Partner Channels: Bill Pay | Health | IT Education | Jobs | Technology | Travel
June 29, 2001
|
|
|
|
|
|
||
|
Channels: Astrology | Broadband | Contests | E-cards | Money | Movies | Romance | Search | Wedding | Women Partner Channels: Bill Pay | Health | IT Education | Jobs | Technology | Travel |
||
|
|
||
|
Home >
Money > Options Trading Strategy Guide June 29, 2001 |
Feedback
|
|
|
Options Trading Strategy Guide: The World of Options TradingOPTIONS PLAYERS Options: Not a Zero-Sum Game With the possible exception of futures contracts, trading is not a zero-sum game. In other words, for every winner there doesn't have to be a loser. Therefore, because there are so many different combinations and ways options can be hedged against each other, it doesn't make sense to look at overall figures (e.g., the number of options that expire worthless) and reach conclusions about how many people made or lost money. For simplicity, let's take the case of a spread. The fact that one person made money buying a butterfly does not automatically mean that someone else lost. Instead, the person who sold the butterfly may have traded out of the position using spreads or by selling individual options. For every person who is long a butterfly, call spread, put spread, or whatever, there are not necessarily people who are short the corresponding position. As such, the profitability of their positions will necessarily differ. Know your competition In many respects, option trading is a game of strategy not unlike competitive sports or chess tournaments. The main difference is that in trading there are more players and multiple agendas. To succeed, it's important to have a knowledge and appreciation of the other players. In general terms, you must gain an appreciation for the behavior and motivations of the different players. In the option markets, the players fall into four categories:
What follows is a brief overview of each group along with insights into their trading objectives and strategies. The Exchanges The exchange is a pblace where market makers and traders gather to buy and sell stocks, options, bonds, futures, and other financial instruments. Since 1973 when the Chicago Board Options Exchange first began trading options, a number of other players have emerged. At first, the exchanges each maintained separate listings and therefore didn't trade the same contracts. In recent years this has changed. Now that BSE and NSE both these exchanges list and trade the same contracts, they compete with each other. Nevertheless, even though a stock may be listed on multiple exchanges, one exchange generally handles the bulk of the volume. This would be considered the dominant exchange for that particular option. The competition between exchanges has been particularly valuable to professional traders who have created complex computer programs to monitor price discrepancies between exchanges. These discrepancies, though small, can be extraordinarily profitable for traders with the ability and speed to take advantage. More often than not, professional traders simply use multiple exchanges to get the best prices on their trades. Deciding between the two would be simply a matter of choosing the exchange that does the most trading in this contract. The more volume the exchange does, the more liquid the contract. Greater liquidity increases the likelihood the trade will get filled at the best price. Financial Institutions Financial institutions are pbrofessional investment management companies that typically fall into several main categories: mutual funds, hedge funds, insurance companies, stock funds. In each case, these money managers control large portfolios of stocks, options, and other financial instruments. Although individual strategies differ, institutions share the same goal-to outperform the market. In a very real sense, their livelihood depends on performance because the investors who make up any fund tend to be a fickle group. When fund don't perform, investors are often quick to move money in search of higher returns. Where individual investors might be more likely to trade equity options related to specific stocks, fund managers often use index options to better approximate their overall portfolios. For example, a fund that invests heavily in a broad range of tech stocks will use NSE Nifty Index options rather than separate options for each stock in their portfolio. Theoretically, the performance of this index would be relatively close to the performance of a subset of comparable high tech stocks the fund manager might have in his or her portfolio. Market Makers Market makers are the traders on the floor of the exchanges who create liquidity by providing two-sided markets. In each counter, the competition between market makers keeps the spread between the bid and the offer relatively narrow. Nevertheless, it's the spread that partially compensates market makers for the risk of willingly taking either side of a trade. For market makers, the ideal situation would be to "scalp" every trade. More often than not, however, market makers don't benefit from an endless flow of perfectly offsetting trades to scalp. As a result, they have to find other ways to profit. In general, there are four trading techniques that characterize how different market makers trade options. Any or all of these techniques may be employed by the same market maker depending on trading conditions.
