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Strategies & Market Trends : Options
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To: PAL who wrote (129)12/27/1999 12:49:00 PM
From: buffalogrif  Read Replies (3) of 8096
 
To Jill and Poet (w/ questions for the thread):
Congrats on starting this thread. It dovetails perfectly with my investing and philosophy and might be an area where I can contribute (as opposed to just lurking and learning).

But I'm wondering what level of detail the thread wants to shoot for.

Here's the problem. While options are a wonderful tool for maximizing returns and/or minimizing risk - they are also complex creatures. Prices do not move in a linear fashion with shifts in the underlying price. Prices change with the simple passage of time and with changes in the market's assessment of volatility. In the real world, all of these variables are moving at the same time.

Here's my point: there is a reason why ATM options "decay" faster. There is a reason why out of the money options seem to pick up steam as the market moves toward the strike price. There's a method to the madness of picking strikes and expirations. All of this can be forecast and measured, but there's math involved in constructing and using the models.

I, personally, want to know this stuff. And not because I like the math (heaven forbid!), but because I want to know why I'm making or losing money. So I've spent a lot of time learning it.

But I can also see how keeping it simple might work for others. To do that you need only focus on your profit profile at expiration. As long as you only buy options and keep the positions simple, that should work.

I'm just looking for a way to make a positive contribution and wondering how much information is not enough and how much is too much.

Feedback?
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