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How much can I earn with Options?
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How much can I earn with Options?

  #41 (permalink)
Market Wizard
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blb014 View Post
I have no idea who the others are and what their motivations are for the trade so how could I outsmart them.

I don't look at charts drawing lines squiggly lines where I think sellers are buyers are going to be because IMO it is waste of time. What made Friday and Monday so special according to the charts?
I had a finance prof that studied chaos theory and the seemingly order of the market follow by chaos. Or disorder/followed by order with irrational human behavior as one of the main drivers. How could I outsmart that?

All I can do is invest/trade on good companies that I perceive to be a good long term return.

If you are serious, and you really think you aren't trying to outsmart others and win at this, I honestly don't know what to say, other than to wish you good luck.

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  #42 (permalink)
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kevinkdog View Post
Trading is a (less than) zero sum game, so every dollar you make is coming out of someone else's pocket.

Everyone who trades is competing against each other, you just do not know exactly who you are against on any trade.

A zero sum game ... everytime I hear this I really wonder about the intention saying this. On one hand it's true, especially with the additional words from kevinkdog (less than), on the other hand for a trader it shouldn't matter at all and it doesn't. We see only the own result and work on this. It's absolutely without relevance to sum up all people / transactions / ... resulting in a zero sum game less costs when acting as a single trader.

Lots of traders watch the Zero from below and the only thing we can do is improving the own equity curve. For myself I was looking many years for great systems, trying countless things, developing many indicators and systems. Over the time I recognized that so many working trading approuches are already on the table, free and for everyone to see. One point I've learned is that a good trader and a good system doesn't necessarily means regularly and steady profit. Every trader has to adapt a working system to his own kind of thinking / trading otherwise the "great" trading approuch is nothing worth. Doing this and doing it day by day without blowing up the account is hard work, work on the own attitude and discipline, sticking to the own rules, etc. THIS is the real competition.

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  #43 (permalink)
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PK 1 View Post
A zero sum game ... everytime I hear this I really wonder about the intention saying this.

The intention of saying it is that not everyone can win. That means there is a competition between participants, for a limited number of dollars.

You can frame it as a competition with yourself, I suppose, but if you are not beating other traders, then you are losing to the other players - the competition.

But to act as if there is no competition, or that the competition is only in your head (as some other poster said), or that a trader doesn't need to try to win (as another poster said), ignores the reality of trading.

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  #44 (permalink)
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Hey Man...


kevinkdog View Post
I'd be interested to hear your thoughts!

First I have to say that the markets are NOT a zero sum game. Each individual trade is not even a zero sum as each context can be and is totally different. True enough that the market CAN BE be net greater than or less than a zero sum outcome. I ask everyone, before vociferously, defending a zero sum game, to think about that before typing.

Okay. The question, "How much can I make trading options?" has no basis at all. What I mean is that it shows complete naivety for the markets and trading.

A parallel construct: How would I be viewed and how would the question be received if I went to the Masters this spring and asked in the hospitality tent, How much money can I make from golf? Note that while I do have clubs, I have not seen them in at least two years. I remember what color the golf bag is but I have not been seen on a course with said clubs in probably three or four years. But I am a golfer, eager to capitalize financially from my love for playing golf. I have clubs. I've been to the Masters. I belong to a country club. I shot an eagle ONCE and a double eagle ONCE. I typically get two or three "pars" per round. But I don't have a handicap and I've never broken 90.

At CBOE I was NOT notable as prolific, meaning size and frequency. I was not the fastest, smartest, luckiest or most effective guy in my crowd. I was consistent and reliable. Every day when I'd take the escalator to the trading floor...at that moment when the building geometry gives way to the expanse of the floor...I'd think Holy Shit! I'm going to "work", as a local, on the best, most dynamic, most competitive trading floor in the world. The guys standing all around me are among the best traders in the world. In preparation for that moment I NEVER asked or wondered how much money I could make. Implicitly, it was a SHIT TON...why reveal myself and ask...why cloud my focus to wonder?

I'd been a trader for a while before I arrived. The prior year I probably made $500,000 give or take running a NASDAQ trading desk. But coming into this, the big league, my expectation was first to survive...meaning not to lose money, and try to fit in. I clerked for a great trader and wonderful man for six months before even thinking about membership or trading. I refused any pay at all during that time, but I did accept a $5,000 "bonus" the week before Christmas. I passed membership, got my badge, and chose a crowd. The first three months I might have been on 15 trades. For perspective, there might have been 3000-5000 trades in the crowd that month. So, net nine months in I was "down" probably $25,000-$30,000. That first year I probably made $80,000. I felt like I was on my way.

Prolific traders during that time would have daily swings in their net liq of 4MM to 8 MM dollars. Typical guys like me might have daily swings in the low to mid six figures. There are usually 21 days in a trading month. Sometimes things went your way, sometimes they did not. BUT in my time there I NEVER took a withdrawal against my net liq. Professional traders do not like, no they HATE to hit the account for any reason.

I want folks to understand that. There is a difference between trading to live and living to trade. If trading is what you do, it will be a long road...sometimes awesome and sometimes challenging. If trading is who you are, everyday when you log in and the screen fires up you will think, Holy Shit, I'm getting a chance to participate in the last bastion of true capitalism and an opportunity to make a great outcome for my family.

