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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe -- Ignore unavailable to you. Want to Upgrade?

To: David Lind who wrote (434)	3/13/2002 11:01:05 PM
From: Dominick	Read Replies (1) \| Respond to of 1064

Hi Dave: While I generally agree with your point about advising others, there is also the other side of the coin. It is a well know fact that the market will do what it wants to do regardless of your position. Knowing that, it is the responsibilty of the trader to have a plan. The trader must know and prepare what to do when his trade his favorable or when it is not. If the novice is weak in certain areas he/she must assume the responsibility to read books, take courses or ask for advice. After having received the info the novice then can paper trade or enter with a small trade to test and to get confidence. Other than that, the old proverb " a fool and his money are soon parted" comes into play. Regards, Dominick

To: David Lind who wrote (434)	3/14/2002 12:14:12 AM
From: Dan Duchardt	Read Replies (1) \| Respond to of 1064

David, It is not my intention to put you, or anyone else down for expressing concern about the dangers of trading options, and jt or anyone else reading this thread is well advised to pay close attention to the risks as well as the potential rewards of any of the strategies discussed here. The introduction to this thread is quite explicit that it is a forum for more advanced options topics, and jt's first post on this thread demonstrated an awareness of the risk of loss as well as expressing an interest in spreads as a way of mitigating that risk. From the general knowledge he displayed in that post, I saw no reason to respond to anything more than his direct questions about the strategies in question. All of us build on our experiences to get where we are; sometimes those experiences are very painful and tend to leave us more sensitive in one particular area or another. Your heavy losses from options trading have sensitized you to the dangers of trading options. In my case, what I have learned about options over the last couple of years convinces me that I could have avoided losses from stock ownership had I been able to employ the strategies I have come to understand. Perhaps because we come from different experiences, we disagree on your last point. Options do have their place. But that place is not in the hands of people unless they have truly proved their worth as outstanding stock traders. I would argue that one can go (and many have gone) very broke trying to master stock trading without success, and that with knowledge and understanding options CAN provide a safer approach to the market than trading stocks. This country is full of people who have lost 50% to 80% of their investments in the last couple of years without ever buying or selling an option. Most of them would have been far better off had they put most of that money into fixed return instruments and bought some LEAPS calls. I started buying CPWR LEAPS a couple of years ago. When it started falling (even before the rest of the Nasdaq) I rolled down to a lower strike with fewer contracts at no net added cost, and then I did it again, eventually owning strike 5 calls that I recently sold, covering my full cost. I didn't make much money, but even if I had lost it all I would have lost far less than the stock buyers who held it. Had I been able to sell calls to create diagonal spreads I would have done much better than I did. Unfortunately my IRA accounts would not permit me to make those safer trades. Other accounts would not permit me to buy options at all but they would let me own all the stock I had the cash to buy and ride it into the ground. The point is that stock trading and option trading are both risky. Each has its advantages and disadvantages, but if properly used options give you the opportunity to protect against loss in ways that are not available with stock ownership, and a mechanism for realizing gain even if a stock price never rises or falls. Being a great stock trader would certainly help you be a better options trader, but I cannot agree that it is a prerequisite for achieving success with options Dan