# LET'S NOT PANIC BUT PROFIT!!



## Garpal Gumnut (2 March 2007)

Please excuse the capitals but one has to tackle ones intellectual opponents who shout, with shouting.

With great respect to
Ducatti,
WayneL
tech/a
Gorilla
realist
Kennas
Noiruia
magdoran and 
moneytree 
and too many others to mention

I find it distressing that nobody has posted their profits on this correction. If I were a daytrader I would have carefully plotted my gains and losses over 28/2 and 1/3.

Why could such a significantly talented team of technical analylists fail to anticipate, or utilise  this correction.

Why have the very talented anylists in this forum spent more time discussing why "Rome is burning" rather than how as traders they can profit from this.

A few lame bleats emenate from sheepish "traders" saying they may or may not have open call or put  positions.

Lets get real.

This is not an intellectual tread for pointy heads to prove their superiority over others.

Trading is about making money.

I don't see or hear any member of ASF who has profitted from this correction.

Lets talk about it.

I'm long term trader but value your guys input, which has been sadly lacking recently,.

Garpal


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## wayneL (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Garpal,

There is a rule here... no posting trades after the fact. I'm sure a few goals have been kicked, but without ways to substantiate:

1/ it is open to challenge
2/ could be complete fabrications

The techniques have been discussed often enough before.

But a good idea to discuss tactics again if people so desire.

Cheers


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## Garpal Gumnut (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				wayneL said:
			
		

> Garpal,
> 
> There is a rule here... no posting trades after the fact. I'm sure a few goals have been kicked, but without ways to substantiate:
> 
> ...




re Goals kicked ... agree... no way to substantiate

As opposed to some US sites, still I am asking should we have more balls and ovaries to compete with the global market.

Should we go short in situations like this, rather than just commenting on the market falling.

I am a long term trader but would love to be a short term one, but situations like this make me wonder whether we are capable in Australia of trading and discussioning rationelly put trades.

Garpal


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## ducati916 (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				wayneL said:
			
		

> Garpal,
> 
> There is a rule here... no posting trades after the fact. I'm sure a few goals have been kicked, but without ways to substantiate:
> 
> ...





Strategies should be diversified.
*Investment strategy
*Trading strategy

From a posting perspective, it is easier to post an investment strategy as it doesn't change that much, there are several already on the board.

Trading, or short term stuff is generally more time intensive, and contentious.
Which is why you probably do not see much of it.

I dislike *directional* trading strategy. I far prefer *market neutral* strategies that profit irrespective of market direction, and pay me irrespective of market direction.

You are of course trading volatility in the Options world or spreads in the arbitrage world.

jog on
d998


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## tech/a (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Cant be bothered.


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## ducati916 (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				tech/a said:
			
		

> Cant be bothered.




Fair enough I guess.
Any particular reason why you can't be bothered?

jog on
d998


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## tech/a (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Posting takes up far to much time as it is for me.
There is enough of my stuff on here and Reefcap.
If it interests me I'll read/comment and or post.

Gave up posting analysis due to the peanut factor (Like the Shouting comment made above)---its a headline!!, combined with the time factor last year.

Genarally cant be bothered.
Really am sick of the idiot factor that think trading is gambling,and everyone has to prove how big their Kahuna's are.

And unfortunately its a constant stream.
I'll leave all this to You Ducster,Moggie and others who have more time and inclination.


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## barney (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> Strategies should be diversified.
> *Investment strategy
> *Trading strategy
> 
> ...




Howdy Duc, At the risk of getting in over my head, would you mind outlining the basics of market neutral strategy/strategies.  I have been trying to come up with some simple ideas of my own along these lines in an attempt to "take the heat" out of trading due to working with limited capital, but still searching. I'm sure other newer punters like myself would appreciate any constructive advice on that ........... Thanks.


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## money tree (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

I kept my mouth shut about calling a short on XJO @ 6020 because it wasnt on this forum that I said it. However, there are people who frequent both places who could be a witness. But really its those who DID post it here who deserve credit, since others may have made money (or saved their bacon) from the info.

