25,99 €
Mehr erfahren.
- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Serie: Wiley Trading Series
- Sprache: Englisch
With over 50,000 copies in print for the first edition, Kaeppel's insight has undoubtedly made its mark in the options world. Now, he strikes again with an updated and more comprehensive look at those pesky mistakes that traders continue to make in trading options. In easy-to-understand terms, he systematically breaks down each problem and offers concrete and practical solutions to overcome it in the future. There are big profits to be made in options trading. By avoiding the four most common and most costly mistakes the majority of traders make, you'll be set to win big. System and software developer Jay Kaeppel helps you thoroughly understand each mistake before showing you how to avoid them in future trades. In this new, color edition, you'll find: * More in-depth analysis of the four biggest mistakes including volatility calculations, risk/reward relationships, calendar spreads, etc. * More real world examples with varying scenarios updated to reflect today's market * More graphs and tables to better illustrate Kaeppel's concepts * More detailed discussion on the nature of options trading and how to create a consistently winning strategy Concise and to-the-point, here's an action plan you can read and put into place immediately to become a more profitable trader.
Sie lesen das E-Book in den Legimi-Apps auf:
Seitenzahl: 103
Veröffentlichungsjahr: 2012
Ähnliche
Contents
Introduction
Mistake #1: Relying Solely on Market Timing to Trade Options
Why Traders Make Mistake #1
Why Mistake #1 Causes Losses In The Long Run
How To Avoid Mistake #1
Mistake #2: Buying Only Out-of-The-Money Options
Why Traders Make Mistake #2
Why Mistake #2 Causes Losses In The Long Run
How To Avoid Mistake #2
Mistake #3: Using Strategies That Are Too Complex
Why Traders Make Mistake #3
Why Mistake #3 Causes Losses In The Long Run
How To Avoid Mistake #3
Mistake #4: Casting Too Wide of a Net
Why Traders Make Mistake #4
Why Mistake #4 Causes Losses In The Long Run
How To Avoid Mistake #4
Summary
About the Author and Optionetics
Trading Source Guide
Copyright © 1998, 2007 by Jay Kaeppel.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with the respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for damages arising herefrom.
For general information about our other products and services, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data:
INTRODUCTION
Options offer traders and investors a number of unique and outstanding opportunities that are not available to those who trade only the underlying stock or futures contracts. A bullish speculator can choose to buy a call option for a fraction of the cost of purchasing the underlying security. Likewise, a bearish speculator can buy a put option. In either case, the speculator enjoys the potential for unlimited profits with limited risk. Other traders may employ strategies that offer an extremely high probability of profit. Many opportunities exist for well-educated traders to craft option positions that make a profit if the underlying security stays within a particular price range, or if it remains above or below a given price. This ability to make money in neutral market situations is something that is available only to option traders. In addition, investors can use options to hedge existing stock or futures positions. Through the astute use of options, investors can mitigate or, in certain cases, virtually eliminate the risk of loss for a position that they hold in a given stock or futures contract. Investors can also use option-hedging strategies to generate additional income from an existing portfolio of stocks.
Yet, despite all of these potential benefits, it is commonly estimated that 90% of option traders lose money in the long run. This staggering figure raises several extremely relevant questions:
After listening to a multitude of traders talk about their ideas on trading options over the years, it is interesting to note that there are several common themes running through many of these discussions. This raises an interesting question. If 90% of option traders lose money, and a lot of traders subscribe to the same ideas, can one gain an edge by avoiding the common approaches used by these traders?
In order to attempt to answer this question, I systematically tested the option trading approaches most commonly mentioned by traders—especially novice traders—using computer simulations.
As I will detail in the following sections, there are several common pitfalls that the majority of option traders fall into that cause them to lose money in the long run. As we often find to be the case in the realm of investing, whenever “the crowd” migrates to an idea or set of ideas, it usually pays off handsomely (in the long run) to go the other way and simply avoid whatever the crowd is doing. The good news is that by isolating the mistakes most commonly made by option traders, learning why they are so common, why they cause losses in the long run, and how they can be avoided in the future, you take a major step toward becoming a consistently profitable option trader.
