Thanks Charles. Appreciate the detailed response.
For others who are following, my example was a long put vertical and Charles responded to a long call vertical. Not a big deal, I wanted to know what are his triggers for adjustments were.
The key take-away for me is that you are using technical analysis (mostly likely chart patterns) to make your decisions, which to me doesn't work (patterns become obvious only after they happen). I am not saying they don't work - not for me on a consistent basis while the trade is unfolding.
And yes, Michael's "style" has been a great influence on me, however, I sometimes find myself not so nimble or be decisive at key situations.
Thanks again.
Murthy
For others who are following, my example was a long put vertical and Charles responded to a long call vertical. Not a big deal, I wanted to know what are his triggers for adjustments were.
The key take-away for me is that you are using technical analysis (mostly likely chart patterns) to make your decisions, which to me doesn't work (patterns become obvious only after they happen). I am not saying they don't work - not for me on a consistent basis while the trade is unfolding.
And yes, Michael's "style" has been a great influence on me, however, I sometimes find myself not so nimble or be decisive at key situations.
Thanks again.
Murthy
On Wed, Sep 9, 2009 at 7:46 AM, charlescottle@att.net <charles@riskdoctor.com > wrote:
--- In OptionClub@yahoogroups.com , Murthy N <optionsmaya@...> wrote:
>
> Hi Charles,
>
> I am not one of your paid subscribers - however I did read your CWS book
> (got the book from TOS in 2003 when I opened an account with them) and
> portions of OTTHR that are publicly available. I also saw a couple of videos
> from your website. I love and actually understand your explanations!! Took
> me a while, but I get it now, at least the theory part of it.
>
> Fascinating stuff to say the least ...
>
> Just wanted to drop you a note and say thank you.
>
> Couple of things:
>
> 1. When and how do you decide when to do an adjustment? What is your
> trigger?
>
> Say I I bought a put vertical spread 105/100 when an underlying was at 107.
> Three scenarios:
>
> a) Underlying goes to 109.
> b) Underlying goes to 103 (no adjustment made) and then it goes to 108
> c) Underlying goes to 103 (adjustment made) and then it goes to 99
>
> One of the adjustment timing methodology used (by our own Michael Catalico
> and others) is by using the Expected Move (using the IV of ATM options
> and find the SD of the movement). So I want to know if you preach something
> different.
>
> The biggest impediment in signing up for your courses (other than the
> obvious $$$), is the practicality of using the techniques with commissions
> and slippage for a retail trader like me (btw, I am not a full-time trader -
> fortunately or unfortunately is debatable ;-)).
>
> 2. You may not want to answer this question, but let me ask anyway. What is
> the algorithm for figuring out dissection (I can do it manually) - for
> example, an elongated condor is made up of three or more flies? How do you
> tell a computer to do that? Just curious as a "computer guy" ... as I said,
> if this is proprietary and you don't want to disclose, I completely
> understand.
>
> Thanks!
>
> Regards,
> Murthy
>
>
>> > OptionClub-unsubscr> On Tue, Sep 8, 2009 at 1:47 PM, charlescottle@... <
> charles@...> wrote:
>
> > --- In OptionClub@yahoogroups.com , 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.
> > >
> > Actually `Position Dissection' otherwise referred to as "breaking a
> > position down" is a concept that many people are happy to learn about. I
> > certainly did not invent the concept as I banged heads with countless floor
> > traders in the 80s and 90s in comparing positions and tracking trades. I
> > might be the first and only writer on the subject, so far, but the purpose
> > of Position Dissection is to get everyone on the same page regarding an
> > option position as it evolves, via trade adjustment, and have a common
> > format so that the esoteric nuances of the trade loses fewer followers of
> > the discussion.
> >
> > I am certainly aware that, when first presented, people go "WO Boy", but
> > few would argue that traders need to be aware of the concepts to take their
> > trading further. Chris is very aware that we would lose a few viewers and
> > that there would be Deer in the headlights but we wanted to plant the seed
> > and I think we achieved that. Since the recordings will always be
> > available, those not ready now can come back when they are ready. I am
> > happy to continue the discussion with anyone who gravitates to this practice
> > and perfectly understand that Position Dissection and Options, for that
> > matter, are not for everyone.
> >
> >
> >
> >
> > --------------------- --------- ------
> >
> > The goal of TheOptionClub is to provide a forum for members to work
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>
Reponses:
#1: No definitive answer. Can be done at a predetermined value (of the spread) point or when an action (technical analysis level) point has been reached or breached.
#1a Part I: If 109 was your projection and your further analysis projects a collapse then take profits and move on.
#1a Part II: If your technical analysis suggests consolidation at 110ish and the 110/115 has significant value, condoring it to the 100/105/110/115.
#1a Part III: If your technical analysis suggests retracement to 105ish sell the 105c/110c call vertical (or buy the 105p/110p vertical), butterflying it to the 100/105/110.
#1a Part IV: If it is really bearish, like a double top, you can "3 Way" it by legging the 105p and later selling off the 100p if it picks up significant value.
#1b: See all responses to #1a.
#1c Hard to say because I don't know which adjustment you made but say you adjusted into a higher strike BWB (Broken Wing Butterfly) by selling 2x or 3x as many 105/110 verticals or an equal amount of 105/115 vertical spreads. At that point you can walk away from it or cover the shorted spreads for .05 or so (for a pop back up).
The only thing I "preach" is NNN "Never a Need to be Naked (Short)". Michael's method is very sound. Almost any methodology can make money but they can all also lose. I try to shed light on the pros and cons of each method to show people how to identify if they are violating their own self imposed rules. If Michael keeps his discipline and follows his rules (win or lose), I would have nothing to say to him as I can sense that he knows what he is doing.
#2 I am not a programmer either but have directed programmers on what it is that I do manually and they have built macros that carry out a set of logical steps.
Hope that Helps,
Charles
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