Options Trading

kkseal · #21 21st January 2008, 10:20 PM

Love options , but also mortally afraid of them as only know buying Puts & Calls. No butterfly, straddles (or is it saddles) etc. Can't even say for sure whether the damned thing is overpriced

Regards,
Kalyan.

anjubhatia · #22 21st January 2008, 10:39 PM

Quote:

Originally Posted by faltub

Kalyan Sir,
my honest suggestion........don't go for options.........
futurs are much better........ or maxium ...if u want to headge.......use covered calls......

Dear,
y u think so?
i made money in last 1.5 years around gud money by putting 20k in starting(appx.)
now i hv made 8-9 lakhs in that in above time period.
the only thing is that i usually used calls rather than puts.
cn u clear logic y u r thinking so?

anjubhatia · #23 21st January 2008, 10:55 PM

Quote:

Originally Posted by faltub

Dear,

U can definitly make money using spreads with calls/puts........., but it mimimise profit...... if u use other strategies......stradles.....strangles........nake d options.........in most of cases u loose.......unless.....u r boarn with a golden spoon or god become enough kind (as this time if u sold naked calls or bought naked puts).......this is my own experience.....

thanks fr ur reply & suggestions.

rambharosey · #24 23rd January 2008, 12:14 PM

Quote:

Originally Posted by marcus

How do they show you hell? If you buy options you know exactly what you've lost no matter what ...... your premium.

Not so in futures, in futures if there a gap up or down you may lose not only your shirt but your chaddi as well.

Ayway I trade futures myself, haven't brought myself to exclusively trade options although I know they have a lot more advantages.

Marcus, I had a basic doubt. With stop loss in futures (which I am supposing everyone should and does use), why do you say that a gap up or down may loose you everything?

The main advantage of options is said to be that the 'downside' is limited (generally speaking) as opposed to futures which have an unlimited upside as well as downside; but with Stop loss in futures, you can limit your downside as well.

What am I missing?

rambharosey · #25 23rd January 2008, 01:23 PM

Quote:

Originally Posted by marcus

Once again not really they are a little on the expensive side but still much cheaper than futures or stocks, actually big players hedge with options and not the other way around.

I am not understanding you at all. How do you say Options are cheaper than futures? Futures don't cost 'anything' to be set up (except the brokerage and margin requirements which is not an 'investment', but just a practice that ensures people don't default on their commitments.

Can you elaborate.

marcus · #26 28th January 2008, 01:48 AM

Quote:

Originally Posted by rambharosey

I am not understanding you at all. How do you say Options are cheaper than futures? Futures don't cost 'anything' to be set up (except the brokerage and margin requirements which is not an 'investment', but just a practice that ensures people don't default on their commitments.

Can you elaborate.

I'm refering to leverage, you can control a large quantity with a smaller amount than in futures. The premium on the option is smaller than the margin you'r pay for in futures, it requires a smaller amount of money.

rambharosey · #27 29th January 2008, 09:48 AM

Continuing with my efforts to understand Futures better, a very well respected analyst said: "I have always urged people not to go for Futures. People who go for futures don't have any future". In a similar vein, during the last few days, apparently, traders with long futures positions got huge margin calls.

My question is: Do people not apply Stop Loss (and why not) with Futures trading? With a reasonable Stop Loss, you can avoid Margin calls (at least as per my understanding) and also, limit your downside, so that you 'do' have a future.

Again, what am I missing.

Thanks,
Bharosey.

rambharosey · #28 29th January 2008, 09:50 AM

Quote:

Originally Posted by faltub

GAP.......that can occure in the morning........
S/L that can not be placed for nextday.......

Hi Faltub, can you you please elaborate on GAP? What is it? Are you referring to the spikes that normally occur within the first few minutes of start of trading?

Thanks,
Bharosey.

marcus · #29 31st January 2008, 03:03 AM

Quote:

Originally Posted by rambharosey

Marcus, I had a basic doubt. With stop loss in futures (which I am supposing everyone should and does use), why do you say that a gap up or down may loose you everything?

The main advantage of options is said to be that the 'downside' is limited (generally speaking) as opposed to futures which have an unlimited upside as well as downside; but with Stop loss in futures, you can limit your downside as well.

What am I missing?

Dear Rhambharosey I am really sorry I missed this post of yours.

To answer your question when a gap up or down occurs your SL trigger will be jumped and your stop loss will not be triggered, this is a very common occurance. Ma I ask whether you are familiar with the practicalities of stop loss orders,? you r probablly of the opinion a sl order is a limit sell order but its not you have to input a trigger price. Just try to read about the stop loss order.

Your second para is correct but stop loss orders are far from full proof, there are so many loop holes in the SL order, you can lose a lot but with a naked (buy) option you can not lose more than your premium under any cicumstances you can even lose less than your premium if your stop loss is triggered but even if your stop loss is not executed you will not lose more than your premium.

Hope that clarifies

marcus · #30 31st January 2008, 03:23 AM

Quote:

Originally Posted by rambharosey

Continuing with my efforts to understand Futures better, a very well respected analyst said: "I have always urged people not to go for Futures. People who go for futures don't have any future". In a similar vein, during the last few days, apparently, traders with long futures positions got huge margin calls.

My question is: Do people not apply Stop Loss (and why not) with Futures trading? With a reasonable Stop Loss, you can avoid Margin calls (at least as per my understanding) and also, limit your downside, so that you 'do' have a future.

Again, what am I missing.

Thanks,
Bharosey.

I think my previous post answered your question, the answer lies in understanding the nature of the stop loss order and its limitations.

If the stop loss order was executed no matter what at the price you specify then I too would agree with you when you say "With a reasonable Stop Loss, you can avoid Margin calls (at least as per my understanding) and also, limit your downside, so that you 'do' have a future." but practically it isn't so.