I suggested that the best way to profit from the gloom ahead was to short the Aussie 200 index via CMC. This pays you over 4% interest (leveraged 50x = 200%) while short. Since I doubt XJO will get over 6020 for the next 5 years, this could be a great little earner. At some point I see XJO going under 4500, so you could end up with heaps of interest earned and huge capital gain. This strategy is one I invented and is part of my course.

I know there are some people who are short Aussie 200 and looking for an exit. Perhaps this may help them a bit.


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## Atomic5 (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Did Buffet just say anything interesting?


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## Sean K (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Garpal Gumnut said:
			
		

> Please excuse the capitals but one has to tackle ones intellectual opponents who shout, with shouting..............
> Garpal



Hi Garpal. I think you raise a good point in that we all need to learn how to make money in a falling market. The market will have another soft period shortly (if it hasn't started already), and there will be negative returns one year soon, if not a couple. I have stated many times in various threads that I thought the market was getting toppy and for people to have exit plans and learn how to make money selling short (see XAO analysis thread, and the Irrational Exhuberance thread for eg). 

I have been selling down my portfolio for the past 3 months, and have stated so on the forum during that period, and in my blog. I've even been accused of downramping some stocks because I have been saying they looked overpriced, or that the fundamentals weren't there to support such market caps (see most uranium stock threads). Selling down was simply a risk management process to be set to reinvest after the market came back to fair value or was even undervalued. Although that's probably some way off.  

I am just learning other trading instruments and only recently started using CFDs with ETrade and IG Markets, and have used them to sell short the index and individual stocks - so far with little success. Until I am confident in using them with conviction I'm probably not going to be sprouting about their use on the forum. When I think I have some really good ideas I will post them up.

For now, I'm sitting tight on what I have left (mostly gold and some uranium), waiting for the dust to settle, and the noise to quieten down a bit. 

There's others out there who have been investing longer than me who probably have some well tried methods of confidently investing in a falling and volitile market......


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## CanOz (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Being a realtively inexperienced trader, i have not bought back into the market (other than a quick scalp on my day off). I will stay in CASH until a trend has re developed. In the meantime i think it would be a good time to start paper trading short positions to practice. 

If your not good at trading in a sideways or bear market then why on earth would you try it? You can still earn interest in the bank.


 

Cheers,


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## ducati916 (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				barney said:
			
		

> Howdy Duc, At the risk of getting in over my head, would you mind outlining the basics of market neutral strategy/strategies.  I have been trying to come up with some simple ideas of my own along these lines in an attempt to "take the heat" out of trading due to working with limited capital, but still searching. I'm sure other newer punters like myself would appreciate any constructive advice on that ........... Thanks.




*barney*

Assuming an average capital base of say US $25K it is possible to trade a market neutral or fully hedged position

Utilizing Options trade a *delta-neutral* position.
Long the Options contracts
Short the common stock 
Adjust position on an intra-day daily basis.

Risks;
*Overpaying for Implied Volatility
*Realized volatility below paid for Implied volatility

Now what you have seen or heard recently [if you've been listening] is the extremely low levels of volatility as measured by the VIX.

This tends to happen in bull markets, not always, and not quite to these low levels. The time was ripe to buy volatility.

How to overcome the risks;
*Understand the pricing models
*Extend expiry time
*Understand the theory of volatility cones.

Once you position is set, you make money if price rises, or falls, the greater the fluctuations, the greater your profit. No stoplosses required, in the market 24/7............perfect for volatile bear markets.

jog on
d998


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## Dr Doom (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Garpal Gumnut said:
			
		

> Should we go short in situations like this, rather than just commenting on the market falling.
> 
> I am a long term trader but would love to be a short term one, but situations like this make me wonder whether we are capable in Australia of trading and discussioning rationelly put trades.
> 
> Garpal




Garpal,
I think you are missing some of the pieces here, as you imply that none of us are capable of trading any other way but long, when you should probably question yourself as to why you have not looked into taking advantage of moves in either direction. 

Why ask the question on going short;  it should be part of your everyday trading instruments. This is where the men are sorted from the boys, ie after a great bull run. See who makes real money in a falling market.

