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Stating The Obvious and The Quest For Wisdom

  • #881
  • Mar 18, 2010 11:08pm Mar 18, 2010 11:08pm
Quoting SunTrader
Hedgers buy declines and sell advances.

Everyone else trades with the trend if they want to stick around.

And the only uptrend atm is on a 1 minute chart.

Just my 2 cents.
Oooohhh, you're that close to the ignore button MISTER!!!!!
How dare you imply that being long right now is wrong??
Biggest joker
  • #882
  • Mar 18, 2010 11:42pm Mar 18, 2010 11:42pm
Quoting baron193
Oooohhh, you're that close to the ignore button MISTER!!!!!
How dare you imply that being long right now is wrong??
Actually I think I am there already but I am glad you noticed at least. Don't want to get a complex or something.

  • #883
  • Mar 18, 2010 11:45pm Mar 18, 2010 11:45pm
Quoting Scotty B
Darkstar,
There was one thing you said the other night that I didn't understand. When you were showing us that option defense move/stop run, what did you mean when you said that the defenders stops were immaterial? Did the hunters go hunting just to cause that momentary volatility?...
just like he said, it's immaterial/irrelevant because the defense players are defending an option. their main goal is to defend that option.
i think it's like having an accident. when u are riding a car/bike, & get into an accident (deadly or not), u get hurt, right? whether the car/bike survives with minor/major issues, it's immaterial. what's relevant is the passenger (you). if the passenger dies, it becomes more irrelevant if the car/bike survives with just a scratch.

(it's possible) that the hunters did it because it is (possibly) their 'bread & butter', that is stop hunting, & at that time they did it successfully (no matter how small the profit or short the 'mission timeframe' is). [i used the word 'possible' because im just guessing here]
let me know if im off with my reply again.

Quoting Scotty B
...
But there is no content in the news window when you click on it.
i think they are doing that intentionally, for whatever reason.
  • #884
  • Mar 19, 2010 12:07am Mar 19, 2010 12:07am
Quoting Leonlorenzo
Add the bold above to the list of recommended topics I submitted on your site earlier. The more you speak, the more complicated and discretionary you paint the picture of orderflow trading to be.



Not really. I would have made a comparison between the two (average win and average DD) to gauge the kind of risk/return you were working with. I'm guessing risk adjusted return is a variation on that, not sure about the calculation, I'll check it out.

Cheers, Leon
I havent completed this thread, but i think u should concentrate on biggest loss instead of DD, more accurate picture.

A DD could be biased, a string of losing trades can happen at an time, dosent alter the individual trade probability, so in effect u cant control DD.
On the other hand doing ur system stats and calculating ur best 'f' is better done with biggest loss in mind.

Sorry to get of topic, but i was also curious about DS's trade mgmt and risk, and was wondering.
  • #885
  • Edited 1:34am Mar 19, 2010 1:26am | Edited 1:34am
Quoting SunTrader
Actually I think I am there already but I am glad you noticed at least. Don't want to get a complex or something.


There's always something to learn, no matter how..........
Biggest joker
  • #886
  • Edited 2:58am Mar 19, 2010 2:39am | Edited 2:58am
Does anyone know if all the options reported by IFR are barriers? Also, IFR gives you the maturity dates for differant options, do the options expire or mature at the end of the trading day or at some unknown specific time?

Today, the closest option is @ 3650, it's payout is 200M. Darkstar, are all options defended or only barriers?

I understand basic vanilla options where you have either a put or call hinged on a certain price where you as the option holder can choose to execute the option to buy or sell at the agreed price on or before expiry. With this understanding, it would make no sense to defend the option because if you lose you're only taking a loss on the option premium. I'm just trying to clear this up and verify what I understand to be true.

If the option that expires today up at 3650 is a barrier, would it NOT make sense to try and play the defensive stop move since we are so close to that price along with the fact that Trichet will be speaking shortly? Anything he says about Greece will probably move the markets, if he says something that induces buying the option won't have a chance anyways. So I guess the question is, are quiet non news times the best for the option defense trade?

Edit...If the 3650 option that is reported by IFR is a barrier, wouldn't it already be dead anyways? I say this simply because the market has already printed through this price. Why would IFR report an option that was already dead?
  • #887
  • Mar 19, 2010 2:49am Mar 19, 2010 2:49am
One more thing about options.

Say that Joe Schmoe bought a 200M Put option @ a price of 1.3900 in EU.

Lets say that the option expires next Monday, but Joe want to exercise his option today. Where does the transaction take place? Does an open position appear in joes trading account as if he had sold at 3900, or does the option writer have to pay joe the the differance at the current market rate when Joe executes the option?