Day traders Day traders, on or off the trading screen, tend to use small positions to capitalize on intra-day market movement. Since their objective is not to hold a position for extended periods, day traders generally don't hedge options with the underlying stock. At the same time, they tend to be less concerned about delta, gamma, and other highly analytical aspects of option pricing. Premium Sellers Just like the name implies, premium sellers tend to focus their efforts selling high priced options and taking advantage of the time decay factor by buying them later at a lower price. This strategy works well in the absence of large, unexpected price swings but can be extremely risky when volatility skyrockets. Spread Traders Like other market makers, spread traders often end up with large positions but they get there by focusing on spreads. In this way, even the largest of positions will be somewhat naturally hedged. Spread traders employ a variety of strategies buying certain options and selling others to offset the risk. Some of these strategies like reversals, conversions, and boxes are primarily used by floor traders because they take advantage of minor price discrepancies that often only exist for seconds. However, spread traders will use strategies like butterflies, condors, call spreads, and put spreads that can be used quite effectively by individual investors.
Theoretical Traders By readily making two-sided markets, market makers often find themselves with substantial option positions across a variety of months and strike prices. The same thing happens to theoretical traders who use complex mathematical models to sell options that are overpriced and buy options that are relatively underpriced. Of the four groups, theoretical traders are often the most analytical in that they are constantly evaluating their position to determine the effects of changes in price, volatility, and time. Individual (Retail) As option volume increases, the role of individual investors becomes more important because they account for over 90% of the volume. That's especially impressive when you consider that option volume in February 2000 was 56.2 million contracts-an astounding 85% increase over February 1999 The Psychology of the Individual Investor From a psychological standpoint, individual investors are in interesting group because there are probably as many strategies and objectives as there are individuals. For some, options are a means to generate additional income through relatively conservative strategies such as covered calls. For others, options in the form of protective puts provide an excellent form of insurance to lock in profits or prevent losses from new positions. More risk tolerant individuals use options for the leverage they provide. These people are willing to trade options for large percentage gains even knowing their entire investment may be on the line. In a sense, taking a position in the market automatically means that you are competing with countless investors from the categories described above. While that may be true, avoid making direct comparisons when it comes to your trading results. The only person you should compete with is yourself. As long as you are learning, improving, and having fun, it doesn't matter how the rest of the world is doing. HOW TO HEDGE RISK AND PROTECT PROFITS WITH OPTIONS? Market making Professional traders (known in the industry as market makers or market operators), often think that for the beginning investor, option trading must seem similar to putting together a puzzle without the aid of a picture. You can find the picture if you know where to look. Looking through the eyes of a professional market maker is one of the best ways to learn about trading options under real market conditions. This experience will help you understand how real-world changes in option pricing variables affect an option's value and the risks associated with that option. Furthermore, because market makers are essentially responsible for what the option market looks like, you need to be familiar with their role and the strategies that they use in order to a regulate a liquid market and ensure their own profit. We will provide an overview of the practices of market makers and explore their mindset as the architects of the option business. First, we will consider the logistics of a market maker's responsibilities. How do market makers respond to supply and demand to ensure a liquid market? How do they assess the value of an option based on market conditions and demands? In the second part of this chapter, we will consider the profit-oriented objectives of a market maker. How is market making like any other business? How does a market maker profit? What does it mean to hedge a position, and how does a market maker use hedging to minimize risk? Who are market makers? The image of an electronic trading terminal is not unfamiliar to the Indian imagination, but many people might not know who the players behind the screen are. Market makers, brokers, fund managers, retail traders and investors occupy trading terminals across India. Thousands of trading terminals across 250 cities of India are combined, they represent the marketplace for option trading. The exchange itself provides the location, regulatory body, computer technology, and staff that are necessary to support and monitor trading activity. Market makers are said to actually make the option market, whereas brokers represent the public orders. In general, market makers might make markets in up 30 or more issues and compete with one another for customer buy and sell orders in those issues. Market makers trade using either their own capital or trade for a firm that supplies them with capital. The market maker's activity, which takes place increasingly through computer execution, represents the central processing unit of the option industry. If we consider the exchange itself as the backbone of the industry, the action in the Mumbai's broking offices represents the industry's brain and industry, heart. As both a catalyst for trading and a profiteer in his or her own right, the market maker's role in the industry is well worth closer examination. Individual trader versus market maker The evaluation of an option's worth by individual traders and market makers, respectively, is the foundation of option trading. Trader and market maker alike buy