also, fair point with regards to the normal distribution, however, assuming the writer is hedged - why should he blow up? (I do know that Socs is doing this naked). Also, surely the buyer is leaking capital in premium payments. Therefore - premium is the edge? Please let me know if I have completely misunderstood this thread.........

Absolutely correct, sell an asset (ie the time value componant of an option's premium) which must expire worthless.

As to hedging, there is no such thing as a perfect hedge as, essentially, second derivatives of a curve are used to monitor and adjust the magnitude of the hedge.

Simple example with easy numbers just to illustrate the point

I write 100 puts which have a delta of 0.25. To make myself delta-neutral (ie unconcerned with moves in the market) I sell 25 Futures (which obviously have a delta of 1).

Overnight, the market gaps down, the puts suddenly have a delta of 0.5!
But I was supoosed to be hedged!

 

[A Dashing Blade]

Besides, this morning has been a model of how a thread should be run. You should be proud of us all.

Aye, it's trundling on quite nicely imo.

 

[Splitlink]

. .

"S**t hits the fan" scenario of market gapping 30% overnight (as it did in Oct 1987) would put the market at 4375 with a notional loss of £517,500

E&EO, pretty sure the numbers are corect.

Thanks for that information.

The man isn't doing badly. What is he moaning to us about?

I hope the s**t does not hit the fan, I would not wish that on anyone.

Split

 

[Profitaker]

DB

The total margin requirment on those positions you posted up #335 is £ 65,990 plus broker surcharge (minimum 25%) so call it £ 82,000.

That margin could easily quadruple, or more. The main exposure is vega, so a serious IV spike would blow anybody short naked those positions sky high.