- #1,910
- Jun 16, 2011 9:04am Jun 16, 2011 9:04am
- Joined Feb 2008 | Status: Trader | 6,736 Posts
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Dislikedahhh seems they finally popped that eur/chf barrier at 1.2.... it was only a matter of timeIgnored
DislikedYep, it was going to happen but I'm sure it ruined some traders during that upmove. I dumped all longs @ down break of 1.22.. glad the big guys threw a 48hr sale on eur/chf shorts. I was able to reposition myself even better for parity.. one day.Ignored
DislikedYou need to really understand how delta-hedging works (the fundamental option trading strategy) to finally get options. It's a truly mind-bending moment when you finally see why a put is from a volatility point of view identical to a call and why in most situations they should have the same price. Even more awesome (for people not schooled in finance like me) is understanding how you can create a synthetic option by just trading the spot, or the other way around.Ignored
DislikedI STILL don't understand delta hedging. Any good resources you can reco for achieving that "ah-ha" moment?Ignored
DislikedNot really. Remember that options are a play on volatility, not on direction. Wikipedia explains RRs better: A positive risk reversal means the volatility of calls is greater than the volatility of similar puts, which implies a skewed distribution of expected spot returns composed of a relatively large number of small down moves and a relatively small number of large upmoves.
Most assume if puts are more expensive -> downward move more probable. You need to really understand how...Ignored
DislikedI had the same problem. I wanted to understand what this delta hedging was all about, but all the explanations were chock full of math.
Then I saw this book recommendation for math-impaired people who want to get options. Doesn't require more than 5th grade math. I've read it all in a single (longer) train trip and it was one of the most awesome book I ever read. Because it explains how options work with simple graphs and small tables.
EDIT: Forgot to put book
http://www.amazon.com/Buying-Selling.../dp/0471968846...Ignored
DislikedYou're right. But if you have a directional view you should just trade the spot. I can think of a few situations where using options for implementing a directional view would be better, but in general options are more expensive than the spot market for directional trading. It doesn't make sense to me to pay for the volatility estimation embedded in an option and then just throwing that away.Ignored