and sell the products that they foresee as profitable. From this perspective, no difference exists between a market maker and the individual option trader. More formally, however, the difference between you and the market maker is responsible for creating the option industry, as we know it. Essentially, market makers are professional, large-volume option traders whose own trading serves the public by creating liquidity and depth in the marketplace. On a daily basis, market makers account for up to half of all option trading volume, and much of this activity is responsible for creating and ensuring a two-sided market made up of the best bids and offers for public customers. A market maker's trading activity takes place under the conditions of a contractual relationship with an exchange. As members of the exchange, market makers must pay dues and lease or own a seat on the floor in order to trade. More importantly, a market maker's relationship with the exchange requires him or her to trade all of the issues that are assigned to his or her primary pit on the option floor. In return, the market maker is able to occupy a privileged position in the option market - market makers are the merchants in the option industry; they are in a position to create the market (bid and ask) and then buy on their bid and sell on their offer. The main difference between a market maker and retail traders is that the market maker's position is primarily dictated by customer order flow. The market maker does not have the luxury of picking and choosing his or her position. Just like the book makers in Las Vegas casinos who set the odds and then accommodate individual betters who select which side of the bet that they want, a market maker's job is to supply a market in the options, a bid and an offer, and then let the public decide whether to buy or sell at those prices, thereby taking the other side of the bet. As the official option merchants, market makers are in a position to buy option wholesale and sell them at retail. That said, the two main differences between market makers and other merchants is that market makers commonly sell before they buy, and the value of their inventory fluctuates as the price of stock fluctuates. As with all merchants, though, a familiarity with the product pays off. The market maker's years of experience with market conditions and trading practices in general - including an array of trading strategies - enables him or her to establish an edge (however slight) over the market. This edge is the basis for the market maker's potential wealth. Smart trading styles of market operators Throughout the trading day, market makers generally use one of two trading styles: scalping or position trading. Scalping is a simpler trading style that an ever-diminishing number of traders use. Position trading, which is divided into a number of subcategories, is used by the greatest percentage of all market makers. As we have discussed, most market maker's position are dictated to them by the public's order flow. Each individual market maker will accumulate and hedge this order flow differently, generally preferring one style of trading over another. A market maker's trading style might have to do with a belief that one style is more profitable then another or might be because of a trader's general personality and perception of risk. The scalper generally attempts to buy an option on the bid and sell it on the offer (or sell on the offer and buy on the bid) in an effort to capture the difference without creating an option position. Scalpers profit from trading what is referred to as the bid / ask spread, the difference between the bid price and the ask price. For example, if the market on the Nifty July 1130 puts is 15 (bid) - 15.98 (ask), this trader will buy an option order that comes into the trading pit on the bid along with the rest of the crowd. This trader is now focused on selling these puts for a profit, rather than hedging the options and creating a position. Due to the lack of commission paid by market makers, this trader can sell the first 15.20 bid that enters the trading crowd and still make a profit, known in the financial industry as a scalp. The trader has just made a profit without creating a position. Sometimes holding and hedging a position is unavoidable, however. Still this style of trading is generally less risky, because the trader will maintain only small positions with little risk. The scalper is less common these days because the listing of options on more than one exchange (dual listing) has increased competition and decreased the bid/ask spread. The scalper can make money only when customers are buying and selling options in equal amounts. Because customer order-flow is generally one-sided (either customers are just buying or just selling) the ability to scalp options is rare. Scalpers, therefore, are generally found in trading pits trading stocks that have large option order flow. The scalper is a rare breed on the trading floor, and the advent of dual listing and competing exchanges has made scalpers an endangered species. The position trader generally has an option position that is created while accommodating public order flow and hedging the resulting risk. This type of trading is more risky because the market maker might be assuming directional risk, volatility risk, or interest rate risk, to name a few. Correspondingly, market makers can assume a number of positions relative to these variables. Generally the two common types of position traders are either backspreaders or frontspreaders. BACKSPREADER Essentially, backspreaders are traders who accumulate (buy) more options than they sell and, therefore, have theoretically large or unlimited profit potential. For example, a long straddle would be considered a backspread. In this situation, we purchase the 50 level call and put (an ATM strike would be delta neutral). As the underlying asset declines in value, the call will increases in value. In order for the position to profit, the value of the rising option must increase more than the value of the declining option, or the trader must actively trade stock against the position, scalping stock as the deltas change. The position could also profit from an increase in volatility, which would increase the value of both the call and put. As volatility increases, the trader might sell out the