James,
Thank you so much for sharing your info.
This is very helpful.
To those who are new to this group -
Prior to my joining this group,
I subscribed to an advisory service which employed multi-calendar strategy.
In a market hiccup, the result was disastrous.
I had a good understanding in option theory, but in practice,
there were many nuances.
Consistency in result eluded me.
There are different ways to trade options.
I had heard good comments about Dan Sheridan.
Dan Kaufman of ThinkorSwim,
John Summa of OptionsNerd,
Mark Sebastian of Options911 provide good training.
I had followed Michael's paper trade for 5 times.
With different market environments, Michael was generous to provide
commentary while providing tips to watch out for.
Very quickly, I realized the gap in my knowledge.
When Michael used the term 'scalp', I had to look for background info
how it was done.
I was usually 4-5 steps behind Michael.
It was like attempting to cross a road where there was no traffic light,
how do I judge the speed of the incoming traffic? 'market feel'
Michael would be adjusting trades, questions from other group members
come fast and I would be using TOS trying to understand the thinking behind them.
Michael once said that the key is to 'learn to trade'.
I found it to be true.
As I followed the paper trades, and I re-studied the options strategies,
I have a better understanding how options behaved in real time.
For members' benefit, Michael used only end-of-day adjustments.
Even in difficult market environments, Michael managed to come on top.
I recalled only one incident that the trades resulted in a small loss.
Please note that Michael mentioned that his trading profit is about $0.05 per contract.
Check out his past comment about negative expectancy too.
So, I followed Michael 5 paper trades,
I re-read Charles Cottle's book,
I watched John Summa and Mark Sebastian webinars,
I began to find similarity in approach to risk and trade management.
This could be because of their experience and success as market makers.
It was hard work but, for me, it was a turning point toward 'consistency'.
When Michael showed us GS trade, I ran my own paper trade to see how I fare.
We all know how volatile the market was in May.
Michael trade ended in profit, my trade ended with $500 in loss.
I dug in Michael's past option gymnastics and ended up breaking even.
So, it was 'consistency'.
Michael has his own account to trade.
But, we have been fortunate to have him assisted us on the side.
So, for some of us who knows Michael, his comments are worth noting.
Best regards,
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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