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"IT WAS THEIR FAILURE TO :
1) ACKNOWLEDGE THE PROBABILITY OF A REALLY BIG WAVE..."
AMEN - AMEN - AMEN
With all due respect to Black / Scholes, a mathematical model for projecting
market activity - regardless of how "elegant" or sophisticated it may be -
is only as profitable as the trader using that model.
I'm only a small trader and would not be so egotistically presumptuous as to
compare myself with mathematical giants such as Black, Scholes and those
with whom they conferred to finalize their formula.
But I will staunchly defend my crude saying that a trader - ANY trader in
ANY market - has to be a whore to the market. A trader must submit to the
market's wishes.
And always to remember my 2 Cardinal Rules when you begin to tout your
analytical invincibility after a string of profits:
Cardinal Rule #1: THE MARKETS DON'T "HAVE TO" DO ANYTHING.
Cardinal Rule #2: SEE CARDINAL RULE #1.
Be humble - and be profitable!!!!!!
So much for today's pontificating - time for lunch!
----- Original Message -----
From: "M. Simms" <prosys@xxxxxxxxxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Wednesday, July 25, 2001 10:02 AM
Subject: RE: Optionetics
> re:".. The effect of applying the Black-Scholes assumption in practice is
> illustrated by the Long-Term Capital Management fiasco."
>
> not true omega man.......their strategy was based on "reversion to mean"
of
> volatility.
> In other words, their backtesting was done with fairly consistent and
> confined waves where volatility would rise, then fall.
> All they did was ride these waves...and it was tremendously
> successful......until a really large one hit them.
> IT WAS THEIR FAILURE TO :
> 1) ACKNOWLEDGE THE PROBABILITY OF A REALLY BIG WAVE
> 2) IMPLEMENT A CIRCUIT-BREAKER STRATEGY
>
> THAT WAS THEIR UN-DOING, NOT THE MODEL.
>
>
> > -----Original Message-----
> > From: the_omega_man@xxxxxxxxxxxx [mailto:the_omega_man@xxxxxxxxxxxx]
> > Sent: Wednesday, July 25, 2001 7:26 AM
> > To: bjeckert@xxxxxxxxxx; omega-list@xxxxxxxxxx
> > Subject: Re: Optionetics
> >
> >
> > At Thu, 19 Jul 2001 14:25:11 -0500, Brian Eckert
> > <bjeckert@xxxxxxxxxx> wrote:
> >
> > >>I attended the Optionetis workshop this week. A few of you expressed
> > >>interest in what I thought of it.
> >
> >
> > I noticed that John Lothian asked you whether the "results" of
> > some strategies presented at the workshop were hypothetical or
> > actual. Did you reply to his question?
> >
> > Many of the current options "strategies" taught by various
> > options gurus are based on Black-Scholes notions of "volatility".
> > I suggest caution in applying such option price "models".
> > Stated simply, the assumption of Gaussian distribution of price
> > changes is incorrect. Thus, the Black-Scholes model is simply
> > bogus. (The more accurate price change distribution, with its
> > infinite "fat tails", negates Black-Scholes as a valid model.)
> >
> > For a more complete discussion of this, see "Nonlinear Pricing",
> > by Christopher May.
> >
> > The effect of applying the Black-Scholes assumption in practice
> > is illustrated by the Long-Term Capital Management fiasco.
> > Scholes and Merton (Black is deceased) used the Black-Scholes
> > assumptions at LTCM. Read "When Genius Failed", a book recently
> > mentioned on this list, for more on this.
> >
> >
> > Be careful out there...
> >
> >
> > Good trading,
> >
> > OM
> >
> >
> >
> > At Thu, 19 Jul 2001 14:25:11 -0500, Brian Eckert
> > <bjeckert@xxxxxxxxxx> wrote:
> >
> > >I attended the Optionetis workshop this week. A few of you expressed
> > >interest in what I thought of it.
> > >
> > >They present a good, clear explanation of how to make low risk,
> > high-reward
> > >options trades. The trades are categorized, the risks are
> > explained, they
> > >teach you the exact way to place the order, etc.
> > >
> > >I have not started to trade using these techniques, but I am
> > >encouraged. Their "calendar spread" technique averaged a 300% return
on
> > >equity last year.
> > >
> > >I was bothered by one thing. Throughout the seminar, they pitched
their
> > >other seminars, web site, newsletters, etc. I would have been a
> > bit more
> > >comfortable if the seminar came with a 4 week free subscription to
their
> > >news letter.
> > >
> > >A friend of mine attended. He recently purchased OptionVue. In
> > looking at
> > >the "platinum" service of their web site, he said that he would have
> > >preferred using it to OoptionVue.
> > >
> > >You may also be wondering if I think George is honest, i.e., does he
use
> > >these techniques in his trading, or he is just hawking a system for the
> > >sake of the money he can raise from these workshops. I think he really
> > >trades them.
> > >
> > >Hope this helps.
> > >
> > >I'll let you know what success I have when I begin trading options.
> > >
> > >
> > >
> >
> > At Thu, 19 Jul 2001 14:25:11 -0500, Brian Eckert
> > <bjeckert@xxxxxxxxxx> wrote:
> >
> > >I attended the Optionetis workshop this week. A few of you expressed
> > >interest in what I thought of it.
> > >
> > >They present a good, clear explanation of how to make low risk,
> > high-reward
> > >options trades. The trades are categorized, the risks are
> > explained, they
> > >teach you the exact way to place the order, etc.
> > >
> > >I have not started to trade using these techniques, but I am
> > >encouraged. Their "calendar spread" technique averaged a 300% return
on
> > >equity last year.
> > >
> > >I was bothered by one thing. Throughout the seminar, they pitched
their
> > >other seminars, web site, newsletters, etc. I would have been a
> > bit more
> > >comfortable if the seminar came with a 4 week free subscription to
their
> > >news letter.
> > >
> > >A friend of mine attended. He recently purchased OptionVue. In
> > looking at
> > >the "platinum" service of their web site, he said that he would have
> > >preferred using it to OoptionVue.
> > >
> > >You may also be wondering if I think George is honest, i.e., does he
use
> > >these techniques in his trading, or he is just hawking a system for the
> > >sake of the money he can raise from these workshops. I think he really
> > >trades them.
> > >
> > >Hope this helps.
> > >
> > >I'll let you know what success I have when I begin trading options.
> > >
> > >
> > >
> >
>
>
>
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