I think I can say, on behalf of the people you mentioned in the first post, that the word panic never even entered their minds. I didn't panic as I do trade either way and made more money on the day than I had in the last month. It's irrelevant what the actual dollar amounts are, as long as you can make money either way.

As far as scaring newcomers, then they should be scared; it's not going to be a one way 'bet' anymore.


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## Ants (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



> How to overcome the risks;
> *Understand the pricing models
> *Extend expiry time
> *Understand the theory of volatility cones.



Could you please expand on this for us beginners please,
  ducati
thanks


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## >Apocalypto< (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				tech/a said:
			
		

> Posting takes up far to much time as it is for me.
> There is enough of my stuff on here and Reefcap.
> If it interests me I'll read/comment and or post.
> 
> ...





Very well said T/A

and it answers why i never see you write more then 10 words per post on most of your posts!


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## Magdoran (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				tech/a said:
			
		

> Posting takes up far to much time as it is for me.
> There is enough of my stuff on here and Reefcap.
> If it interests me I'll read/comment and or post.
> 
> ...




I fully agree with you on this one Daffy,


The peanut factor does seem to grow substantially in these kinds of situations.

Some of us have been planning for this very situation for a long time.  Some of us even called it well in advance (even the day and the index level).  Then along come those that just don’t take the time to understand markets, and are surprised when a pull back/correction comes along and it catches them unprepared.



			
				Garpal Gumnut said:
			
		

> Please excuse the capitals but one has to tackle ones intellectual opponents who shout, with shouting.
> 
> With great respect to
> Ducatti,
> ...




Naivety is quite normal.  The classic assumption that no one was aware or prepared for this pull back amuses me.  I don’t know how many times I and other key people posted warnings of this situation arising.  I even posted a month out with the date of the high, and a week out with the index level, what more do you want?

Then the classic assumption that none of us took action without even reading our posts.  Also the assumption that no one has planned a campaign approach to this situation astounds me too.  Wavepicker and I have been planning for this for over 2 months with our fingers on the trigger…

Also, how has this “mystical” group of so called experts been “sadly lacking” (how anyone can give credence to the resident clown “realist” and even think of rating him as some kind of expert speaks volumes, doesn’t it? – and of course the sagacious realist knew this was coming because he is omniscient and omnipotent, isn’t he)?  All the key posters I know have posted great material leading up to the event if anyone cared to read it.  It just required reading the posts.

Also, why would any of us want to beat our chest making comments like we cleaned up quadrupling our account in a day and comments to this effect?  How does that help?  Please tell me that?  Why on earth should we talk about it?  The ongoing commentary is appropriate in my view, certainly not boasting about how much was made.  Anyway, it’s easy come easy go, and the next call could be totally wrong, couldn’t it?

Using the same logic, why haven’t all the losers posted how much they have lost?  There Gumnut, how much did you lose?  An equally fascicle question that should be relegated to the garbage bin of ASF.

So, Garpal, if you want to learn about the short side there are hundreds of post on the subject, certainly a lot in the derivative area.  Considerable time was spent on these if you care to do some research.  Consider how insulting your comments may come over firstly when you ignore and dismiss all the work we’ve done, and secondly because now post the event you expect us to drop everything to hold your hand and spoon feed you.  

With all due respect, please take the time to use the search function and research this site.  It’s all there if you take the time to look for it.  If in doubt, go right through the derivative area for a start.  Also, pick your favourite expert, and read through their posts – that might be a good start for now, how does that sound?


Regards


Magdoran

P.S. The market will do what it wants to do.


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## Magdoran (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Dr Doom said:
			
		

> Garpal,
> I think you are missing some of the pieces here, as you imply that none of us are capable of trading any other way but long, when you should probably question yourself as to why you have not looked into taking advantage of moves in either direction.
> 
> Why ask the question on going short;  it should be part of your everyday trading instruments. This is where the men are sorted from the boys, ie after a great bull run. See who makes real money in a falling market.
> ...



Great post Doc,


Well said!  Good point – this situation certainly sorts out the wheat from the chaff.

