Tuesday, September 8, 2009

Re: [TheOptionClub.com] Charles Cottle Presentation: Goal of Dissection

 

--- In OptionClub@yahoogroups.com, Ricky Jimenez <rickyjim@...> wrote:
>
> It would seem that the "decomposition into baby butterflies" is the
> central point of his method. Is that some way of breaking up an
> arbitrary options position into a sum of simple ones (analogous to a
> Fourier series)? Does he have some sort of goal position in mind,
> described in terms of baby butterflies and other basic positions,
> which he tries to leg into?
>
>
> On Sun, 06 Sep 2009 16:28:13 -0000, "jamesbparker999"
> <jp@...> wrote:
>
> >Viky
> >
> >Hi, Charles Cottle's approach to teaching options is not easy to digest, but incredibly rewarding when you can.
> >
> >Michael Catalico regularily refers to 'synthetic' positions and that he doesn't distinguish between Call and Put spreads or between Call and Put Butterflies .... as the are all synthetically equal to each other.
> >
> >Charles's work aims to give you a fundamental understanding of these concepts, and then go beyond this, by applying his dissection methodology, you can sub-analyse your position into different baskets that you can prioritise from a risk management perspective.
> >
> >If we were aiming to become airline pilots we would require thousands of hours of studying, training, simulation before flying solo ... options trading is no different.
> >
> >I would encourage you to revisit Charles's work .... and maybe we could discuss some of the concepts here that you want to get a better understanding of.
> >
> >Cheers
> >James
> >
> >--- In OptionClub@yahoogroups.com, Viky <vikas.basantani@> wrote:
> >>
> >> Hi Chris, as I feared earlier, personally for me the presentation wasn't any
> >> easier to digest than some of the most difficult chapters in Charles'
> >> book:-)
> >>
> >> Having said that, thank you very much for taking the pains to arrange the
> >> webinar. It doesn't happen very often that you get to hear from such
> >> experienced traders and that too for free...
> >>
> >> May it is time that I revisited his book (bought a few years ago) to make
> >> another attempt at understanding/improving my knowledge about dissection
> >> etc...
> >>
> >> Happy loooong weekend to all...
> >>
> >> Cheers Viky
> >>
> >> http://options101.wordpress.com
> >>
> >>
> >>
> >> On Sat, Sep 5, 2009 at 7:21 AM, Ricky Jimenez <rickyjim@> wrote:
> >>
> >> >
> >> >
> >> > Chris, in the future, I hope you can suggest to the speakers, to
> >> > explain their modifications by showing how they change the trade's
> >> > expiration diagram. I think Charles assumed the viewers had greater
> >> > vizualization capabilities than most of us have.
> >> >
> >> >
> >>
> >
>
The Goal Ricky: To find the next trade; your highest priority. What I mean is; when you accumulate a convoluted position as a result of initiating a position, followed by eventual adjustment(s), you need to establish where the bulk of your risk lies in order to liquidate that aspect first, whether it be to take a profit, stop a loss, or remove the risk because you no longer have an opinion.

The excesses or remnant positions (net of butterflies because they are rather insensitive to underlying price fluctuations for most of their life until expiry) become components of that next (highest priority) trade.
I hope that helps.
Charles

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