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I’ll upload it shortly. The big problem is that this discussion is probably not worth your time. I got mixed up more than once and the discussion about broken wing butterflies and iron condors is confusing. That’s why I plan to do a more complete post or video on this topic. This video can be too confusing and contradictory. I recommend that you skip it.
Sorry to hear of the low live response 15th sept. I do watch the video’s when I have the time, but am mostly away during weekdays for an away work assignment can seldom attend live.
I listen to the audio a lot in the car or during a walk outside lately and that works for me. Is there any chance that you would produce an audio format of older meetings?
Chris: I will look into making audios. Do remember that the live sessions are not meant to be ‘teaching’ moments. Theya re designed for clarifications for Members who have questions. Nevertheless, we do cover some interesting material in some of those meeting.
Your mic cuts in and out while you are talking (not sure why). I only bring it up because sometimes important information is lost. You can probably view today’s video to see this effect. Is there some setting to fix this?
s-
No video. Only one Member attended and we had a private chat/mentoring session.
I thought that the opportunity to ask questions or request a topic for a webinar would be attractive to members.
Apparently that is no longer the case. I like the idea of the live sessions. Do you have any suggestions? Thanks
The only suggestion I can think of is more predictable and suitable timings for the sessions, but agreeing to a common time for everyone will not be possible.
As an aside, for the idea of live sessions, how do you conceive them to be different from asking question in the forums and getting responses? Obviously if someone is lucky enough to get a one on one then things are different.
At first, I also thought that appropriate timing would be the most important factor. The truth is that fewer people seem interested in attending now than previously.
What is a good time for you? I can certainly try to accommodate that time – at least some of the time. I already have a request for 7:30 pm CT weekdays.
The difference, is the immediate response and the ability to follow up. Anyone with the patience to continue a thread via the forum does not need such immediacy.
The other difference is that others are more likely to chime into the conversation if attending the live meeting. As you can see, the forum does not attract a lot of outside conversation.
My request would be the weekend slot. I am sure many people catch up on your session recording even if they don’t attend. There is much to be learnt from your answers to others’ questions.
Mark, referring the 120815 webinar, my question is how are the weekly options priced regarding the time decay?
Is the time recalculated by the hour? with the monthly options I think (not sure) the time is recalculated every day.
Ilan
1) The value of an option, as calculated from the traditional Black-Scholes model, depends on the number of days that remain before the option expires.
2) By that definition, the value of an option is changed every day – in the morning before the market opens.
3) When there are many days remaining in the option’s lifetime, that formula works well enough for you and me.
4) Market makers – the people who must make bids and offers for all options, need something better. But this ‘better’ is simple the way that the ‘time remaining before expiration arrives’ is calculated.
What they do is use the running clock. Thus they use the actual time remaining before expiration arrives. That means that the theoretical value of an option could change every time one second passes. Of course, that change would be so minor that no one would see it. However, as expiration draws near, even the passage of a very short period of time matters.
But that does not concern us. That time value is built into their software. That means the values they determine and the bid ask spread that they use takes the current and correct time into consideration. That means the quotes you see already have been corrected for time. The option values are updated continuously, and not daily or hourly. The values do not have to be corrected or adjusted for time.
5) When your broker (or wherever you get your option valuation) shows you the theoretical value for an option, I do not know how they do the calculations. You would have to ask. They could use ‘real time’ or they could use the calendar (recalculate every day).
When we use online calculators, the request is that we input the number of days. Thus they do NOT update theoretical value during a trading day.
6) To complicate matters, each MM may sue a different algorithm to determine the ‘real time.’ Most sophisticated traders do not sue linear (real) time. They set their clocks to move faster as the weekend approaches. In other words, by the time the market closes on Friday, they have moved their clocks ahead. Perhaps 24 hours, perhaps 48 hours. I have no iaea. It is proprietary information.
The MMs want to value options as accurately as possible, and they do not reveal how they use the clock. In the old days, people wanted to sell options ate Friday because the weekend was coming and by selling, they quickly earned three days’ worth of time decay – if and only if nothing happened over the weekend to move the markets. That mindset is no longer possible. At some point MMs recognized that they were getting to buy too much on Friday (because the sellers were selling) and up with a better way to evaluate the options.
For you and me, that means there is no special advantage to selling options on Friday. In fact, I prefer not to sell premium on Friday just because the weekend is coming. That means there is more time for something newsworthy to happen.