You are right too, I for one was far from panicking on the day.  Maybe did a little dance or two… but remained fairly calm the whole day, and even took the time to post once the bottom was reached in the morning, and then later got back to working on my charts and strategies as per usual.

The only point I disagree with you on is that realist was probably the exception to the group listed (bet he was howling as his portfolio took a hit).

Fully agree, the newbies need to be very careful in this market, and if you can’t trade short or non-directionally, this could be a severe disadvantage.


Mag


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## Kauri (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Garpal Gumnut said:
			
		

> Please excuse the capitals but one has to tackle ones intellectual opponents who shout, with shouting.
> 
> 
> I find it distressing that nobody has posted their profits on this correction. If I were a daytrader I would have carefully plotted my gains and losses over 28/2 and 1/3.
> ...




  Garpal,
           If you post trades after they are completed you get accused of being a hindsight trader. For a while I posted trade setups I was set to enter complete with entry point and stop but after a couple of emails pointing out that this is sailing close to the wind re giving advice I no longer do that. (Incidentally one of the emails was from a member here but signed off with another members nickname.... ooops..    ).  Dreamers may build castles in the sky, but schitzophrenics live in them. 
           I posted a short trade yesterday on the ASX 200 based on the chart and call/put ratio just after I had entered and again as I closed it, without specifying entry and exit points. I have just closed out a long CCL trade based on the same principles, have closed out a failed long LHG trade, and currently have shorts open on RIO and WDC.


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## tech/a (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

*Dreamers may build castles in the sky, but schitzophrenics live in them. * 

Classic!!!!!!!


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## ducati916 (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Ants said:
			
		

> Could you please expand on this for us beginners please,
> ducati
> thanks




Pricing models.
The best and easiest one to use and understand is the Black Scholes Option Pricing Model.

Buy long dated option contracts with somewhere between 3mths minimum to 6 months expiry. Based on your analysis, you will have to decide if you are going ATM or ITM [and how deep] In a bear market, or deep correction I would opt for ITM.

With regards to volatility cones, there is an article [today's] on volatility.
Saves me typing twice.

jog on
d998


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## rederob (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Garpal Gumnut said:
			
		

> Plea
> 
> I find it distressing that nobody has posted their profits on this correction. If I were a daytrader I would have carefully plotted my gains and losses over 28/2 and 1/3.
> 
> ...



Garpal
My portfolio is substantially down - 7% this week - but as I sold nothing and added PDN and CWT (gross profit to date of $70 on these 2 additions) the whole affair is not an issue.
If there is a massive correction in coming weeks, I might worry.
But for now, it's a matter of trying to find more "value" for my longer term strategy.
If oil prices had dipped into this correction, I would have added more BPT and/or OSH.
Now waiting to see what next week has to offer.


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## barney (2 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> *barney*
> 
> Assuming an average capital base of say US $25K it is possible to trade a market neutral or fully hedged position
> 
> ...





Thanks for the reply Duc,  

Now I confess to being quite ignorant (as in unaware) of some of the things you mention, but still very interested, so please excuse any obviously dumb questions or apparent lack of knowledge .............. 

Simple things first .......... I understand the long the options/short the stock .......... If we are to "adjust" the position intra day, what measures do we take to achieve a continuing suitable setup? ie. Is it possible to keep readjusting our option position (I've never traded options at all so forgive the lack of knowledge)  Is there a cost/brokerage factor involved in adjusting option positions?  Or, is the adjustment simply done on the shorted stock? ie. Short more if the stock moves in our favour/opposite if moves against??  

Does "extending expiry time" if required incur further brokerage fees? .... Approx cost?

"Volatility Cones"? No idea   , but if I guessed, volatility would generally follow a graphical pattern eg A parabola, where the maximum volatility would be at the peak, and would tend to diminish (one for Mag!!) at both ends, therefore the most financially rewarding point would be the "top curve" of the parabola??  Totally off the scent or not??

Thanks for your patience in advance  

PS Just noticed your reference to volatility cones above.... will follow that up, thanks.


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## Out Too Soon (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				tech/a said:
			
		

> Posting takes up far to much time as it is for me.
> There is enough of my stuff on here and Reefcap.
> If it interests me I'll read/comment and or post.
> 
> ...




