Wednesday, September 9, 2009

RE: [TheOptionClub.com] Charles Cottle Presentation

 

Yes Murthy captured what I was fumbling to say. Somewhere in there I did reference the dynamic nature of an evolving position with “if you can continually lock in risk free, positive edge trades like flies, you will be a consistent winner.” The “if” is the key.

 

But to Charles’s point – and for the sake of clarity – a fly is of course a LIMITED or fixed risk trade. And from a risk management standpoint it is a very versatile tool both figuratively to analyze a position and literally to modify and shape your risk/reward profile.

 

From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On Behalf Of Murthy N
Sent: Wednesday, September 09, 2009 12:37 AM
To: OptionClub@yahoogroups.com
Subject: Re: [TheOptionClub.com] Charles Cottle Presentation

 




I am sure Michael can speak for himself on this, but let me attempt to give Charles the context of Michael's statement.

 

Charles, One of the adjustment startegies that Michael likes and often speaks is to convert a (long) vertical into a butterfly for a credit - IF the market goes your way. If I am not mistaken, that's what he implied here and not necessarily that a fly has zero risk. Please correct me if I am wrong, Michael.

 

Thanks,

Murthy

 

 

 

I would not say; "A butterfly is a RISK FREE trade, so it is
one of the natural positions a market maker ..."  Certainly the risk is limited and relatively smaller than most position types and I realize the point trying to be made but I would say that because butterflies do not fluctuate in value for most of their life, removing them via dissection often uncovers more potentialy iminent risk to deal with first.  I would also say that there is a synergy to evaluating risk using dissection along with traditional analysers.
CC




 




__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
Recent Activity
Visit Your Group
Give Back

Yahoo! for Good

Get inspired

by a good cause.

Y! Toolbar

Get it Free!

easy 1-click access

to your groups.

Yahoo! Groups

Start a group

in 3 easy steps.

Connect with others.

.

__,_._,___
at

No comments:

Post a Comment