Bottom line: Do not worry about theoretical option values as far as time is concerned. If you use quotes from the marketplace, you will always see quotes that take the clock into consideration.
During your live session on 11/13/2012, you answered a question about using covered calls versus IC in a retirement account. You suggested that CC were less risky. My question is would your answer also include using in the money calls as stock substitute.
Thank you
Fran,
Risk is not that easy to define. I was careful to state that:
CC is much more risky from this point of view; You can lose a whole lot more money per 1-lot.
IC is more risky from this perspective: Much easier to lose maximum possible per 1-lot.
IC is MUCH more risky from this point of view: It is easy for trader to misunderstand risk and own TOO MANY iron condors.
Using ITM calls ‘as a stock substitute’ is not quite the right description. Yes, buying an ITM call and selling a call against that is far less risky (in terms of possible loss per 1-lot) than a CC. But that ITM call is NOT really a ‘stock substitute’ Why? Because it carries time premium and that reduces upside profit potential. It is a good idea. I prefer it. But it is not a stock substitute.
I’d like to follow up, please. In your book, Hedge Fund, you are always in, to full $100,000. I am trying to determine if in the money calls would be the same? I mean to use the full $100,000 each month, as you do in your book, am I buying $100,000 worth of in the money calls each month? I tend to doubt it.
Link to the latest April 11 video is not working.
alfonso,
Problem solved for now.
Instant Presenter thought I was over my monthly viewing limit. But it was their error.
Regards
Hi Mark,
Did you get a chance to upload yesterday’s, September 1, live session? Thank you.
Wayne
Wayne,
I’ll upload it shortly. The big problem is that this discussion is probably not worth your time. I got mixed up more than once and the discussion about broken wing butterflies and iron condors is confusing. That’s why I plan to do a more complete post or video on this topic. This video can be too confusing and contradictory. I recommend that you skip it.
Mark,
Sorry to hear of the low live response 15th sept. I do watch the video’s when I have the time, but am mostly away during weekdays for an away work assignment can seldom attend live.
I listen to the audio a lot in the car or during a walk outside lately and that works for me. Is there any chance that you would produce an audio format of older meetings?
Regards, Chris
Chris,
Members: Does anyone else use the audios?
Chris: I will look into making audios. Do remember that the live sessions are not meant to be ‘teaching’ moments. Theya re designed for clarifications for Members who have questions. Nevertheless, we do cover some interesting material in some of those meeting.
Hi Mark,
I have been unable to open the live session video from 12/29.
Look forward to viewing it. Thanks.
Wayne
Problem fixed. Thanks for letting me know.
There is a 2-minute silent period late in the session. But, the sound returns.
Hi Mark,
Have you had a chance to upload yesterday’s (Thursday 1/26) live session?
Wayne
Wayne,
I’m told it should be available within a couple of hours.
Thanks for the heads-up alert
Hi Mark,
Your mic cuts in and out while you are talking (not sure why). I only bring it up because sometimes important information is lost. You can probably view today’s video to see this effect. Is there some setting to fix this?
Thanks
s
Thanks for the helpful information.
I tired to set up, using a different computer. I believe that is the source of the problem. I will test it before the next session.
Is there a video session from this week? Sorry I can only live attend the weekend sessions and have to watch these recordings on other days.
s-
No video. Only one Member attended and we had a private chat/mentoring session.
I thought that the opportunity to ask questions or request a topic for a webinar would be attractive to members.
Apparently that is no longer the case. I like the idea of the live sessions. Do you have any suggestions? Thanks
The only suggestion I can think of is more predictable and suitable timings for the sessions, but agreeing to a common time for everyone will not be possible.
As an aside, for the idea of live sessions, how do you conceive them to be different from asking question in the forums and getting responses? Obviously if someone is lucky enough to get a one on one then things are different.
s-,
At first, I also thought that appropriate timing would be the most important factor. The truth is that fewer people seem interested in attending now than previously.
What is a good time for you? I can certainly try to accommodate that time – at least some of the time. I already have a request for 7:30 pm CT weekdays.
The difference, is the immediate response and the ability to follow up. Anyone with the patience to continue a thread via the forum does not need such immediacy.
The other difference is that others are more likely to chime into the conversation if attending the live meeting. As you can see, the forum does not attract a lot of outside conversation.
My request would be the weekend slot. I am sure many people catch up on your session recording even if they don’t attend. There is much to be learnt from your answers to others’ questions.
s_,
I’ve tried Saturday mornings for the Live Meetings, and will do so again.