That's a shame Tech, I'm sure your analysis was greatly valued by many more ppl than you realise. I saw some of the stupid attacks on you that you refer to & it was often by wallys with 5 posts to their name.   I did often wonder how you found the time to share so much though as your analysis is obviously pretty time consuming, just don't doubt for a second that for every peanut shouting at you there were 100s of silent owls taking it all in. I'm sure the peanuts have all just been roasted though so it should be quieter for a while, anyway you can always just put them on ignore.


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## ducati916 (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				barney said:
			
		

> Thanks for the reply Duc,
> 
> Now I confess to being quite ignorant (as in unaware) of some of the things you mention, but still very interested, so please excuse any obviously dumb questions or apparent lack of knowledge ..............
> 
> ...




The easiest way is to walk you through a trade.

Ticker *GG*
Date January 17 2007 Buy Strike $22.50 Call
Expiry July 21 2007
Price $5.00
Implied Volatility = 35%
Cone [average] volatility = 48%
Fair Value @ 48% = $5.70
Theoretical Profit = $0.70 per contract

Price of common.....delta.........position..........adjustment........date
$26.15...................75.6.........[-22640]...............................1/17
$26.68...................73.7.........[-22110]............+530..............1/18
$25.18...................71.8.........[-21540]............+570..............1/18
$25.68...................73.7.........[-22110]............[-570]............1/19

And so on.

So you adjust as prices change, in my case, I adjust on every $0.50 move in price, recalculating the delta to each new price, and buying or selling to the hedge ratio.

The risk, is that volatility does not equal or exceed your theoretical volatility.
If it falls below the Implied Volatility, the probability is that you will lose money........thus, by taking a long dated Option, I feel the cone effect of volatility has a longer time period to emerge and provide me with a cushion.

If volatility does rise to your theoretical level, or exceeds it, you will make money as long as you adjust on a regular basis.

This is why when the markets started to jump, I was very pleased.

I went deep ITM as I am bearish on Gold, and I wanted quite a large short position, without excessive risk. Of course, if Gold went through the roof immediately I placed the trade, I place the trade under immediate pressure.
However, gold tends to increase in volatility at higher prices [the inverse to equity]

It is a very low stress methodology, when you can buy cheap volatility, which has been on sale recently.

jog on
d998


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## ducati916 (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Sorry chap's can't even copy from my own notes;

Price of common.....delta.........position..........adjustm ent........date
$26.15...................75.4.........[-22620]...............................1/17
$26.68...................77.3.........[-23190].............[-570]..............1/18
$25.18...................71.8.........[-21540].............+1650..............1/18
$25.68...................73.7.........[-22110]............[-570]............1/19

The *correct* figures.

jog on
d998


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## wayneL (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> Sorry chap's can't even copy from my own notes;
> 
> Price of common.....delta.........position..........adjustm ent........date
> $26.15...................75.4.........[-22620]...............................1/17
> ...



Not clear here. You are delta neutral with a synthetic straddle and continuously hedging your delta buy trading stock?

and...

Are you constructing your own cone in excel or using software?


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## ducati916 (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				wayneL said:
			
		

> Not clear here. You are delta neutral with a synthetic straddle and continuously hedging your delta buy trading stock?
> 
> and...
> 
> Are you constructing your own cone in excel or using software?




*enzo*

That is correct I am delta neutral by trading the common stock, adjusting intra-day as many times as possible on a $0.50 move basis. Generally I will get at least one trade/day

On big move days, I might get 4 trades.

On cone calculation, my calculator.
Not too good with excel.

For ease of explanation to the others I have lumped all positions into one position. However, I have a range of Strikes and Expiry dates, to diversify the position slightly.

In essence I want to reduce my risk to the theta decay as closely as possible, while still maintaining a reasonable reward should my volatility projection prove reasonably accurate.

jog on
d998


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## wayneL (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Duc,

gotcha

I like going out expiries for the vega effect too.

Re the cone.

I've made a makeshift version for amibroker, (which doesn't plot as a cone because of the axes) but I think I might give excel a go.