There are good trading ideas and bad trading ideas. One of the best ways to find the good ideas is to first eliminate the bad ones. This is what I will attempt to accomplish in the following discussions where we will focus on the four biggest (and most common) mistakes made by the majority of option traders. So consider this the “how not to” portion of your option trading education.
For each of the following four biggest mistakes in option trading, I will first discuss what the mistake is. It is important to have a clear understanding of each error in order to be able to recognize in the future when you might be about to fall into a potential problem situation. I will then explain why it is so common for traders to make this mistake and why it causes traders to lose money in the long run. The idea here is to help you understand the reasons behind why a seemingly enticing idea can lead to your downfall in the long run. But, if you can learn how to avoid making these mistakes, you will stop falling victim to the siren song of tried and failed ideas. Finally, I will detail what needs to be done in order to avoid each of the most common mistakes. The goal here is to teach you to think independently of the “the crowd” and to teach you how to achieve the success that most option traders can only dream about.
One word of warning: a lot of traders may not enjoy reading these sections for the simple reason that we are about to de-bunk several ideas that many hold near and dear. Much of what you are about to read details the way that the majority of option traders trade. Yet, given the fact that most uneducated option traders lose money, it is important to read these sections with an open mind. Most often when someone attacks an idea that you believe to be true, or which “conventional wisdom” has convinced you is true, the first reaction is to become defensive and to try to defend your reasons for believing the idea in the first place. It is impossible to overemphasize the importance of reading the following text with an open mind if you want to trade options profitably in the long run. This is especially true given the following paradox: in most cases, the very ideas that lure traders into the options market in the first place are the same ideas that cause them, in the long run, to lose their time and money.
Mistake #1
Relying Solely on Market Timing To Trade Options
WHY TRADERS MAKE MISTAKE #1
Far too many first-time option traders view options as nothing more than a tool for leveraging their market timing decisions. That is, rather than buying or selling short a particular stock or futures contract, they feel that they can buy a call or put option and:
Commit a great deal less capital than they would to buy the underlying security itself, and,
Obtain a great deal more leverage than they would if they simply bought the underlying security.
And, in fact, it is possible to attain these benefits via option trading. By putting a relatively small sum of money into an option position, it is possible for a trader to achieve a much higher rate of return on a given trade than if he or she had bought or sold short the underlying security directly. For example, consider a stock that is trading at a price of $55 per share. In order to buy 100 shares of that stock, the investor would need to invest $5,500 (100 shares times $55 per share). At the same time, a call option with a strike price of 55—which gives the buyer of the option the right, but not the obligation, to buy 100 shares of the underlying stock at a price of $55 a share—might be trading at a price of $3 per contract. In order to buy one call option, the investor need only to put up $300 ($3 per contract times 100). The call option trader’s breakeven price in this example is $58 per share (the strike price of 55 plus the premium paid of $3). Hence, the call makes a profit at any stock price above 58. So in this case, the option trader needs to put up only about 5.4% as much capital as the buyer of 100 shares of stock; at any price above $58 per share, the option trader will enjoy point-for-point profit with the more traditional stock trader who invested $5,500 to buy the stock.
That is the good news. Unfortunately, a vast number of market timers adopt the belief that market timing is all they need in order to profit from trading options. Accordingly, they do little or no options analysis—instead adopting the attitude that “if my timing is good, any old option will do.” This is invariably a fatal error in the long run.
Market timers take great comfort in their winning trades—perhaps too much comfort. Any winning trades that they experience serve to reinforce their belief that market timing is all that is required in order to succeed, regardless of how few and far between the winning trades may be. Unfortunately, occasionally achieving a high rate of return on a given trade is not the same thing as making money in the long run. The question to ask is not, “Do I achieve a big winner now and then?” (as even the worst traders can occasionally hit a big winner). The relevant question is, “Am I following an approach that is likely to generate profits over the long run?” Traders who rely solely on market timing to trade options must answer no to this all-important question.
The primary reason that relying solely on market timing to trade options fails in the long run is that it completely ignores one of the most important factors in option trading: implied volatility. Before proceeding to explain why market timing alone fails option traders in the long run, let’s first discuss what implied volatility is and why an understanding of this important concept is critical to option trading success.
