JOYOUS WEEK END

FROM AN EXPERIENCE

The Gambler - This is the “I’m-giving-up-my-job-to-become-a-trader-because-I-don’t-like-working-9-to-5″ idiot. Observe that this bottom-dwelling resident of the phylogenetic scale is not giving up his job because he’s had success at trading. He’s also not giving up his career because he so loves trading that he researches it day or night and has found a winning edge.

No, The Gambler doesn’t do anything beyond 9-to-5, because what he’s after are easy riches, not effort and earned success. He hears that others have been successful (usually from Idiot #3), and he figures, “That means I can do it too”.

Invariably, the Gambler is attracted to daytrading. Why? It gives him a sense of action, and it justifies his decision to abandon all efforts at productive work.

Besides, you can’t really explain to your wife and kids why you’re not out there with working humanity supporting your household when you’re sitting around doing nothing, holding positions for weeks at a time.

So the Gambler actively trades in and out of markets, pretends like he’s got a job, and every so often berates his spouse when she wonders when the family will be able to pay its bills. My take on Gamblers?

They’re not interested in trading; they’re interested in their fantasy. So interested that they’ll take their bank accounts and families down with them.

Be a Hawk, Not a Worm

Always be aware of the big picture. Investment market movements are a function of the global economic and political environment as well as the collection of moods and attitudes of investors.

While investors are mercurial, the political and economic landscape tends to move in a more deliberate fashion.

Peter Stamos, chairman and CEO of Sterling Stamos Capital Management, relayed the story about the headmaster on campus who walked his dog every evening. Every evening after dinner the headmaster would stroll along the quad, walking his dog who hurriedly scampered from lawn to lawn, bush to bush, occasionally stopping to greet a passer by. Each evening the headmaster walked an identical path in a slow and predictable
fashion, yet predicting the path of his dog was impossible. That depended upon an incalculable number of decisions taking place in his trusted pet’s brain. Ultimately, the dog followed the headmaster. After all, he was on a leash.

Peter’s point was that the economy is the headmaster and the market is the dog. Over shorter periods,
predicting the markets’ pathways is like reading the collective minds of investors, yet over longer periods, the market must follow the economy. Focus on the landscape and understand the economic headwinds and tailwinds as your guide to managing your asset allocation.
(to be contd)

LEARN THINGS


Remember that only those who possess and use the necessary skills to survive the period of great danger are in position to profit from great opportunity. Risk control is paramount.

1. The extrinsic (time) component of the option premium goes to zero at options expiration. Always.


2. Although statisticians would argue, the probability of occurrence of an extremely unlikely event is much greater if you “bet the farm” on the event not occurring. Never forget that black swans do exist.


3. The human brain is not inherently logical. It evolved for survival and is prone to make erroneous assumptions and draw incorrect associations. To guard against these potentially costly errors, continuously challenge your assumptions.


4. Absence of proof does not constitute proof of absence.


5. Thinly traded options are usually characterized by egregious B/A spreads. You may be able to negotiate acceptable spreads to enter the trade. You will not be able to do so if you need to exit. It is usually better to stay away from these snares.


6. Option orders executed as spreads always receive better fills than individually placed orders.


7. Failure to consider current IV in an historic framework for the particular underlying will usually cost money.


8. Failure to follow predicted changes in volatility prior to a known event (e.g. earnings) indicates there is some factor of which you know not. When discovered, it usually impacts your position negatively.


9. Failure to use and understand option modeling and option modeling software puts you at a significant competitive disadvantage to other participants in the options market. The only thing more expensive than having appropriate tools is not having them.


10. It is stunningly easy to “roll more than you can smoke”. It is usually disastrous to attempt to smoke all you rolled if you find yourself in these circumstances. This is another reason to model trades and crisply define risk.


11. If you create multi-legged option beasts by manually entering the orders as opposed to entering from a graphical presentation, you will enter positions incorrectly and end up “upside down” and commit other similar errors more often than you thought possible. You must monitor the magnitude of extrinsic value when short options are ITM. Failure to do that and considering your trade plan in light of these developments, will result in unanticipated early assignment at the most inopportune times. Option positions can be easily adjusted to improve their structure only before they enter the ICU.