If successful I'll post.


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## ducati916 (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

*enzo*

Indeed [regard vega] just makes so much more sense to me anyway.

If you have joy with the calculations I'd be interested, my poor braincell is entering meltdown.

jog on
d998


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## wayneL (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> *enzo*
> 
> Indeed [regard vega] just makes so much more sense to me anyway.
> 
> ...



It's a tough ask, brain matter oozing from my ears already... I'm not exactly proficient at excel either


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## barney (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> *enzo*
> 
> Indeed [regard vega] just makes so much more sense to me anyway.
> 
> ...




Hi Duc,  If I were to put the above scenario into laymans terms would this be close to the money?? ...............

We are having an each way bet on a football match, and betting on both teams at the same time ................ we are able to increase/decrease our bets as the match unfolds to increase our exposure to a positive outcome (we are hoping it is a high scoring/wide ranging scoreline) ............. and the best part is we don't have to wait until the game is finished to cash our bets in??

Therefore, the worst case scenario would be to initially pick the wrong team to win (trend changes), or for the game to be a long drawn out affair with very little range in the scoreline??

Am I on the right track, or am I missing something important?  Cheers.


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## Rob_ee (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Agree with you totaly Out To Soon re comments about Tech/a.

Are you a peanut or an owl ??? .... just curious in light of your post about the dumb brigade who execute stop losses.

It was Tech who instilled in me the need to bail at the 1st sign of trouble and be vigilant and firm in stop loss execution.

Watching his many examples of chart analysis is something to behold and embrace.. I greatly appreciate his generosity in sharing and even bothering

Rob


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## ducati916 (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				barney said:
			
		

> Hi Duc,  If I were to put the above scenario into laymans terms would this be close to the money?? ...............
> 
> We are having an each way bet on a football match, and betting on both teams at the same time ................ we are able to increase/decrease our bets as the match unfolds to increase our exposure to a positive outcome (we are hoping it is a high scoring/wide ranging scoreline) ............. and the best part is we don't have to wait until the game is finished to cash our bets in??
> 
> ...




*barney*

Sure you're pretty much there.

With anything based on statistics, the *Law of Large Numbers * is key.
So therefore in a similar manner to the card counter in Blackjack, on any given hand we may lose, however, by adjusting our bets, and being allowed to play for as long as we wish [make as many bets as we want] based on probability [statistics] we will win.

That's it.
Simple, market neutral, profit up or down, lose with zero movement.
The key is to calculate an underpriced Option, get a good fill, and hedge correctly.

Charts, stops, etc, toss "em out the window.......redundant.
Remember on selecting Strikes, Bachliers Law.

jog on
d998


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## barney (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> *barney*
> 
> Sure you're pretty much there.
> 
> ...




Thats good, I've got the laymans part sorted !! ............. Now all I have to do is study options for a year or two (Delta, theta,vega, straddles, etc etc .......... my brain hurts already   

Thanks Duc and others ...... good thread with some interesting stuff.


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## 2020hindsight (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				tech/a said:
			
		

> Dreamers may build castles in the sky, but schitzophrenics live in them.



to run, where the brave dare not go ... 
good luck you brave dudes still buying.
I am prepared to lose a grand to be a spectator. - at least with all this discussion, you get a good view of the game. in the member's "grandstand" so to speak.
trouble is I say that too often - and the grands lost add up. but what the hek.


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## CanOz (3 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				barney said:
			
		

> Thats good, I've got the laymans part sorted !! ............. Now all I have to do is study options for a year or two (Delta, theta,vega, straddles, etc etc .......... my brain hurts already
> 
> Thanks Duc and others ...... good thread with some interesting stuff.




I agree too, very interesting stuff. Love your questions Barney, and your answers Duc.

So much to learn and so little time.

Cheers,


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## ducati916 (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

I suppose the basic message to take away is that markets have a number of cycles and there are a number of strategies that maximise risk/reward ratios within those cycles.

