[TheOptionClub.com] Re: GS TRADE [was:How do you manage your Vega?]

 

James,

It has been some time since I visit Cottle's site.
I should also dust up Cottle's book and re-look it.

In your attachment, I noticed you used Cottle's "Risk Illustrator",
is this tool part of his training program?

Beyond his book, have you had any of his training programs?

Thanks,
Sam

--- In OptionClub@yahoogroups.com, "JP" <jamesbparker999@...> wrote:
>
> Sam .. the positive experience is an ability to dissect complex positions into simpler alternative equivalent positions ... that reveal embedded risks / opportunities .... that naturally lead to more logical position management / adjustments ... ultimately you have to do what works for you ... and this works for me .. Cheers, James
>
> --- In OptionClub@yahoogroups.com, "speedsam21" <SpeedySam21@> wrote:
> >
> > Thank you Ricky for the 'Algorithm for Flattening Expiration Graphs'.
> > I am looking at it.
> >
> >
> > Thank you James for your comments.
> > Previously, a poster mentioned that he went through Cottle's book a couple of times to soak in his method.
> > I found it heavy-going too but I continued because what I learned from it helped me a lot.
> >
> > You seem to be familiar with his book and style.
> > What was your positive experience that helped you understand his book better?
> >
> > Thanks,
> > Sam
> >
> >
> > - - -
> >
> > --- In OptionClub@yahoogroups.com, Ricky Jimenez <rickyjim@> wrote:
> > >
> > > On Fri, 21 May 2010 15:31:12 -0000, "JP" <jamesbparker999@>
> > > wrote:
> > >
> > > >Ricky
> > > >
> > > >Please don't take this as being in any way critical, but I disagree completely with you regarding Cottle's book [Options Trading: The Hidden Reallity] as it contains many examples of dissections and synthetically equivalent positions.
> > > >
> > > >Michael's positions frequently end up with 'guts' options that can easily be plotted on a risk graph, but not easily understood from the raw data unless you apply some form of dissction.
> > > >
> > > >For example in the preface to Cottle's book he asks: what amount of money is the most one can lose with the following position:
> > > >
> > > >QQQQ trading at 37.30
> > > >36 strike call at $1.70
> > > >39 strike put at $1.90
> > > >
> > > >A trader buys 10 lots of the 36c / 39p strangle for $3.60 ea.
> > > >
> > > >Have a go at answering without using a risk graph ..
> > > >
> > > >Cheers
> > > >James
> > > >
> > > I agree, James that there are plenty of examples in the book but not
> > > enough information how to go about using dissections to make money.
> > > Buying or selling a box can simplify a position, but I need guidelines
> > > on where to look for such opportunities and how they lead to profits.
> > > I don't see why it is a virtue, not to draw a risk graph. Using the
> > > mechanical table method I have shown before:
> > >
> > > 10*39p
> > > 10*36c
> > > Slope: -10 0 10
> > > Payoff: 30 30
> > > Profit: -6 -6
> > > BE: 35.40 39.60
> > >
> > > so the minimum result is -6 in the interval [36,39].
> > >
> > > I did try to find use for one of Charles' ideas, decomposition in
> > > terms of "baby butterflies". After staring at his description for a
> > > while, I saw that any position, in s region where strikes are at equal
> > > distances, can be decomposed into a positive or negative whole number
> > > of baby all put or all call flies. This becomes obvious if you
> > > realize that a baby fly has the property that its expiration payoff is
> > > the distance between strikes at its center and zero at its wings. I
> > > thought that maybe I could buy a wide fly, say, and then sell off most
> > > of the ATM babies as the underlying hit various strikes in between the
> > > wings of the wide fly. But I soon found out that even with well
> > > traded stocks like Google, ATM baby flies have very large bid/ask
> > > spreads so I was not accumulating much credit by selling them.
> > >
> > > But if you can give me a hint as to where to look for the really
> > > useful stuff in the book, I will try again. :-)
> > >
> >
>

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