Today, if a reasonably skilled person had $500,000 in cash and securities in an account with full options and futures access, they could routinely bank $5,000 to $15,000 a month without outsize risk. That is trading profits, not market appreciation. A bunch out of 100 with that set up could do better...BUT a typical person (read average skills and luck) will lose money trading options and futures in a normal month. ANYONE that has actually traded those markets for a few months would, or should, know that.

That was the bell. I'd elaborate if anyone asked.

Dan

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  #45 (permalink)
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kevinkdog View Post
You can frame it as a competition with yourself, I suppose, but if you are not beating other traders, then you are losing to the other players - the competition.

I wrote it above already, one has to level the own abilities such that one is profitable surviving in the pool of sharks. Having this the point that one is competing with the market participants is without relevance. It's simply an abstract phrase not helping in any way for the own trading. The own (fulfilling) trading skill is already implying that one has to be able to beat the market in any way (which is surviving the huge competition in the market) in order to survive as a trader.

And in the end exactly that is the case, one is competing with the market. Stating things like competing against other traders is just a false projection leading to wrong / misleading conclusions / statements (as seen above by other posts here). Re-Phrasing it as competing against those sharks swimming in the same pool would be more accurate.


kevinkdog View Post
But to act as if there is no competition, or that the competition is only in your head (as some other poster said), or that a trader doesn't need to try to win (as another poster said), ignores the reality of trading.

Not my words, I can't justify other peoples words.


Last edited by PK 1; February 7th, 2018 at 09:49 AM. Reason: Refinement
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  #46 (permalink)
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wldman View Post
First I have to say that the markets are NOT a zero sum game. Each individual trade is not even a zero sum as each context can be and is totally different. True enough that the market CAN BE be net greater than or less than a zero sum outcome. I ask everyone, before vociferously, defending a zero sum game, to think about that before typing.
Dan

Thanks Dan.

Just to clarify, I was referring to the futures market when I used the term "zero sum" because in total, the amount won is equal to the amount lost. In stocks, that is not true, because stocks can go up and all stockholders make money, without someone losing.

I appreciate your response.

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  #47 (permalink)
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kevinkdog View Post
If you are serious, and you really think you aren't trying to outsmart others and win at this, I honestly don't know what to say, other than to wish you good luck.

You are looking at from a short-term futures traders perspective. Long term traders especially with equities and options have a different perspective. There are equities that I have held for the last 14 years trading in and out positions with options. Me trying to outsmart "someone" doesn't not factor in to any trades I take.

As far as winning, how do you define that as regards to trading? If it is being profitable well I would say 99% of Americans invested in the market have been winning this year or any year with positive return in the overall market. Is that a zero sum game when the vast majority is winning? Wildman put forth a good answer.

If winning to you is beating the S&P annual return, yes I'm winning but at what point do diminishing returns happen if I'm only beating the S&P by a couple percentage points, compounded over years It makes a difference but time is finite resource.

The truth is that most of us are of average intelligence, I know I am. We are not going to "outsmart" quants back by supercomputers and physicists from MIT and Harvard.

****Edit ^^^^^^last year^^^

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Last edited by blb014; February 7th, 2018 at 10:55 AM.
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  #48 (permalink)
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kevinkdog View Post
Thanks Dan.

Just to clarify, I was referring to the futures market when I used the term "zero sum" because in total, the amount won is equal to the amount lost. In stocks, that is not true, because stocks can go up and all stockholders make money, without someone losing.

I appreciate your response.

What if someone is hedging a position or a commodity?
There are longer term strategies that can be implemented with futures also.

Regarding stocks, On a given day there are finite number of issuance among an equity *(I know it changes from time to time - dilution, treasury stock, exercised options) so is that a zero sum? Someone sells and the price goes up the, the stockholder "won" and the seller "lost"

There are multiple reasons why someone might take a futures or options trade and looking at from a "winning, losing and outsmarting" perspective is myopic IMO

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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  #49 (permalink)
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blb014 View Post
What if someone is hedging a position or a commodity?
There are longer term strategies that can be implemented with futures also.



Here is a simple example:

I buy a mini S&P futures contract. I hold for a month then I sell, and I make $5000.

During that time, someone held the short side of that contract. It could have been multiple people, it could have been hedgers, it could have been speculators, doesn't matter. But you add up all the people holding that contract during that time I held it, and the amount they lost on that futures contract adds up to $5000.

My $5000 gain + their $5000 loss = $0 (zero sum)

Note I am only talking about the futures market transaction being zero sum.

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  #50 (permalink)
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kevinkdog View Post
Here is a simple example:

I buy a mini S&P futures contract. I hold for a month then I sell, and I make $5000.

During that time, someone held the short side of that contract. It could have been multiple people, it could have been hedgers, it could have been speculators, doesn't matter. But you add up all the people holding that contract during that time I held it, and the amount they lost on that futures contract adds up to $5000.

My $5000 gain + their $5000 loss = $0 (zero sum)

Note I am only talking about the futures market transaction being zero sum.

Thanks for your response Kevin. I think your opinion has merit from a day traders perspective.

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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