The ideas that I trade by:

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trueblueTEX
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Postby trueblueTEX » Tue Feb 12, 2013 4:54 pm

Where was it that I recently read that our brains try to complicate something simple?

I think it was on Kreslik (probably MO.)

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MightyOne
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Postby MightyOne » Tue Feb 12, 2013 6:28 pm

"Nice illustration, but you did kind of bias it to make the midpoint look better by having equal ranges" -PT

It is not a 'bias', the bars are all the same candle.

Price will spend most of its time between two points & not as one point or the other.
We all know where the midpoint will be on the close of the bar; at the open price.

But lets say that price did again expand the range =)
at some point there is a ret and you are back in the illustration:

Do I wait for and use the closing price, a random event within the range?
or
Do I use the midpoint, a fixed place from which I can make a decision?

& I'm not talking about small charts where this idea is inconsequential; strictly daily+.

I have nothing against your step chart, I am just trying to explain why I use the midpoint.

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PebbleTrader
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Postby PebbleTrader » Tue Feb 12, 2013 6:37 pm

"It is not a 'bias', the bars are all the same candle."

LOL, Gotcha, thought those were 5 consecutive bars you were showing.

I understand better what you are doing now, you were looking at it more from an active bar point of view.

----------------------------------

I wasn't criticizing, just offering constructive feedback and different perspective :)
Life is just a journey

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rushN4
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Postby rushN4 » Tue Feb 12, 2013 6:47 pm

Hi MO and all other Pirates,

Im just diving into the World of Options because i was not able to find succes with trading Forex. I purchased all the stuff MO suggested in this thread and watch nearly all the videos on the DVD course. But i have to watch them all over again. Making Money on TIME decay is what the course is mostly about.(but there are also other strategies)

when this guy (David Vallieres:) on the videos begins to adjust his positions, is that not some kind of cost averaging? I mean if you do that all the time and suddenly a Flash Crash happens then a margin call is not far away. There are ways to protect from such an event but if you do that your profit is getting smaller because of the protection you have to put on.(buying an OTM PUT)

MO do you use that kind of trades (Iron Condors, straddles,strangles) to collect money on Time decay?

I also thought about Options and your Space Wars concept. I think with the Space Wars concept you build your own OPTIONS on FX (POSITION=STRIKE) but there is one BIG difference with real Options you can collect money on time decay so even if price does not move you make money at the end.( If price is closing higher it probably will not close lower) With the Space concept price has to move in your direction to make money.


I think all the concepts MO came up with ZL,CCs....have to do with OPTIONS and TIME.

I was looking at Options before but after seeing all that complicated stuff i put it aside because Forex looked much easyer, maybe thats the hurdle one has to overcome to make the switch from loser to winner.


Im still new to the Option stuff so maybe it does not all make sense what i wrote.:wink:

cheers

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MightyOne
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Postby MightyOne » Wed Feb 13, 2013 4:02 am

The DVD course is 3.5 out of 5 stars at best; it mostly a cheap introduction to the TOS platform.

In the case of a 'flash crash' you will likely realize your maximum loss:

This loss will be far greater if you buy a call option than had you traded a vertical spread.
In either case, you cannot get a margin call because your risk is limited to the premium that you pay less the premium that you receive.

If you sell/write naked (unhedged) options then yes you can get a margin call because you have taken on unlimited risk in exchange for the premium

Do not be discouraged by the fancy names:

Time Decay is like positive or negative interest in Forex.

Volatility is like a price spike: if you buy in a range and price spikes then you are in profit, but if you buy into a spike and price returns to the range then you are sitting with a loss.

Option strategies are just 'shapes':

A call option is _/ <-- limited risk and unlimited reward.

Combining options creates different shapes:

_/``\_ _/\_ \__/ _/``

Where the shape intersects with your 'zero line' is your break even point.

Keep it simple & stay away from managing deltas.

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rushN4
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Postby rushN4 » Wed Feb 13, 2013 4:35 pm

MightyOne wrote:The DVD course is 3.5 out of 5 stars at best; it mostly a cheap introduction to the TOS platform.

In the case of a 'flash crash' you will likely realize your maximum loss:

This loss will be far greater if you buy a call option than had you traded a vertical spread.
In either case, you cannot get a margin call because your risk is limited to the premium that you pay less the premium that you receive.

If you sell/write naked (unhedged) options then yes you can get a margin call because you have taken on unlimited risk in exchange for the premium

Do not be discouraged by the fancy names:

Time Decay is like positive or negative interest in Forex.

Volatility is like a price spike: if you buy in a range and price spikes then you are in profit, but if you buy into a spike and price returns to the range then you are sitting with a loss.

Option strategies are just 'shapes':

A call option is _/ <-- limited risk and unlimited reward.

Combining options creates different shapes:

_/``\_ _/\_ \__/ _/``

Where the shape intersects with your 'zero line' is your break even point.

