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TheBramble
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Absolutely not!!! Nothing to do with collapsing vols...harryp said:
Success at selling premium has EVERYTHING to do with basic probability...
Remember 1:7...(sorry RR)
Tony,
Lets presume that in Jan 2003 with the ftse at 4000 and vols at 25% windle sold an atm call option with 30 days to run and received X.
!2 months later ftse is again at 4000 vol is at 15% and he does the identical trade. Does he receive X ? Of course not , he gets much less.
When windle sells premium it means he is going short. So if you sell on day 1 and buy back on day 20 at a profit, and during that time vol goes from 25% to 21% then you've made some of your profit due to the drop in vol.
Surely that's obvious ?
" success at selling premium has EVERYTHING.............. " NONSENSE !!
I had a quick look at your exchange with RR. Read his comments again because he knows a great deal more about options than you do.
SOCRATES ..
You obviously dont know much about options if you believe that is a reason for selling premium
Lets presume that in Jan 2003 with the ftse at 4000 and vols at 25% windle sold an atm call option with 30 days to run and received X.
!2 months later ftse is again at 4000 vol is at 15% and he does the identical trade. Does he receive X ? Of course not , he gets much less.
When windle sells premium it means he is going short. So if you sell on day 1 and buy back on day 20 at a profit, and during that time vol goes from 25% to 21% then you've made some of your profit due to the drop in vol.
Surely that's obvious ?
" success at selling premium has EVERYTHING.............. " NONSENSE !!
I had a quick look at your exchange with RR. Read his comments again because he knows a great deal more about options than you do.
SOCRATES ..
You obviously dont know much about options if you believe that is a reason for selling premium
growltiger
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Option writing and volatility
But maybe something to do with collapsing volatility, in the following way. Supposed Windlesham is making a nice income out of writing options (probably, he is mainly doing credit spreads). As volatility collapses, the amount of premium he can take in on this strategy declines. With relatively fixed capital, he cannot compensate for the decline by just writing more tickets. So he looks for a way of exploiting his entry signals that is not apparently sensitive to the level of volatility and not subject to the ravages of theta. Bingo, he decides to try futures.
TheBramble said:
But maybe something to do with collapsing volatility, in the following way. Supposed Windlesham is making a nice income out of writing options (probably, he is mainly doing credit spreads). As volatility collapses, the amount of premium he can take in on this strategy declines. With relatively fixed capital, he cannot compensate for the decline by just writing more tickets. So he looks for a way of exploiting his entry signals that is not apparently sensitive to the level of volatility and not subject to the ravages of theta. Bingo, he decides to try futures.
TheBramble
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Not only obvious Harry, but quite unrelated to my comment.harryp said:
However, I'm sure many will appreciate the basic math lesson.
One small correction though. Unless I'm mistaken, when 'windle sells premium' - it doesn't mean he's going short. He doesn't have to buy it back - it can expire worthless, which the majority do. He's already received his premium.
I'd be the first to acknowledge RR's superior knowledge in options. However, neither he, nor you have contested my position that selling options has a far higher probability of profit than buying them.harryp said:
BTW - we're all way off-topic on this thread with this stuff and if anyone want to carry it on, I'd suggest the options forum would be a good place for it.
TheBramble said:
You're missing the point re the benefits of selling premium in a mkt where vol is steadily decreasing otherwise you would'nt have dismissed my original comment.
If windle is selling premium it means he is going short. The way in which the position is closed does'nt change anything [ if you short a ftse future do you have to buy it back ?]
You are wrong to assume that because most option expire worthless it is more profitable to sell options. [ you can have 5 losing trades , 1 winner ....... and still make a profit on the day.]
china white
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harryp - quick comment - when u trade vol u HEDGE your option positions. when u r short vol e.g. u r short gamma and in order to capture your vega profit as much as possible (assuming vol collapses) u have to be quite good trading short gamma.
thez a famous saying among junior (and not so junior) option traders that "gamma long can't be wrong". Worked perfectly in march-april 2002 when everyone was buying S&P 1 yr ATM vol on dips below 20. I know quite a few chaps who tried to play same game in 2003 and really had to fight to just break even getting smashed on vega.
btw - harryp - this will help u understand quite a few things - ask yourself: why in the bull market of 1999 vol was shooting up with market flying whilst in the recent "bull" market (since March 2003) vol got smashed?
thez a famous saying among junior (and not so junior) option traders that "gamma long can't be wrong". Worked perfectly in march-april 2002 when everyone was buying S&P 1 yr ATM vol on dips below 20. I know quite a few chaps who tried to play same game in 2003 and really had to fight to just break even getting smashed on vega.
btw - harryp - this will help u understand quite a few things - ask yourself: why in the bull market of 1999 vol was shooting up with market flying whilst in the recent "bull" market (since March 2003) vol got smashed?
harryp said:
Back after a week's self imposed ban. Looking forward already to the next one! Nice to see this thread strays off topic with such vehemence!
Re the last para above, I agree 100% (I think this response was implied from one of Socrates' (such a modest moniker) earlier posts- I hear the ban coming already!), but there is certainly much confusion in the preceding paragraph!
I think there is much confused thinking on these boards with what "being short" and "being long" actually means. (Not to mention "hedging" and "risk").
Short does not mean selling, long does not mean buying, hedging does not always mean doing the opposite, and risk isn't measured by your stop loss.
If you are happy with these statements, you understand what you are doing, if you are not, you need to think long and hard about what you are doing!
Like off-piste, off topic is so much more refreshing!
correct spelling to please the pedants of which I am one
I'm glad you're happy!... In the words of Ken Dodd (He beat the taxman- an example to us all : "Happiness, Happiness...." (altogether now- especially the JUDGES) I DREDD the answerRognvald said:
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Rognvald
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Ped´ant
n.1.A schoolmaster; a pedagogue. A pedant that keeps a school i'th' church. - Shak.
2.One who puts on an air of learning; one who makes a vain display of learning; a pretender to superior knowledge. A scholar, yet surely no pedant, was he. - Goldsmith.
For the benefit of those who may not know what it means
n.1.A schoolmaster; a pedagogue. A pedant that keeps a school i'th' church. - Shak.
2.One who puts on an air of learning; one who makes a vain display of learning; a pretender to superior knowledge. A scholar, yet surely no pedant, was he. - Goldsmith.
For the benefit of those who may not know what it means
Rognvald
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Not at all, as it is you who makes a virtue of the quality you purport to describe.
From the shorter Oxford English Dictionary Vol II:
"Pedant - of obscure origin.
1 A schoolmaster, teacher or tutor.
2 A person who overrates book learning or technical knowledge , or parades it ; one who has mere learning without practical judgement ; one who lays an excessive stress upon details or upon strict adherence to formal rules ; occasionally - one who is possessed by a theory, "
You certainly are pedantic but fortunately we do not live in a pedantocracy
From the shorter Oxford English Dictionary Vol II:
"Pedant - of obscure origin.
1 A schoolmaster, teacher or tutor.
2 A person who overrates book learning or technical knowledge , or parades it ; one who has mere learning without practical judgement ; one who lays an excessive stress upon details or upon strict adherence to formal rules ; occasionally - one who is possessed by a theory, "
You certainly are pedantic but fortunately we do not live in a pedantocracy
SOCRATES
When this thread was split from 'no indicators - revisited' I expected it to move on along the route that you originally started. Unless I am missing something it appears to have come to a halt in that direction.
Is it your intention to carry on with your original method of imparting your trading style, or apart from general posts, is that it?
Regards
bracke
When this thread was split from 'no indicators - revisited' I expected it to move on along the route that you originally started. Unless I am missing something it appears to have come to a halt in that direction.
Is it your intention to carry on with your original method of imparting your trading style, or apart from general posts, is that it?
Regards
bracke
Windlesham1
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flattered
just caught up with the posts here. I'm truly flattered by the suggestion that so mighty is my trading power that I have reduced volatility-I'm honestly not that big! It's a question of RELATIVE volatility-there is a very good free calculator at cboe,but often as traders will tell you,just looking at prices you just know when something's out of skew. Volatility on futures is less important to me as it's purely a directional trade-right or wrong,simple as that. Thanks to all for the kind words I'm getting a few trades right now.
just caught up with the posts here. I'm truly flattered by the suggestion that so mighty is my trading power that I have reduced volatility-I'm honestly not that big! It's a question of RELATIVE volatility-there is a very good free calculator at cboe,but often as traders will tell you,just looking at prices you just know when something's out of skew. Volatility on futures is less important to me as it's purely a directional trade-right or wrong,simple as that. Thanks to all for the kind words I'm getting a few trades right now.
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