Thanks for the input.
Mark, referring the 120815 webinar, my question is how are the weekly options priced regarding the time decay?
Is the time recalculated by the hour? with the monthly options I think (not sure) the time is recalculated every day.
Ilan
Ilango,
1) The value of an option, as calculated from the traditional Black-Scholes model, depends on the number of days that remain before the option expires.
2) By that definition, the value of an option is changed every day – in the morning before the market opens.
3) When there are many days remaining in the option’s lifetime, that formula works well enough for you and me.
4) Market makers – the people who must make bids and offers for all options, need something better. But this ‘better’ is simple the way that the ‘time remaining before expiration arrives’ is calculated.
What they do is use the running clock. Thus they use the actual time remaining before expiration arrives. That means that the theoretical value of an option could change every time one second passes. Of course, that change would be so minor that no one would see it. However, as expiration draws near, even the passage of a very short period of time matters.
But that does not concern us. That time value is built into their software. That means the values they determine and the bid ask spread that they use takes the current and correct time into consideration. That means the quotes you see already have been corrected for time. The option values are updated continuously, and not daily or hourly. The values do not have to be corrected or adjusted for time.
5) When your broker (or wherever you get your option valuation) shows you the theoretical value for an option, I do not know how they do the calculations. You would have to ask. They could use ‘real time’ or they could use the calendar (recalculate every day).
When we use online calculators, the request is that we input the number of days. Thus they do NOT update theoretical value during a trading day.
6) To complicate matters, each MM may sue a different algorithm to determine the ‘real time.’ Most sophisticated traders do not sue linear (real) time. They set their clocks to move faster as the weekend approaches. In other words, by the time the market closes on Friday, they have moved their clocks ahead. Perhaps 24 hours, perhaps 48 hours. I have no iaea. It is proprietary information.
The MMs want to value options as accurately as possible, and they do not reveal how they use the clock. In the old days, people wanted to sell options ate Friday because the weekend was coming and by selling, they quickly earned three days’ worth of time decay – if and only if nothing happened over the weekend to move the markets. That mindset is no longer possible. At some point MMs recognized that they were getting to buy too much on Friday (because the sellers were selling) and up with a better way to evaluate the options.
For you and me, that means there is no special advantage to selling options on Friday. In fact, I prefer not to sell premium on Friday just because the weekend is coming. That means there is more time for something newsworthy to happen.
Bottom line: Do not worry about theoretical option values as far as time is concerned. If you use quotes from the marketplace, you will always see quotes that take the clock into consideration.
OK, thanks Mark.
Ilan
During your live session on 11/13/2012, you answered a question about using covered calls versus IC in a retirement account. You suggested that CC were less risky. My question is would your answer also include using in the money calls as stock substitute.
Thank you
Fran,
Risk is not that easy to define. I was careful to state that:
CC is much more risky from this point of view; You can lose a whole lot more money per 1-lot.
IC is more risky from this perspective: Much easier to lose maximum possible per 1-lot.
IC is MUCH more risky from this point of view: It is easy for trader to misunderstand risk and own TOO MANY iron condors.
Using ITM calls ‘as a stock substitute’ is not quite the right description. Yes, buying an ITM call and selling a call against that is far less risky (in terms of possible loss per 1-lot) than a CC. But that ITM call is NOT really a ‘stock substitute’ Why? Because it carries time premium and that reduces upside profit potential. It is a good idea. I prefer it. But it is not a stock substitute.
Thanks Mark,
But isn’t the in the money call also a hedge? Would it be “safer” than using stock?
Can you give me some idea on how many calls to buy? I have found that TOS has a nice paper money section.
I use an imaginary $130,000. This is more of a diagonal. I bought JAN 13 34 @ 1.90
sold DEC12 37 @ .40
Difference of $1.50.
If I’d like to risk 2% of my $130,000. That would be $2600. Put $150 per contract into the $2600 means I would have 17 spreads?
Is this a good way to do this, or can you advise a better way?
Thanks again.
Response coming as a blog post.
I’d like to follow up, please. In your book, Hedge Fund, you are always in, to full $100,000. I am trying to determine if in the money calls would be the same? I mean to use the full $100,000 each month, as you do in your book, am I buying $100,000 worth of in the money calls each month? I tend to doubt it.
Can you give me an answer to this, also?
Thanks again.