Forum Replies Created
I know plenty of traders who make around 100% a year. The trouble is that the profits pay the bills, they dont compound over time. My impression is that these guys are playing with around $150k on average.Yep! same here. It seems traders like to live the high life….and neglect to leave some profit in the a/c for compounding purposes.
(I must admit to being the same in the past…[
]yet[]) What’s the name of that song?….”I’ve Done All the Dumb Things!” LOLNowadays not much cash escapes my coffers to be spent on frivolities.
Wayne
“If anyone could consistently show 40% per annum over a number of years as a retail customer rather than a market maker or registered trader they would be able to command almost whatever salary took their fancy with most financial houses in the world.”
One factor most people don’t consider is account size:
Returns of 40% p/a…and well in excess of that are possible with a relatively small account size.
i.e. with say a 50k-200k a/c it is quite easy.
with a million dollars it is considereable harder.
With a several hundred million dollars like the financial houses are playing with, it is virtually impossible.
The reason basically comes down to liquidity. You can sneak in and out of a small cap stock vitually unnoticed with a 10k parcel and scoop out….say 50% profit as an example.That sort of trade would have a considerable impact on the bottom line of a 100k a/c.
The financial houses can’t really take trades such as that.
I can dump 1500 NAB shares into the market and the market wouldn’t even blink. If One of the funds dropped their $200,000,000 worth of shares onto the market it would cause a mini crash.
The private trader has a monumental advantage in this regard.[
][][]Hope that makes sense.
Wayne
Forumites, sharetraders bicker a lot, this is how we learn off each other. Only the emotionanally immature take it personally ok!
Crashy,
“Or is it the duck that sits?”
Sorry that went over my head[?]
“I could swear I have educated you about using closing prices of options before on hotcopper.”
Two points about this statement:
1/ I don’t go to hotcopper.
2/ Educate me!!!!!!!!!!! How sanctimonious! Who appointed you the guru?“DO NOT USING CLOSING PRICE AS VALUATION. THE LAST TRADED PRICE IS USUALLY OUTDATED AND IRRELEVANT. THEORETICAL PRICE SHOULD BE USED.”
Mate, as xyzzy has pointed out, the market decides the price of the option, not the ASX theoretical option price calculater. The last trade of NABWL on friday was 0.45, 20 contracts At 3:56 PM. This is about as current as it gets. The market has spoken, were you listening?
If anyone had tried to write NAB calls at the theoretical price on friday, the R.T.’s would have laughed there heads off.
“You waffle on about greeks as though they are some magical secret that only the elite know about, when the truth is they are largely useless because they are dynamic. Delta is the only one that is compulsary to know. The other two are mere trivia. I find it strange that you preach about the greeks yet you cant even value an option properly.”
Waffle? I mentioned them only. Show me where I have been preaching greeks???? Oh and by the way there are more than 3 greeks, better go back and check your textbooks son(my turn to be sanctimonious[}
]) I find it strange that you don’t consider theta important as this is is what is working in our favour in a written position. Delta is less important in a short option position. Perhaps it is you who needs more “education”. For some basic education on the FIVE option greeks, click on the link. http://www.asx.com.au/markets/l4/OptionGreeks_AM4.shtm“Secondly, you deliberately picked a stock with a low current Implied Volatility,”
Ahhh! Implied Volatility!!, excactly why theoretical values are BS…..And it is the reason why the stategy cannot return 3-6% every month.
“This is quite incorrect. You do not need to sell YOUR shares. You need to sell SOME shares IF you get exercised. If CGT was an issue you could simply buy more shares then sell them to the taker.”
You are correct on this point, however if you need to go into the market to buy shares because you written call has been assigned, it will of course be at a loss. Now we have to write a call in the next month just to break even (assuming the loss was equal to the premium recieved originally. Here is another reason the strategy cannot make 3-6% per month.
“This of course assumes that you do not hold calls at another strike, which you did not mention.”
Now we are talking bought calls as well? When did they come in the picture? I thought we were talking covered calls.
A little more about implied volatility:
Writing calls is, or should be a volatility based strategey….write them when iv is high….not every month for the sake of it.Finally, I’m with xyzzy….lets see some broker statements that show 40% p/a on covered calls. Until then there are other strategies I would much prefer to use.
