Hi Berney; Well it looks like those mountains in Cuba are taking
some punch out of her on this last sat view, & maybe she is
slowing her forward motion a bit.
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As for options, when I first started trading them I took a good
hair cut, so with out trying to act like a know it all, I do
try to pass on some of what I learned not so much to get people
into them but to caution anyone new. The writers of options are
more on the professional side than most newbies would think.
I've come to see writers know how to hedge them and most buyers
lose money by a big margin. A person can make money but they better
be a lot better than just good. They have a lot of odds to over
come, and for the most part have to sell what they buy back to
some other mullet who thinks he is going to make a killing.
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Most writers never buy back an option they let them expire
if your a buyer your looking at getting rid of them in a third
market, the writer if he's wrong just buys the stock if its a call,
or goes short if it's a put and lets the option traders fight
it out. The floor traders and specialist can skew the bids/ask
( strip them ) in a heartbeat.
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Any I buy now have to pass what I call a pain test. I don't play
very many now, but of the ones I do play I have not lost on one
for over a year, but that's due to the pain test.
I graph them and only play ones close to, or in the money, when
I find a lot of open interest, and them going off at about 1/3rd
or less than what most of the buyers paid. That in effect opens
up my third market when it comes to selling them, as if she moves
just a tad the right way, "those in pain buyers" try to average
down, along with a rush by the floor traders, it's always the
in pain options that have already been striped & have the big moves.
They are hard to find, and at times I wonder if it's worth the
effort. By and large my expenses, if I count the spread two
ways and both commissions add up over time making the brokers and specialist as much or more than I make, or at least they did
on my 97 taxes.
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I'm looking at the writing angle now as there is only one commission
and the buyer pays the spread, so far if I use say the opposite
of the pain test, and write these things where I write at a
price well above where 2/3rd were bought , and watch my step it
should be a cake walk.
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In graphing options I'm not so much doing TA , but just finding
my position in the pecking order. This is a game of musical
chairs, and when the music stops there are always less chairs
than dancers, to get the edge you need to have good position in
the pecking order. Always play with an edge, as other things
being equal you may need it. I maintain traders who don't look
at strategy are going to wind up sucking hind tit.
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Jim
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