-----Original Message-----
From: Ricky
>
Simple framework for your kind of trading? Pleeeaze. Just knowing
the bare essentials is not enough. I am curious why I have never read
about the method. Do you know many people who operate in a similiar
way?
mc- of course many people trade this way. It's called delta neutral trading.
The variation - which is also very common - is that I add outside units as
insurance bets against volatile moves. It's not particularly complicated:
"sell local, buy remote" as I've said many times before.
If I were to try it myself, certainly paper money for the first
few months, I would sell a small amount of ATM premium every day using
the same play each time, perhaps a single IC or IB and do the
necessary flattening and buying the now OTM shorts during expiration
week. Have you tried or considered such a semi-mechanical approach?
mc- no and I wouldn't necessarily recommend it unless you have infinite
funds available. what you are suggesting is essentially a monte carlo
approach - which works in theory as long as markets are frictionless (not)
and you have unlimited capital (check no again even if you are warren
buffett).
The one criticism of the trying to center the entire trade around the
current ATM, that occurs to me, is why bother so hard with these
volatile stocks since you know, very well that the chances of it
staying put are very low?.
Mc - the point is that I have no idea what the chances are of anything
happening and all I can do is make a small bet, see if it works out, and
react one way or the other once things change.
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