If the differace is paid to Joe at the current market rates, does the trasaction affect the underlying market?
  • #888
  • Mar 19, 2010 2:59am Mar 19, 2010 2:59am
i dont think ifr gives u whether its a barrier or not

i have access to it through oanda
ill check it in a bit but last i saw it does give u different expiries for a week ahead i think including today. obviously the amount too.

as far as timing and from what i know its 4pm eastern at the close of the US markets but im just not sure about that

ill get back to u on that later.
  • #889
  • Mar 19, 2010 3:13am Mar 19, 2010 3:13am
Quoting boxingislife
i dont think ifr gives u whether its a barrier or not

i have access to it through oanda
ill check it in a bit but last i saw it does give u different expiries for a week ahead i think including today. obviously the amount too.

as far as timing and from what i know its 4pm eastern at the close of the US markets but im just not sure about that

ill get back to u on that later.
I'm wondering because if we don't know what type of option is being reported then the info would be pretty useless, other than seeing what expected future values are according to those options.
  • #890
  • Mar 19, 2010 3:55am Mar 19, 2010 3:55am
Quoting boxingislife
i dont think ifr gives u whether its a barrier or not

i have access to it through oanda
ill check it in a bit but last i saw it does give u different expiries for a week ahead i think including today. obviously the amount too.

as far as timing and from what i know its 4pm eastern at the close of the US markets but im just not sure about that

ill get back to u on that later.

Isn't it 10 am new york cut ?
  • #891
  • Mar 19, 2010 4:06am Mar 19, 2010 4:06am
Quoting Scotty B
I'm wondering because if we don't know what type of option is being reported then the info would be pretty useless, other than seeing what expected future values are according to those options.
exactly. if its a barrier then the battle should happen right on the barrier

but if its a regular vanilla option then piercing it wouldnt matter as long as it closes under or above it according to its type and the payoff and what not. my experience with options is fairly limited

lumesh, like i said i honestly have no idea i was just assuming from what i hear, here and there
  • #892
  • Mar 19, 2010 4:35am Mar 19, 2010 4:35am
I hope you're not offended, I went through google to see what you're talking about. I'd imagine lots of people are mystified about options, and especially forex options. Below are an example each of the regular user and of the ordinary person using options.


forex options:

from wikipedia:

The FX options market is the deepest, largest and most liquid market for options of any kind in the world.
Most of the FX option volume is traded OTC and is lightly regulated, but a fraction is traded on exchanges like the International Securities Exchange, Philadelphia Stock Exchange, or the Chicago Mercantile Exchange for options on futures contracts.
The global market for exchange-traded currency options was notionally valued by the Bank for International Settlements at $158,300 billion in 2005.

....Corporations primarily use FX options to hedge uncertain future cash flows in a foreign currency.

The general rule is to hedge certain foreign currency cash flows with forwards, and uncertain foreign cash flows with options.

...Suppose a United Kingdom manufacturing firm is expecting to be paid US$100,000 for a piece of engineering equipment to be delivered in 90 days.
....Assuming that the cash flow is certain, the firm can enter into a forward contract to deliver the US$100,000 in 90 days time, in exchange for GBP at the current forward rate. This forward contract is free, and, presuming the expected cash arrives, exactly matches the firm's exposure, perfectly hedging their FX risk.

...Using options, the UK firm can purchase a GBP call/USD put option (the right to sell part or all of their expected income for pounds sterling at a predetermined rate), which will:
protect the GBP value that the firm will receive in 90 day's time (presuming the cash is received)
cost at most the option premium (unlike a forward, which can have unlimited losses)
yield a profit if the expected cash is not received but FX rates move in its favor


from investopedia

Options in FOREX are especially prevalent during important economic reports or events that cause significant volatility (when cash markets have high spreads and uncertainty).

You suspect this [,in the example,] volatility will occur within the next two months, but you don't want to risk a cash position [where you have to buy and thus risk the entire, leveraged amount of the underlying symbol], so you decide to use options....

to buy two lots of EUR/USD at 1.3000 in one month; such a contract is known as a "EUR call/USD put."

the buyer loses only the premium.

The premium varies, according to the strike price and date of the option, so the risk/reward ratio varies.

...[this] option will cost [i.e., the premium is, in the example,] 10 pips ... .
  • #893
  • Mar 19, 2010 5:30am Mar 19, 2010 5:30am
My understanding is that the options reported on the option expiry are all vanilla options unless they have little abbreviations next to them. I also think they are all European style because otherwise their expiry date would be a lot less important at least for traders like us following options. Europeans can only be excercised on expiry while Americans can be excercised anytime during the option's lifetime.