Recognition that a cycle is becoming mature is all that is required, absolutely accurate timing is not a prerequisite. Accuracy in timing is difficult, and fraught with false positives.

jog on
d998


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## wayneL (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				barney said:
			
		

> Thats good, I've got the laymans part sorted !! ............. Now all I have to do is study options for a year or two (Delta, theta,vega, straddles, etc etc .......... my brain hurts already
> 
> Thanks Duc and others ...... good thread with some interesting stuff.




Here is a video on gamma trading (similar to what we're talking about here) the only difference is that duc and I prefer to go out in expiry and be longer on vega (betting that volatility will increase)

http://www.options-university.com/Videos/GammaTrading/

It's a marketing video, but gives a good idea of the technique.


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## wayneL (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> *enzo*
> 
> If you have joy with the calculations I'd be interested, my poor braincell is entering meltdown.
> 
> ...




Making progress with this. Should have something next week.

<edit> Finally worked out the excel formula for caclulating historical volatility and have a rudimentary cone working. Lots of tidying up to do, but it will work out well


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## ducati916 (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

*enzo*

Looking good.
It even looks like a cone.

I'll join on the other thread otherwise posts start going everywhere.

jog on
d998


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## lesm (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> I suppose the basic message to take away is that markets have a number of cycles and there are a number of strategies that maximise risk/reward ratios within those cycles.
> 
> Recognition that a cycle is becoming mature is all that is required, *absolutely accurate timing is not a prerequisite. Accuracy in timing is difficult, and fraught with false positives.*
> 
> ...




Duc,

A very good message and one that people should try and understand, as we are not dealing in an area that can be considered an exact science.

Cheers.


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## 2020hindsight (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				ducati916 said:
			
		

> Accuracy in timing is difficult, and fraught with false positives.



duc, my philosophies are probably more fatalistic... maybe something like "timing has a lot to do with the outcome of a rain dance"? sorry if this clashes with the formulae or if seen as irreverent. 

PS I'll study some of the posts below before adding to this lol - plenty of homework there , thanks.

some comments from the peanut gallery (throw in some zen):-
I'm cashed up at moment, but want to get back in "at the bottom of the J curve" - lol - wish I had better foresight.  I would have thought (pure zen this one) that the "foreseeable future" includes 
a) (short term) a bit of a dip, whether this week or next
b) (long term) hard to see anyone losing with the blue chips - question is did you optimise your profit I guess by sitting out some of the snakes and hitting all the ladders.

options for the coming week:-
market starts up - then I've blown it - missed chance for short term gain, but with my limited bank I have little chance but to play safe

market starts down - ? - I'll probably wait out Monday if down - will it continue down? - too far into the "unforeseeable future".    
might even watch the Iran developments for a day or so.
(seriously uneducated comments here - just my plan for the week)


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## tech/a (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				lesm said:
			
		

> Duc,
> 
> A very good message and one that people should try and understand, as we are not dealing in an area that can be considered an exact science.
> 
> Cheers.




"The head of the serpent is in continual motion while its body remains still."


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## Out Too Soon (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Rob_ee said:
			
		

> Agree with you totaly Out To Soon re comments about Tech/a.
> 
> Are you a peanut or an owl ??? .... just curious in light of your post about the dumb brigade who execute stop losses.
> 
> ...



I'm sure TechA & co may think my stop loss attitude puts me in the peanut gallery but I certainly spend a lot of time soaking up every tidbit of wisdom & testing it. Everyone says DYOR & that gos for such things as stop losses too. I'm probably trading in an unconventional manner compared to others so "horses for courses."


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## barney (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				wayneL said:
			
		

> Here is a video on gamma trading (similar to what we're talking about here) the only difference is that duc and I prefer to go out in expiry and be longer on vega (betting that volatility will increase)
> 
> http://www.options-university.com/Videos/GammaTrading/
> 
> It's a marketing video, but gives a good idea of the technique.




Thanks for the link Wayne ............ very clear explanation for those interested ............. Thought the guy speaking was Danny Devito for a while   ............. 

Agree with the "so much to learn" Canaussieuck ........... wish I'd started a bit younger ..........


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## lesm (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				tech/a said:
			
		

> "The head of the serpent is in continual motion while its body remains still."



Interesting quote and your point is?


