ajtj's Post-Lobotomy Market Charts and Thoughts Message Board

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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts

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To: Lee Lichterman III who wrote (81660)	9/29/2023 8:56:15 AM
From: Qone0	2 Recommendations Recommended By bull_dozer Lee Lichterman III Read Replies (1) of 97594

>> I guess we'll have to agree to disagree. It would be too hard to try and track it accurately. Example, I would count today as a completion. At the beginning of the week I first posted about it. There were 88K puts open. From trading SPY myself, I know there is about a full point of decay per day as expiration gets close. Those puts probably lost at least 3 full points since then. So those are now profitable even if we close a couple points below now because of the decay and the seller's chance to rehedge from today's 430 hit.<< So the time decay is where the money was made by the option sellers. The price they were sold at is really irrelevant. Over time this decay needs no games to be profitable. On a index like SPY it would be hard to push it anywhere it doesn't want to go.. The daily dollar volume on SPY is close to 30 billion. Might be able to do it on a single stock but not the index. So lets say this does happen, option dealers are going to use a billion in capital to make maybe $50 million in options reach max pain. Then after they do this, how do they get out of the billion dollar trade? >> Yes, the MMs hedge accordingly but with the theta decay they can reel those hedges in as time goes by. That's what gamma is all about. As puts go in the money, those shorting the puts have to sell to hedge and when they come out of the money they buy to close those shorts. Time decay clouds the issue even more.<< Who do they buy from, where do the seller magically come from so the can cover? >> If max pain was just the mood of the market, it should act more as a contrary indicator. Instead it usually acts as a magnet.<< No it should act like a magnet, because that is where a large amount of trading took place. >> Plus op ex often moves and reverses drastically like this week vs most times it trending. Most of the books I've read from "insiders" of the markets have them openly talking about how they would push the market in their favor close to contract expirations. The fun begins when two houses are on opposite sides and neither one wants to close out. I don't recall if it was market wizards or market wizards 2 where was a "who's going to blink" the night before expiration and the two traders even talked on the phone to each other about it knowing they were "The Market".<< If the are the market how do the exit any trade? If the shorted or bought to push the market where they wanted it and are the market how do the get flat.? Or is the time decay the only mechanism in play? Over 90% of options traders lose money Less than 10% of options traders consistently make a profit The average options trader loses money in their first year Only 1% of options traders become consistently profitable over the long term Options trading is responsible for a significant portion of overall trading losses Most options traders fail to properly manage risk Options trading requires a high level of skill and knowledge Successful options traders often have a background in finance or mathematics

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