I wrote: For example, take a plain vanilla ratio backspread. Optionetics teaches you how to search for stocks (not options) that meet precise criteria, such as high historical volatility, low implied volatility, and a volatility skew greater than 15%.Marcos asked: Stocks are screened by multi-million dollar computer systems. Optionics teaches how to do better?Response: Optinetics uses a multi-million dollar computer to search stocks and options that match your predefined criteira. They maintain a historical database on options, as well as all the Greeks. Having unfettered access to such an extensive database allows you to backtest any options strategy with real data. If you know of another screening program that searches for real (not theorical) volatility skews greater than 15% on today or August 14, 1998, or implied volatility (IV) within the 10th percentage decile on today or February 13, 2000, please let the board know about it.I wrote: Optionetics teaches the underlying criteria that gives you a statistical advantage of winning. Knowing how to enter a trade is only half the secret of success. Managing and exiting the trade is even more important. They teach that, too.Marcos asked: I only know one way to exit a trade (else it is not "exit"). Can you give more details?Response: Lets consider buying a long call and then converting it into a Bull Call Spread to lower the volatility of the trade, and lowering its breakeven point. A Bull Call Spread is about as plain vanilla spread that you can find. If the trade moves into profitability the overriding concern is when to take profits and how to take them. The first exit rule is to close half when the value of the spread is twice its cost, giving you a 100% profit. This effectively gives you a free trade because you've captured the original cost and you have a profit, too. With half the original position still open, you let the remaining spreads run and when they reach 80% of maximum profits, you close the entire position. If the 80% profitability level is not reached, it is recommended that the remaining spreads be closed when there are 30-days left till expiration--that rule has everything to do with the ravaging effects of time-decay on a long position.Should the Bull Call Spread turn against you, then Mr. Market has passed judgment on your expectations and loudly proclaimed that you are wrong. The smart thing to do is to cut your losses early while your losses are still small. On first blush, Optionetics recommends that you take your losses when the spread is down by 50% and your losses are still small.If you search through my messages on this board, you'll find detailed messages on how I manage calendar spreads and straddles.I wrote: After the trade is opened, Optionetics teaches how to manage the trade so that your maximum risk is minimized. Please note that your maximum risk is not the maximum risk of the trade.Marcos asked: Who wants to minimize risk? If that is your goal, simply bury gold in the vault of a salt mine in Utah.Response: To successfully trade for the long haul, success traders always considers the risk of a trade before any potential profits are considered. If the risk-to-reward is too great, they simply pass on the trade and look for another that's less risky. Preservation of your trading capital should be your first and last concern. Successful speculators are conservative traders with the patience of Job--they don't put on a trade unless the odds-of-success are overwhelming in their favor.If you don't manage your risks, then you'll be working in that salt mine in Utah rather than burying your gold there/I wrote: < In a nutshell, Optionetics teaches you how to be successful with advanced hedging strategies. And you only wanted one example.Marcos asked: Where is the example?Response: Carefully reread the first part of my message. If you want more examples, then dig back through my messages for techniques used with calendar spreads and straddles.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar<