Chris, there was an Optionetics infomercial on TV just this last weekend in the Chicago area. They were announcing various locations for their free seminars all around the city. It was pretty slick, with George F. prancing around the stage all enthusiastic! I've never given any money to the Optionetics people, but that Hooper guy got a decent chunk of my change a couple years ago. I agree with your earlier posting that this forum will teach you a lot more than those weekend seminar hawkers.
RFH
--- In OptionClub@yahoogroups.com, "TheOptionClub" <chris@...> wrote:
>
> Years ago I was an Optionetics student, too. Spent $3,000 and learned
> very little about option pricing or the greeks. They showed me a number
> of great ways to spend $20,000 to $30,000 with them, however.
>
> Christopher Smith
> TheOptionClub.com
>
> --- In OptionClub@yahoogroups.com, "PLA" <optionzz@> wrote:
> >
> > Irshad,
> >
> >
> >
> > Regarding a good source for understanding and applying the Greeks, but
> more
> > importantly, all about options and how to trade them, I recommend
> > Optionetics.com. I had my original training with them 10 years ago,
> and
> > have repeated classes (for free) a number of times, as well as
> attended
> > their annual OASIS three day function for updates. Best money I ever
> spent.
> > Finally, Optionetics has a POWERFUL analytical website (Platinum Pro),
> with
> > full historical options data, and amazing search and trade analysis
> > tools.unlike anything I've seen anywhere else. It was created by
> > professional traders for professional traders (at least that's what
> they
> > say!) You can try it for free for two weeks, but be prepared to drink
> from
> > a firehose! Of course, there are lots of sources and I use them too.
> >
> >
> >
> > Pete
> >
> >
> >
> > From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com]
> On
> > Behalf Of TheOptionClub
> > Sent: Thursday, July 08, 2010 12:38 PM
> > To: OptionClub@yahoogroups.com
> > Subject: [TheOptionClub.com] Re: Greeks - Chain Reaction
> >
> >
> >
> >
> >
> > Irshad,
> >
> > You have to be careful about assumption like those you are proposing.
> > Always keep in mind that the greeks are outputs from an options
> pricing
> > formula, but that option prices are not determined by option pricing
> > formulas. Option prices are dictated by the laws of supply and demand
> and
> > the option pricing formulas simply try to explain why the prices are
> what
> > they are. That explanation always comes down to a measure of implied
> > volatility.
> >
> > In general, we do expect to see implied volatility ease when the
> market
> > moves higher but this is not always the case. Maintaining delta
> neutrality
> > addresses the directional risk present in your portfolio, but often it
> seems
> > that traders lose sight of the real goal. In my book, the goal is not
> to
> > reduce my delta to near zero. Rather, my goal is to manage risk.
> Those
> > greeks help me assess where the risks lie and provide me with some
> guidance
> > as to what I might do to address unacceptable risks.
> >
> > The danger I find is that as traders begin learning about the greeks
> they
> > lose sight of the bigger picture. Option prices are going to respond
> to the
> > demand present in the market. That demand is a reflection of the
> relative
> > expectation of the marketplace for future price movement. When the
> market
> > grows concerned that equity prices are susceptible to significant
> price
> > movements of 3SD or more you will see option prices rise. This is
> reflected
> > in an inflated implied volatility. As the concern of the market eases
> the
> > demand for options subsides, which is in turn reflected by a lower
> implied
> > volatility.
> >
> > Implied volatility only effects the extrinsic or "time value" of an
> option.
> > So, if the implied volatility rises the option's time value has
> increased.
> > The expiration date of that option remains unchanged, however. With
> the
> > knowledge that options lose all of their time value as of their
> expiration
> > date we know that the relative "time decay" has to increase for the
> option's
> > time value to be reduced to zero by that fixed date of expiration. Of
> > course, this is all mathematical theory and imperfect at that because
> even
> > with a large theta an option's implied volatility can continue to rise
> and
> > inflate the value of an option's time value even as expiration
> approaches.
> >
> > So, the answer to your first question is that your assumption is not
> > necessarily correct. It is true that when you see market prices
> trending
> > higher you will often see implied volatility subside. With that lower
> > implied volatility you will necessarily see less time value in your
> option
> > and, therefore, a smaller decay rate. Your option's vega is a
> measure of
> > it's sensitivity to changes in the implied volatility. While
> potential
> > price collapse is often a cause for increased implied volatility other
> > factors can inject uncertainty and concern into the market. Earnings
> or FDA
> > announcements are prime examples. Such events can inject concern into
> the
> > minds of investors who in turn seek to protect their equity positions
> even
> > if prices have been trending higher. This increase in demand for
> options
> > will result in a rise in the option's pricing and, consequently, a
> rise in
> > the implied volatility figures returned by an option pricing model.
> >
> > In other words, even though there is often a correlation between price
> > movement of the underlying and implied volatility, there is no direct
> link.
> > Assuming that there is a direct link is an incorrect assumption.
> Where you
> > will find a direct linkage is between implied volatility and the price
> of
> > the option. In fact, many who really know this stuff will tell you
> that
> > implied volatility IS the price of the option.
> >
> > I don't have any one book or on-line resource to suggest. In my
> experience,
> > learning this stuff requires a bit of struggle. You'll just need to
> keep
> > working at it until your mind wraps around it and grasps it. There
> are many
> > resources on-line, but quite frankly I think this message board is as
> good
> > as any of them. I might also shamelessly plug the Trading Room
> > <http://member.theoptionclub.com> , but the real deciding factor in
> > achieving a good understanding is persistence.
> >
> > Christopher Smith
> > TheOptionClub.com
> >
> >
> >
> > --- In OptionClub@yahoogroups.com, Mohamed Irshadullah mirshadu@
> wrote:
> > >
> > > Hello Option Gurus,
> > >
> > > Need your help in understanding and setting up build block for
> delta
> > nuetral position. Based on the three standalone option theories
> > >
> > > 1) When underlying (price) goes up, Volatility goes down
> > > 2) When Volatility goes down, Gamma (net, long or short) goes up
> > > 3) When Volatility goes up, Positive Theta goes up
> > >
> > > Question #1, Is it correct to assume that, if price go up, then vega
> (net)
> > & theta (positive) goes down and gamma (net) goes up and vice versa,
> when
> > prices go down?
> > > Question #2, Is there any recommended book or online resource that
> can
> > help in understanding & maintaining delta neutral position either on a
> > periodic basis or on occurance of an event like x% movement in
> underlying or
> > change in volatility?
> > >
> > >
> > > Appreciate your response in advance, Happy trading!!
> > >
> > > Best
> > > - Irshad
> > >
> >
>
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