12. Forgetting to honor time stops when holding certain varieties of option beasts can be as costly as forgetting price and/or P/L stops.


13. Good traders know what they know; great traders also know what they don’t know.


14. If you don’t understand the trade and its structure, you will lose money.


15. Buying OTM options as a single position (as opposed to representing one of several legs of a spread) is almost always a bad idea.


16. Keep your trade sheets tidy. Allowing short options with minimal value to remain on your sheets as opposed to closing them for trivial cost is not being frugal; it is denying the existence of unforeseen and unforeseeable risk.


17. When trading options, as in life in general, you will make many errors. Each mistake contains a lesson. Study your mistakes and learn the lesson each teaches. You already paid for the instruction.


18. Pickpockets prowl the option markets with great regularity. Their bread and butter trade is buying ITM options for less than the intrinsic value. Never sell an option for less than intrinsic value. Be aware of “Plan B” to capture the entirety of the intrinsic value.


19. If all you have is a hammer, everything looks like a nail. The available option strategies are numerous and designed to accommodate a variety of market conditions. If you limit yourself to 1 or 2 strategies, you are not taking full advantage of the inherent flexibility of options. Learn several strategies, their nuances, and indications for their use.


20. Avoid having open option positions on stocks that will split. Option trading has adequate complexities without dealing with non standard strikes and changes in contract size resulting from splits. Your head will explode trying to deal with these complications. Avoid them like swine flu; spend your energy elsewhere.


21. Understanding the various concepts of volatility is essential for success. Volatility can be considered in light of:a. What was (SV, statistical vol; HV historical vol; different words and abbreviations for the same thing),
    b. What is,
    c. What shall be (IV, implied volatility, Market Implied Volatility (MIV); confusingly disparate words and acronyms signifying identical concepts)
    
    Of these three, IV is by far the most important. The nexus point is right here, right now. The future is unclear and always will be so. It is essential to understand IV and its various implications.


22. Be relentless in your pursuit of perfection but accepting of the fact that you are human and will never achieve it.


23. The first half hour of each day in the option markets is usually quite noisy; the predominant activity is fleecing the sheep. Don’t be one of the sheep.


24. Obfuscation of the basic concepts and structure of option strategies is the everyday business of the option community. The names of various strategies are multitudinous and confusing. Understand the concepts and be conversant with the various names of the strategies; success lies in analysis and execution not nomenclature.

MARKET REACHING DESTINATION EVEN AFTER A SLIP..???

THINK IT OVER

TODAY’S DAY TRADING STRATEGY OF NIFTY FUTURES– SEPT 3

Did u friends notice yesterday’s write up..?

Perfectly went upto

my 1^st resistance – 5509 and turned..!!!

What next..?

NOW

No buying in Nifty futures till 5495 level is crossed and the movement is sustained.

If happens today hike upto 5544-54 is for sure

If trades below 5495 for 20 minutes

See a Slide upto 5470-63

Good support @ 5463

And obviously no problem for Bulls above this level

BANK NIFTY

Good Support between 10950-30

Buy btwn 10983-11000

T1- 11028-41

T2- 11054-72

OR

Sell btwn 10927-10

T1- 10882-68

T2- 10855-38

Nifty, Bank Nifty levels and intraday news updated here gives astonishing success rate (more than 97%) that is more than enough for the readers to attain a decent profit daily.

To mint much more money pls subscribe our service and

enjoy daily market with our guidance.

Thank you.

SHARE TIPS TODAY (SEPT 3)

Sell SBM @ 1022

T1 – 1012

T2 – 1001

RICHARD DAWKINS WITH STEPHEN HAWKING

A must watch conversation it is..





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TODAY’S QUOTE

It is time we recognized that belief is not a private matter; it has never been merely private. In fact, beliefs are scarcely more private than actions are, for every belief is a fount of action in potentia.

-SAM HARRIS, The End of Faith

RELAX CORNER

JUST SMS TO YOUR PAL

Sardar made a call to the airport.
Asked,”How long is the journey from Punjab to America?”
Receiptionist: “One second sir….”.
Sardar: Ok, thank you..!!!

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