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Posted by truth-b-told on July 21, 2007, 3:04 pm
This pathetic post comes from Ricky Ratchford in his Friends and
Traders Forum....this post is about as STUPID as you could ever get,
if you are a REAL TRADER!!!!
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Re: Learn this BEFORE you trade futures!
Posted By: Rick (Analyst - AmazingAccuracy.com) (70.178.248.151)
Date: Saturday, 21 July 2007, at 1:14 a.m.
In Response To: Re: Learn this BEFORE you trade futures! (Wolf)
"If a person succeeds in trading the options as you describe then they
would need to place an order requesting that the future position be
closed at the same time as the put option is exercised..."
Let me help you here.
You are short November Soybeans at 500.
The market goes limit up. What is that, 50 cents? Okay, so it is at
550 and locked.
You don't want to take a chance that it will go limit up again the
next day. You want out, and out with the loss you just accumulated.
You would exit with a LONG NOVEMBER at 550 and take the 50 cent loss,
but no trading is taking place due to the "lock" limit.
Therefore...
You create a synthetic long position at 550. Buy a 550 CALL and Sell a
550 PUT.
Would someone like to step up and tell us what would happen if you
were already short November Soybeans at 500 and your SHORT 550 NOV PUT
is exercised?
I'll try to explain this in the simplest way possible.
1. You are short November Soybeans at 500.
2. Your SHORT 550 NOV PUT is exercised. You are assigned a long
November Soybeans at 550.
So then, why would you "need to place an order requesting that the
future position be closed at the same time."?
Michael, if you are short November Soybeans and then assigned a long
in November Soybeans, that GETS YOU OUT OF THE MARKET. You don't have
to request anything from anyone. You simply end up with the original
50 cent loss (plus spread debit) and you're holding a LONG 550 CALL
that has value. Sell it and reclaim some of the spread you paid.
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So Ricky,
Do you know how STUPID your explanation is?
Let me explain this.....In the first place, why are you SHORT with NO
STOPS? If it opened limit up and is locked limit up and it stays there
till the close, your Call Option costs may or may NOT get filled, and
your Put Option costs that are bought/sold at the same strike price as
the Futures price is, may or may not get filled either.... plus you
now have 2 more commissions to pay. Oh ya, Ricky, you collect the Put
Option money you sold to help pay for your Call option you just
bought!!!!! But....What happens if you get filled at your Call price
and Put price, and the market DROPS 50 cents the next day....are you
"in or are you out," of your short Futures price? Being you sold your
Put, you are now LOSING BIF TIME MONEY on it, and being you still own
a Call, that too, is LOSING MONEY...........and what if it is LOCKED
LIMIT DOWN for 2 days in a row? How much money did you LOSE when you
got out of your short Futures BEFORE the prices dropped, and what did
you do with your Put you just sold? How will you cover your BUTT on
that scenario? You just LOST MONEY on ALL three trades, if the markets
drop and your timing is perfect!!!!
If you are short Futures, and it goes LIMIT UP, the margin money for
Soybeans would likely increase for the next days market, and now you
are telling us that you will "buy a 550 CALL and Sell a 550 PUT,"
with the anticipation that the market will continue to go higher? So
this means you are now long Futures with a 50 cent loss, and you just
sold a Put and gathered that option price, to help offset the costs
you paid for your $5.50 Call option. Now, three things can happen with
this kind volatility, prices can either open up but not limit up and
continue to go up, or they can open limit up and stay locked limit up,
or they can open up and go higher or reverse and drop like a rock, and
allow some trading, which will also allow you to "get out or back in,"
the Futures side of the game. Which GUESS will work for you? Why dig
your hole DEEPER with these Options gimmicks?
If the Futures price opens limit up, you LOSE that amount on your
Futures position, but you do not know if your Put or Call prices are
filled....and if it is, how much did you pay and how much did you gain
on these Options at the end of the day? Now what do you do tomorrow?
Do you put in an order to get out of your Call Options? Do you sell
your Puts and pocket the money? Quick Rick, act fast!!! What if the
market suddenly drops and goes limit down? Now you still have two
LOSING positions, plus an increase on margin money, plus another
Broker fee, and you still have to be certain that the market will
definitely go your way. What happens to your Put Option that you sold.
Which "option will you get out of, the Put you sold or the Call you
bought or the Futures contract? How quick with the trigger do you
think you can actually pull this off?
What if the Soybean Futures drops 50 cents or more on expanded limits,
the very next morning, after you got filled on your Option prices and
you are feeling smug? Now your $5.50 Put you sold, is losing you penny
for penny like your Futures contract did yesterday, and you still have
2 Option commissions to pay, but your $5.50 Call option, is also
LOSING MONEY, because you could have sold it quickly for a small
profit.....You gain some and you lose some, with your scenario, but
you have to be 100% CORRECT, in your 3 trades/ANALYSIS, and by looking
at your forecasting abilities, I really don't think I would want to
trade your way!!!! Then you also have "time decay, on your Options,"
so you can't sit there and hold it for a week or two, or you'll LOSE
even more money!!!
How complicated do you want to play this game? Buying options or
selling options, should be done without combining them to your Futures
trades. That is where you get into REAL TROUBLE, trying to be sneaky
and cocky by playing games with options. Many GURUS also do this, in
order to always be in the game and not miss an opportunity. This way,
they can always come back and say I bought this Option/Futures and I
made this amount of money on it, but in reality, they ALSO LOST money
on the other side of the table with their Options/Futures trades. So
this is why RAT wants to learn Options?
Options should ONLY BE USED, in the simplest forms, which is to either
buy a Put or a Call, straight out, or sell a Put or a Call, straight
out, or buy a Call and sell a higher strike price Call, or buy a PUT
and sell a lower Put to help finance your strike price that may get to
be "in-the-money!!!" First you have to do you chartwork on your
Futures charts, and see if the Futures charts, will work with your
Option trades and forecasts. When you try and be cute by combining
them with Futures Trades, and playing these "Option-Delta Gamma Guru
Games," you are asking for MORE Broker fees, MORE LOSSES, and very
seldom, does anyone come out ahead than if they stood their ground and
accepted their outcome in the simplest form. The glitter that comes
with off-setting your Futures trades with Options, is a JOKE!!!! You
win on one and LOSE on another....if that's the case, why bother to be
an half-assed ANALYST about it, and make your Broker happy? After all,
if you DON'T use stops, then this scenario could easily happen, and
that more than likely will lead to frustration on your part. Just look
at Ricky Ratchford and Dale Legan and see how frustrated they are!!!
Sincerely,
gerillio.
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Posted by UMT on July 21, 2007, 6:08 pm
Ratford started off with his 'cycle turns' being called for the actual
date of the turn.
....... That didn't work, so he went to a "3 day widow"
....... That didn't work, so now he is trying to call 'weekly turn
dates' (which ain't working well either!)
....... Then he got fascinated with Forex but that didn't work as he
found out that Forex is no different than any other market he can't
trade.
...... Then add all the different MLM's he's promoted, none of them
worked!
...... Now, he'ld like to come across as a 'option expert' also
I'll bet this doesn't work either!
UMT
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