Keep it simple & stay away from managing deltas.



I understand what you mean with the maximumg loss on the flash crash with buying a call Otpion or a vertical spread, the loss is limited.

But the guy in the videos is laying Positions over Positions and that requiers more and more margin.(he always bet on that price will stay in a range and if it does try to breakout he lays a bigger Range on Top of the old one)
If someone thinks he can always win with this type of adjustments and take more and more risk it could be he lose a big amount of his account on a Crash.



"Keep it simple & stay away from managing deltas." MO

Does that mean stay away from laying new Sell Option over old Sell Options that are on their break even point?(adjustment,repairing a trade)
Does this then also mean staying away from Selling OPtions (collecting Premium)?
Or do you mean dont adjust positions that are reaching the break even point?

thanks for taking time

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MightyOne
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Postby MightyOne » Wed Feb 13, 2013 7:06 pm

"But the guy in the videos is laying Positions over Positions and that requiers more and more margin" -rushN4

You don't have to 'save' your positions if you don't want to ;)

If you have some profit from THETA then you can roll (sell old, buy new) one condor into another with minimal loss if any.

These are my steps for trading options:

1) Option Spreads
2) Vanilla Options (even OM & deep out of the money)
3) Liquidate and buy the Outright with a cushion of profit
4) Covered calls, leg into intermonth spreads

Go down the list as you gain money from the previous.

Why the transition into outrights eventually?

1) you can get 3.5+ months for commission and fees
2) unlike options, your profit is 'marked to the market' and can be used to fund the purchase of more contracts without liquidating.

Naked Futures are DANGEROUS, do not attempt to trade them without a cushion of profit.

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rushN4
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Postby rushN4 » Wed Feb 13, 2013 8:02 pm

MightyOne wrote:"But the guy in the videos is laying Positions over Positions and that requiers more and more margin" -rushN4

You don't have to 'save' your positions if you don't want to ;)

If you have some profit from THETA then you can roll (sell old, buy new) one condor into another with minimal loss if any.

These are my steps for trading options:

1) Option Spreads
2) Vanilla Options (even OM & deep out of the money)
3) Liquidate and buy the Outright with a cushion of profit
4) Covered calls, leg into intermonth spreads

Go down the list as you gain money from the previous.

Why the transition into outrights eventually?

1) you can get 3.5+ months for commission and fees
2) unlike options, your profit is 'marked to the market' and can be used to fund the purchase of more contracts without liquidating.

Naked Futures are DANGEROUS, do not attempt to trade them without a cushion of profit.



"If you have some profit from THETA then you can roll (sell old, buy new) one condor into another with minimal loss if any." MO

Ok i think i understand what you mean, it is like in that example:
http://www.optionsplaybook.com/managing ... t-spreads/


1) Option Spreads = Bull Put Spread/Bear Call Spread

2) Vanilla Options (even OM & deep out of the money) = Buying Call/Put Option

3) Liquidate and buy the Outright with a cushion of profit = Buying the Future/Etf

4) Covered calls, leg into intermonth spreads = Protecting the the bought Future/ETF by Selling a Call Option


correct me if im wrong in something...im still learning the basics.
This Future and Options Jargon is still new to me

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MightyOne
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Postby MightyOne » Thu Feb 14, 2013 4:25 am

1) there are many types of option spreads

2) even though a deep out of the money option is likely to expire worthless, it can still significantly increase in value prior to expiration.

3) I don't trade ETFs

4) that is correct. but an intermonth spread is not an options position.

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Postby newscalper » Thu Feb 14, 2013 11:52 am

I wouldn't trade ETFs, I tried a year or two ago and they proved...problematic. Spreads are stupidly wide too so not something you'd day trade.

This isn't necc. what MO was talking about but it's proven profitable this last 3 days for me.
Yesterday I took the eu long but noted that the weekly was down, waiting for the daily down etc - got one on the short yesterday afternoon and was wanting to load up again short - missed that one as it was 3 or 4 in the morning over here. Then took further shorts on the m15 later this morning. Long scalp on the Swissy worked out too.
No, I'm not doing something as dumb as trading a MA cross - what you see on the chart in hindsight is not what you see as it occurs - you have t]o see the larger TF MAs start to push in real time. What I'm looking for on a 15 minute scalp is for H4 to be holding in a certain direction, if H1 follows lok to M15 to enter. If H1 is pulling back wait for movement on the M15 to start pushing the H1 in the same direction. If it doesn't go your way you can get out for a tiny tiny loss. I know pips don't matter and % do but over the last three days it's done something like 80 pips gain and 7 pips loss - I took two trades on EU yesterday and closed for tiny losses when the H1 started to push against again.

Of course the medians do move in real time and that's what you're looking for.

Image

Image

I need to study this some more to make sure it's not just a purple streak in a random sample.

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