Cheers
WayneGood point Muppet,
We will never know the future….till it arrives[
]To many unknown factors[?]
Wayne
BUT, beware the retiring baby boomer.I have a lengthy report on demographical influenses on real estate prices. It covers this subject in detail.
The conclusion it reaches is that by about 2012-2015 there will be a chronic oversupply of housing.[
][][]
Must admit I have noticed the same things about crashy and his posts, but his answers seem ok. Maybe he just doesn’t think about what he has said in the past, and leaves out pertinent info.
However, in his defence, those who write covered call options know how easy it is, in a short amount of time, to make 3-6% per month on quality shares, much more on volatile stocks. So 36%p.a. is not unreasonable, and many % more is possible, but with the higher % goes higher risks.Until you do the study, you cannot know how easy this is.[]3-6% ?????? Hilary, you must be writing atm or itm calls to be getting 3-6% month in month out. The standard covered call writing dogma is to write otm calls….which will return 1-2% per month on average.
If you can get 3-6% per month, every month, writing otm calls PLEASE PLEASE show me where, so I can write some.
Cheers
Sheesh Jim, what a fantastic and detailed post…tables an’ all. well done!!!
Boy am I glad to be a technical trader. Money management mathematics and option greeks is quite enough for this little black duck.
But great to see the effort to explain these complicated issues FULLY[
]Cheers Wayne
Perhaps I wouldn’t have worded it like Martin, but I have empathy with what he is saying.
Ignoring the tough questions seems to be quite common. Particularly by one of the posters in this very thread.
Now, I don’t want anyone thinking that I am getting all negative here, and I do think Martin should have phrased his thoughts a little more diplomatically…..BUT IN ANY INVESTMENT ONE SHOULD BE ACUTELY AWARE OF THE RISKS.(sorry for shouting but I believe it is important)
Once aware of the risks, one can examine the potential reward of the investment. Now we have a “Risk/Reward Ratio”
If the numbers stack up…DO IT. If they don’t stack up, then back off.
There is a another risk attached to investment, that has more to do with money management, and that is “The Risk of Ruin”. Many investors ignore this one in both the property and share markets.
So lets forgive Martin, and lets have some contribution and intellegent discuusion about the potential risks…As well as the potential rewards.
Cheers
WayneOmegatrend is modelelled on Amway as I stated above.
I wents to find the site I was talking about but it seems amway has sooled its lawyers onto the site owner and he has pulled the site.
But here is a google search page with a number of mirror and similars sites.
Have Fun[
]Wayne
I was given a link that tells thr true story of network marketing. It was about Amway, but Loren Watts, the originator of Omegatrends was an Amway “Diamond Distributor” (yeah I got sucked into it about 10 years ago) I’ll try and find it and post it here.
A few comments based on the website and my own experiences.
*Yes, you can become extremely successful, but the reality is far removed from the story they tell people at the lower levels.
*They say you can become sucessful working the business part time…..true! providing you put in at least 40 hours per week, preferably more.[
]*Your business expenses will be far in excess of you gross profit until you get to the higher levels. The expenses are something they neglect to tell you.[
]*According to the Amway site, even “Diamond Distributers”, if you remove the income they make from selling the tapes, seminars and books etc. are not profitable. That is why they push the tapes, seminars and books so hard. In other words even the diamonds business expenses exceed the gross profit from product sales.[
]*They talk about retiring quite a lot. HAHAHAHAHAHAHAHAHAHAAHA!!!! the diamonds work harder and longer than anyone.[
]Thats just a few points. But in the spirit of banishing negativity from this forum, I say go for it. It will be a growing experience at least. It will cost you a lot of money and time but they try to shove as much positive down your throat as you can possibly stand (at a cost to you of course); which can be of benefit later on.
OK I’m off to see if I can find this site I was talking about.
Wayne
]yet[
]) What’s the name of that song?….”I’ve Done All the Dumb Things!” LOL
]) I find it strange that you don’t consider theta important as this is is what is working in our favour in a written position. Delta is less important in a short option position. Perhaps it is you who needs more “education”. For some basic education on the FIVE option greeks, click on the link. 
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