Trading ETOs Questions

[Starcraftmazter]

Hello

Bell Direct decided to finally roll out ETO trading, so I decided to give it a go, as it's too boring not being able to make money when the market is dropping. So far I've only bought and sold XJO puts.

I have some questions now.


1. It seems to me a suspiciously easy way to make ridiculous profits. 30-50% single day ROI? I presume the same can be done for calls when the market goes up, so then what is the point of trading actual shares? What stock is going to consistently give you such a return on any given day? I mean of course, it's not going to be clear every single day which way the market will go tomorrow, but quite often it is, so why even bother with anything else?


2. Given the market depth at any one time, it seems that these options are very illiquid - the spreads are often fairly large (though move quickly), and the number of options to buy or sell at any time is pretty small. So if you had some large amount of money, say $100,000 - I don't see how it is at all possible to trade even those XJO options with the highest volume.

Am I missing something here - ie. are there market markers obliged to always give you a transactions? Will they always give you a reasonable price?

3. Sort of related to last Q, is it because most people are using other instruments - Futures? CFDs? Would these be better recommended derivatives to options for those looking to make 1-few day trades to profit from market moves?

I am not interested in using leverage, but rather a well priced market with lots of volume.


Any other information is well appreciated,
Thanks

 

[wayneL]

I thought you knew everything.

::

 

[village idiot]

1. It seems to me a suspiciously easy way to make ridiculous profits. 30-50% single day ROI? I presume the same can be done for calls when the market goes up, so then what is the point of trading actual shares? What stock is going to consistently give you such a return on any given day? I mean of course, it's not going to be clear every single day which way the market will go tomorrow, but quite often it is, so why even bother with anything else?

If it is often clear to you which way the market will go tomorrow, wouldnt it be a suspiciously easy way to make ridiculous profits whatver method you chose to trade it? If you had such a gift, the illiquidity and wide spreads you refer to would make long options the least appropriate vehicle to trade it. Out of interest how many days have you consistently made such a return over?

 

[Starcraftmazter]

If it is often clear to you which way the market will go tomorrow, wouldnt it be a suspiciously easy way to make ridiculous profits whatver method you chose to trade it? If you had such a gift, the illiquidity and wide spreads you refer to would make long options the least appropriate vehicle to trade it. Out of interest how many days have you consistently made such a return over?

2/2, ETOs for my account were activated last week - if they had been activated earlier, then....you get the point. I've been waiting for several months now too! (BD said they would have them ready in July).

Can you please elaborate as to what tools you would use?

 

[ROE]

If it is often clear to you which way the market will go tomorrow, wouldnt it be a suspiciously easy way to make ridiculous profits whatver method you chose to trade it? If you had such a gift, the illiquidity and wide spreads you refer to would make long options the least appropriate vehicle to trade it. Out of interest how many days have you consistently made such a return over?

+1

also remember for you to pocket the premium, you are taking exposure and contracts
many many times higher than the premium amount ....unless you buy call/put then you are limited to the premium put up...writing naked call/put expose you to high degree of risk..... naked call = unlimited risk, naked put stock can hit 0 ...

 

[Starcraftmazter]

+1

also remember for you to pocket the premium, you are taking exposure and contracts
many many times higher than the premium amount ....unless you buy call/put then you are limited to the premium put up...writing naked call/put expose you to high degree of risk..... naked call = unlimited risk, naked put stock can hit 0 ...

Buddy, if you read the OP you will notice I am not talking about writing options, and I am not talking about dealing with individual stocks.

Still waiting for someone to actually answer the questions.

Cheers

 

[wayneL]

If it is often clear to you which way the market will go tomorrow, wouldnt it be a suspiciously easy way to make ridiculous profits whatver method you chose to trade it? If you had such a gift, the illiquidity and wide spreads you refer to would make long options the least appropriate vehicle to trade it. Out of interest how many days have you consistently made such a return over?

Well Mr village idiot, you are no village idiot.

 

[wayneL]

Still waiting for someone to actually answer the questions.

Cheers

1/ Because as a trading instrument for your intended MO, they are the least efficient derivative.

2/ Yes. Not always. No.

3/ It depends.

Options are the best way to skin a completely different cat.

 

[Starcraftmazter]

3/ It depends.

Options are the best way to skin a completely different cat.

More Wayne; tell me more.