Option trading with DanPickUp

[timepass]

Some more infos about how to calculate the IV of options:

http://www.quantonline.co.za/Articles/article_volatility.htm

And here just an idea how to make money with knowing the SV but not knowing the exact IV of the option. Not sure if it works in your market. So you may test it once:

Option 6% OTM*

When the OEX volatility was 20%, an option that was 6% OTM with 10 days until expiration likely had no realistic chance of being worth something before or at expiration, thus it was probably trading for $0.05 (the minimum option price). Once volatility went to 40%, there was now a reasonable chance of the option strike 6% OTM being worth something, so the market will begin to assign it a value. Certainly anyone who had sold them thinking they were going out worthless will want to buy them back to avoid the options increasing in price, and losing money on the options.

The option that had no value and was offered at $0.05 will have people trying to buy them back, so the option will likely become $0.05 bid. If everyone around you is trying to buy the option for $0.05, is there a realistic likelihood that you will get to buy the options for $0.05 before anyone else including the traders on the floor? Eventually, enough fear will precipitate people feeling the need to buy back their naked short puts before they cause any real harm, and may decide to pay $0.10 before they can't buy them back at all.

This purchase of an option for $0.10 now has the nervous traders who were hoping to get the options bought for $0.05, in panic mode. They will no longer have enough patience to wait things out, as they all have had a $0.05 option go to at least $ 1 at some point in their career, so $0.10 does not seem too bad now. In addition, a broker who has an order to buy those options at the market price sees they are now $0.10 bid and offered at $0.15. He is forced to buy the $0.15 ask price. You now see how vega increases the price of a 'garbage' option just as it does with a closer to-the-money option, provided the option has some realistic chance of being worth something.

*(Source: Option Greeks for profit by J.L.Lord)

If you have the time, a must read book for option traders.

DanPickUp

That's about 5100PE today

 

[niludeepak]

it was great experience going thru this thread, i've collected all the things in a word file, so others can have a look at one go,
sorry dan i've not done this with ur permission, if u ask i'll delete the same.

Here's the link:
http://www.4shared.com/file/2WJ_btwz/Option_trading_with_DanPickUp.html

 

[DanPickUp]

it was great experience going thru this thread, i've collected all the things in a word file, so others can have a look at one go,
sorry dan i've not done this with ur permission, if u ask i'll delete the same.

Here's the link:
http://www.4shared.com/file/2WJ_btwz/Option_trading_with_DanPickUp.html

Dear Niludeepak

I not can download it as they even ask me to log in and I am not interested in that. Could you send me a direct link where the pdf just pops up? I then can have a look at it. Thanks

DanPickUp

 

[timepass]

Dear Niludeepak

I not can download it as they even ask me to log in and I am not interested in that. Could you send me a direct link where the pdf just pops up? I then can have a look at it. Thanks

DanPickUp

It is now available in Google docs.

https://docs.google.com/open?id=0ByF-21VBnZ9bYm5JaWJVbVZrZWc

 

[timepass]

It is now available in Google docs.

https://docs.google.com/open?id=0ByF-21VBnZ9bYm5JaWJVbVZrZWc

This link is now working ok. Please recheck and download. Let me know if there is any problem.

 

[niludeepak]

sorry, DanpickUp, i was away so i cud not do what u asked,
But , thanx to Timepass he has done the same.

 

[niludeepak]

sorry, DanpickUp, i was away so i cud not do what u asked,
But , thanx to Timepass he has done the same.

pl. dan keep on flowing the river of ur knowledge,
the best thing i got was ur telling that,

high vola = high premium = sell strategies,

can u suggest as how to know about highest vola from bollinger bands, and for about five or less days' entry what time period and mov. average sud we follow.

thnx

 

[prabhsingh]

it was great experience going thru this thread, i've collected all the things in a word file, so others can have a look at one go,
sorry dan i've not done this with ur permission, if u ask i'll delete the same.

Here's the link:
http://www.4shared.com/file/2WJ_btwz/Option_trading_with_DanPickUp.html

Can you please let me know the process of transfering all the messages in word document (including images)?Did you went page by page and copied the data into word or there is any other clean way to do that.

 

[DanPickUp]

sorry, DanpickUp, i was away so i cud not do what u asked,
But , thanx to Timepass he has done the same.

pl. dan keep on flowing the river of ur knowledge,
the best thing i got was ur telling that,

high vola = high premium = sell strategies,

can u suggest as how to know about highest vola from bollinger bands, and for about five or less days' entry what time period and mov. average sud we follow.

thnx

Hi

I am not the man for BB. If you want to know more about BB, then get in touch with Columbus as he trades on them or visit any of his threads. They are included in my charting system to see more visually: Aha, we are more on the upper side of the middle in the BB or we are more under the middle line in BB. No other use of them from my side and no valuation atoll about vola with them. There are other tools for vola in Metastock like the vola indicator.

About the MAs. For me MA's are fine to see the trend or a possible change in the trend. I very seldom use them to make any entry decisions. If you are interested in MA systems, then you should get in touch with SG or visit his thread about the Quadra strategy.

Even than some words to MAs from my side: If you use MAs in your trading system and you even want to use them for entry points, then you should also use a charting software in which you can make System test's with MA's like it is possible with Metastock.

This system test's you do on what ever time frame you like to trade. If you more an intraday trader, then set the used price data for the calculation around 45 or less days and if you trade more on time frames like one day and bigger, then set the used price data for the calculation higher to 120 or even 180 days. Make these test's on a regular basis as the MA's are changing from time to time and as you want to use them for entries, you should be on top of your system by knowing when the MA periods have changed.

Good trading

DanPickUp

 

[comm4300]

Can you please let me know the process of transfering all the messages in word document (including images)?Did you went page by page and copied the data into word or there is any other clean way to do that.

That's exactly what i did ; i subscribed to Dan's thread from day 1; so whenever Dan/others would update this thread, i'd receive email notification.

I'd copy all that Dan had written on word - including images. For links posted, i'd go and open them and then copy the pic to word doc.

I've the word file updated till the last post on the subject by Dan.