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## lesm (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Out Too Soon said:
			
		

> I'm sure TechA & co may think my stop loss attitude puts me in the peanut gallery but I certainly spend a lot of time soaking up every tidbit of wisdom & testing it. Everyone says DYOR & that gos for such things as stop losses too. I'm probably trading in an unconventional manner compared to others so "horses for courses."



OTS,

At the end of the day you have to work out what works best for yourself and fits your personality or psyche. Each trader/investor has to work out what works for them.

If you only trade in a particular way because that is how others trade or to please others then you are not your own person, but just one of the sheep. One approach to developing an edge in trading is to trade differently to the masses. It easy to guess how the masses are trading and one the reasons why the professional traders can trigger stops or fade the average trader and their methods.

The term 'stop loss' may be misleading, but think of it in terms of minimising potential loss and from a risk management perspective.

There are people who trade without stop losses, but they understand how to manage risk and are extremely good at it. While they do not use a 'stop loss' they do know when to exit a particular trade.

Even if you do run without a traditional 'stop loss' you still need to consider when a trade is failing or at what time/point to exit or how long to hold.

There are many examples, such as HIH, Enron, or One Tel, where holding on in hope would have been disastrous.

Therefore, while you have a view on 'stop losses' you still need to be in control of your trading and not rely on hope that a trade will recover or stay clear of the lower end of the market and focus on sound/solid companies.

You can learn a lot from tech/a and others on the forum, thay have been there and done it, as well as experiencing ups and downs, including developing an understanding of what works and what does not work.

At the end of the day 'each to their own' or 'horses for courses'.

Cheers.


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## Out Too Soon (4 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				barney said:
			
		

> Hi Duc,  If I were to put the above scenario into laymans terms would this be close to the money?? ...............
> 
> We are having an each way bet on a football match, and betting on both teams at the same time ................ we are able to increase/decrease our bets as the match unfolds to increase our exposure to a positive outcome (we are hoping it is a high scoring/wide ranging scoreline) ............. and the best part is we don't have to wait until the game is finished to cash our bets in??
> 
> ...




Thanks Barney!  
If you keep making posts like that I may start learning about options. I know I have to soon.  
ATM whenever I start reading about options the article/or whatever quickly becomes gobbledygook-technical terms even though the basic idea behind options is simple enough the detail is mind-mushing.


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## barney (5 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				Out Too Soon said:
			
		

> Thanks Barney!
> If you keep making posts like that I may start learning about options. I know I have to soon.
> ATM whenever I start reading about options the article/or whatever quickly becomes gobbledygook-technical terms even though the basic idea behind options is simple enough the detail is mind-mushing.




Hi OTS,  Don't worry, I'm in the same boat as you regarding options ......... I have a very basic grasp, but Duc's posts above prompted me to put it into language I could relate to ............ The link Wayne put up above also explains a bit more about the concept of trading stocks and options in opposite directions simultaneously for a possible net profit ........... I'm interested in most of this stuff, but don't think I'll be trading options until I work out how to trade shares more consistently    Glad it made some sense to you as well ........ Cheers.


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## tech/a (5 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

So Friday was seen by some on this thread as a good buy day.

How about today?


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## tech/a (5 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				tech/a said:
			
		

> "The head of the serpent is in continual motion while its body remains still."




Past price action remains fixed.(price action over many months and tears)
However the NEAR term even up to  months can remain dynamic as price action developes and eventually reveals market sentiment.

Its the ability to analyse the dynamic nature of stock/index/future which is the skill/science.


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## dubiousinfo (5 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				tech/a said:
			
		

> So Friday was seen by some on this thread as a good buy day.
> 
> How about today?




Friday was a good day for buying puts.


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## pacer (5 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Today is a good day for those who missed out last week, like myself, because I had no major positions and slept in......lol

But it could also be sign of things to come or just some volatility sideways.


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## cuttlefish (5 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*

Todays the first day I've bought anything since last weds selloff.


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## Magdoran (5 March 2007)

*Re: LETS NOT PANIC BUT PROFIT!!*



			
				dubiousinfo said:
			
		

> Friday was a good day for buying puts.



It sure was!


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