Saturday, March 6, 2010

Using options to get back to delta neutral - Options - Futures Magazine

Using options to get back to delta neutral - Options - Futures Magazine

I posted the above article written by Alex Mendoza who is the chief options strategist with Random Walk.  The ratios and Broken Wing Butterfly are some of the option trading techniques taught by them.

I have not attended any expensive option trading courses conducted by some self-proclaimed gurus but I have had the chance of reading a set of options trading books from one of the better courses.  In general, I find them to be rather basic but most importantly, they do not teach you how to make money in a real trading situation.  They will define what a "bull call spread" is, give a simple hypothetical example and teach you how to calculate the break-even, maximum profit and so on.  They will typically cover the technique in 4 to 5 pages and quickly move on to the next.  By the time you complete technique #6 on page 25, you would have forgotten the name of technique #1 on page 1.

Random Walk, on the other hand, teaches only techniques that that they find useful in actual trading environment.  They do not cover all techniques available and leave you to draw your own conclusion.  They will go into great details for the chosen techniques and leave nothing to your imagination.  They have dedicated an entire book describing how to trade the ratio and Broken Wing Butterflies technique.  A lot of pit option traders use a variation of this technique to earn a comfortable living.  They give step-by-step instruction and it is clear and concise from the first page to the last.  I feel like I have received a proper education and feel confident enough to know what to do in an actual trading situation.

On the down side, these textbooks from Random Walk are not cheap even though they are worth very cent of it.  The first four textbooks cost me US$1,000.  The good thing is that the funding came from the profit that I've made trading their techniques.  I have my eyes set on the "Essentials DVD" also offered by Random Walk at a price tag of US$1,995:

• Vertical Spreads
• The Three-Leg Box
• Butterflies and Condors
• Broken Wing Butterflies
• Reverse Gamma Scalping
• The Iron Cockroach
• Portfolio Management
• Money Management
• Which Strategy to Use
• Stock Market Crashes
• The Five-Year Millionaire

Again, nothing is coming from my pocket.  They will have come from my trading profit for this month.

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