So first remember that there is two diff options European or American. So if its European it can ONLY be excercised at expiry... that's why you see bigger ones have a magnetic effect on expiry dates because usually almost all of them are European.

I'm pretty sure barriers aren't noted on the option calendar because they are supposed to be unseen aka that's why its always rumors until price action confirms.

But IFR guys will always point out barriers.

The hypo about Joe hinges on whether its an American or European option once again. If its European like most reported on IFR then Joe is out of luck and must wait till maturity.

And expiry is 10 AM EST for anyone wondering..
  • #894
  • Mar 19, 2010 6:03am Mar 19, 2010 6:03am
Quoting LasVahGoose
Maybe he is using 'The Force' but when he goes live the stress cancels out his belief.

[i]“Ready are you? What know you of ready? For eight hundred years have I trained Traders. My own counsel will I keep on who is to be trained. A Trader must have the deepest commitment, the most serious mind. This one a long time have I watched. All his life has he looked away... to the future, to the horizon. Never his mind on where he was. Hmm? What he was doing. Hmph. Adventure. Heh. Excitement. Heh. A Trader craves not these things. You are reckless.”...
That's a great post
  • #895
  • Mar 19, 2010 6:47am Mar 19, 2010 6:47am
Quoting Scotty B
If the differace is paid to Joe at the current market rates, does the trasaction affect the underlying market?
Deus is right, these are all Euro style so dealers don't hand over the long/shorts till expiry if they're in the money. The transactions affecting the underlying with vanillas are the delta-hedging by the dealers pre cut (thus the magnetic effect) and then how the holder disposes of their position post cut.
  • #896
  • Edited 9:38am Mar 19, 2010 8:57am | Edited 9:38am
Quoting Scotty B
There was one thing you said the other night that I didn't understand. When you were showing us that option defense move/stop run, what did you mean when you said that the defenders stops were immaterial? Did the hunters go hunting just to cause that momentary volatility? Also, would they have had sell limits placed at 3805 to get liquid when the defenders stops were activated?
The whole point of the attack is to take out the barrier. The trade is a stop hunt for you, me and anyone else helping the attackers but the attackers only care about the barrier.

For an example, Lets say I sell you a 200m DNT at 3600 and 3800. You get paid if the price remains within the range. I don't want to pay you the 200m, so I try to push price around until I can pierce one of those barriers. The second its pierced, I save 200m and you lose your premium.

Now think about that for a min... Where does the "rumor" on IFR come from? What happens to our trading objectives once that barrier is pierced? Applying what we know about market liquidity and the size of the positions accumulated during this battle, how can we liquidiate?

Figuring all this out is a simple game theory exercise once you understand whats going on...
  • #897
  • Mar 19, 2010 9:44am Mar 19, 2010 9:44am
Is there something I'm missing here because I just don't see a reason to buy ATM. Next week who knows but the direction seems pretty obvious today and for the foreseeable future:
Attached Image(s) (click to enlarge)
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  • #898
  • Mar 19, 2010 10:33am Mar 19, 2010 10:33am
Quoting SunTrader
Is there something I'm missing here because I just don't see a reason to buy ATM. Next week who knows but the direction seems pretty obvious today and for the foreseeable future:
ATM there is no good reason.

Up until yesterday it looked promising that the Greek situation was going to be resolved in short order. That was a good premise to buy on because the entire move south (since November) was built on the idea that Greece is going to blow up the EU monetary system. Take that risk away and you have a ton of people caught short. Now there is doubt creeping in because Papandreou couldn't keep his mouth shut...

At the end of the day this is a trade based on the outcome of the Greek situation. If you think they are going to fail at refinancing their debt, then you sell the euro. If you think the situation will resolve itself positively, you’re in a great position to buy. I tend to come down on the side of amicable resolution, but one can never really know...

Whether you’re looking for stops being executed at a specific price or a change in perception that causes a shift in order activity, orderflow trading is about preempting future orders. As long as you have the future orders on your side, you will be a winner... regardless what the chart looks like.
  • #899
  • Mar 19, 2010 10:49am Mar 19, 2010 10:49am
Since we're speculating i would buy pound at the moment, short term ...let's see what happens...There's something i've seen before.
  • #900
  • Mar 19, 2010 10:53am Mar 19, 2010 10:53am
Quoting Darkstar
.... regardless what the chart looks like.
Why not look for some kind of confirmation in price before acting?

Since early Feb EU has been in a corrective phase. Don't see a need to predict next move when this one hasn't shown its about to end.
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