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Purely intended as a directional play. I've been putting on these kinds of positions in the beans and bonds for 30 years. Most of the time they don't work, for reasons you are well aware of, BUT when they do work, they work big. I like being in the market (in this manner), because it's the best way to catch tail moves. Contrary, to what a lot of traders believe, good things can happen when you are in the market.
first thank you very much for posting. needless to say that most here can't keep up with your knowledge.
btw I really like your buying puts strategy. I'm doing this sometimes too (not saying I'm on your level). looking for low premiums, and if you're lucky and volatility increases, you can make money even if the underlying doesn't move much. and if it moves, it's like a home run. but for me it's strictly gambling, because there will be more losers. but doesn't have anything to do with my view of the market.
It's not gambling it's trading, albeit it is speculative in nature. And it's probably counterintuitive to most people because they are a lot happier when they are right frequently. But being right frequently is not necessarily consistent with long term success. The percentage of winning trades in any given sample, does not determine the samples profitability, it is
the dollar change in the sample.. A few big winning trades will often have a much greater impact on the samples performance than the percentage of winners in the sample.
This morning’s Employment Situation (unemployment rate dips to 8.9%) was again better than forecasted looking at the household survey, and slightly below expectations from the payrolls number (January and December revised for the better). However, after the weak shorts were driven out yesterday, and undoubtedly some new longs were trapped, ES futures made a lower high and sold off 23.25 points from the RTH - R1 @1334.5 and closed in the lower half of the days trading range. The fact that the market failed to rally on a positive number and bullish seasonality, along with CL continuing it’s climb above 100$ a barrel, indicates that ES has made the transition from a buy-the-breaks mode to a sell-the-rallies mode. This also leads me to believe that we will take out the bottom trendline of the consolidating wedge pattern early next week.
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
Thanks Given: 1,713
Thanks Received: 3,863
This was a very interesting week. The rally in equities is definitely being tested. From a big picture perspective, we've been range bound but as TigerTrader mentioned, there is some serious reversals taking place, trapping traders on both ends. I was surprised to find that the lowest extreme tick level was - 1201 and +1177. I would think if and when we see serious capitulation, we will see some really low Ticks printing. That will be interesting to watch for. I've wound out of most of my longs at this point with only a few contracts remaining anticipating the potential of a true trend change to the short side.
Like I said before, what we are seeing in today's markets are extraordinary. The USD appears to really be losing it's reserve status as it continues to crash. US Treasuries even though have slightly bounced, are still looking relatively weak and could continue to fall in turn spiking interest rates. Commodities and precious metals continue to shoot higher. Meanwhile, the MSM particularly CNBS continues to try and convince the "Joe Investor" to continue buying equities with their masterful spin doctors/talking heads that know nothing about the markets or economy.
I will say that it's nice to see some volatility returning to equities from an intra-day trading perspective. These are the times when you can make a lot of money provided you know what you're doing. But as always, stick to your trading plan for those who are still finding their bearings in trading and be careful!
tigertrader, based on my limited experience, I would totally agree with what you had stated. 90% of my gains over the years come from only 5% of the trades I made.
But strange enough, even though I see these results I often act to maximize my winning probability.
My question is is this the only method you use and had they work for you consistently?
I buy out of the money premium, far enough out (cheap enough) that I can buy size, but close enough in, that there is a high probability, it could get in the money. I am in no way a sophisticated options trader. In fact, when I was on the floor, I would walk into the bean options or bond options pit, tell a local what I was trying to accomplish, and he would tell me which strike would afford me the highest probability of success. As a way of saying thanks for the advice, I would give up the edge to him when I put my position on. Obviously, I don't have that luxury now so I make an educated guess.