position for a profit or sell options (at the higher volatility) against the ones she owns. The position has large or unlimited profit potential and limited risk. As we know from previous chapters, there is a multitude of risks associated with having an inventory of options. Generally, the greatest risk associated with a backspread is time decay. Vega is also an important factor. If volatility decreases dramatically, a backspreader might be forced to close out his position at less than favorable prices and may sustain a large loss. The backspreader is relying on movement in the underlying asset or an increase in volatility. FRONTSPREADER The opposite of a backspreader, the frontspreader generally sells more options then he or she owns and, therefore, has limited profit potential and unlimited risk. Using the previous example, the frontspreader would be the seller of the 150 level call and put, short the 150 level straddle. In this situation, the market maker would profit from the position if the underlying asset failed to move outside the premium received for the sale prior to expiration. Generally, the frontspreader is looking for a decrease in volatility and/or little to no movement in the underlying asset. The position also could profit from a decrease in volatility, which would decrease the value of both the call and put. As volatility decreases, the trader might buy in the position for a profit or buy options (at the lower volatility) against the ones he or she is short. The position has limited profit potential and unlimited risk. When considering these styles of trading, it is important to recognize that a trader can trade the underlying stock to either create profit or manage risk. The backspreader will purchase stock as the stock decreases in value and sell the stock as the stock increase, thereby scalping the stock for a profit. Scalping the underlying stock, even when the stock is trading within a range less than the premium paid for the position, cannot only pay for the position but can create a profit above the initial investment. Backspreaders are able to do this with minimal risk because their position has positive gamma (curvature). This means that as the underlying asset declines in price, the positions will accumulate negative deltas, and the trader might purchase stock against those deltas. As the underlying asset increases in price, the position will accumulate positive deltas, and the trader might sell stock. Generally, a backspreader will buy and sell stock against his or her delta position to create a positive scalp. Similarly, a frontspreader can use the same technique to manage risk and maintain the profit potential of the position. A frontspread position will have negative gamma (negative curvature). Staying delta neutral can help a frontspreader avoid losses. A diligent frontspreader can descalp (scalping for a loss) the underlying asset and reduce her profits by only a small margin. Barring any gap in the underlying asset, disciplined buying and selling of the underlying asset can keep any loss to a minimum. To complicate matters further, a backspreader or frontspreader might initiate a position that has speculative features. Two examples follow. DIRECTIONAL TRADERS These traders put on a position that favors one directional move in the underlying asset over another. This trader is speculating that the stock will move either up or down. This type of trading can be extremely risky because the trader favors one direction to the exclusion of protecting the risk that is associated with movement to the other side. For example, a trader who believes that the underlying asset has sold off considerably might buy calls and sell puts. Both of these transactions will profit from a rise in the underlying asset; however, if the underlying asset were to continue downward, the position might lose a great deal of money. VOLATILITY TRADERS Volatility traders will generally make an assumption about the direction of the option volatility. For these traders, whether or not to buy or sell a call or put is based on an assessment of option volatility. Forecasting changes in volatility is typically an option trader's biggest challenge. As discussed previously, volatility is important because it is one of the principal factors used to estimate an option's price. A volatility trader will buy options that are priced below his or her volatility assumption and sell options that are trading above the assumption. If the portfolio is balanced as to the number of options bought and sold (options with similar characteristics such as expiration date and strike), the position will have little vega risk. However, if the trader sells more volatility than he or she buys, or vice versa, the position could lose a great deal of money on a volatility move. HOW MARKET OPERATORS WILL TRAP THE PUBLIC? In general, the market maker begins his or her assessment by using a pricing formula to generate a theoretical value for an option and then creating a market around that value. This process entails creating a bid beneath the market maker's fair value and an offer above the market maker's fair value of the option. Remember that the market maker has a legal responsibility to ensure a liquid marketplace through supplying a bid/risk spread. The trading public then can either purchase or sell the options based on market-maker listings, or it can negotiate with the market maker for a price that is between the posted bid/risk prices (based on his or her respective calculations of the option's theoretical value). In most cases, the difference between market maker and individual investor bids and offers are a matter of pennies (what we might consider fractional profits). For the market maker, however, the key is volume. Like a casino, the market maker will manage risk so that she can stay in the game time after time and make a Rs.1 here and a Rs.5 there. These profits add up. Like the casino, a market maker will experience loss occasionally; however, through risk management, he or she attempts to stay in the business long enough to win more than he or she loses. Another analogy can be found in the relationship between a buyer and used car dealer. A car dealer might make a bid on a used car for an amount that is less than what he is able to resell the car for in the marketplace. He or she can make a profit by buying the car for one price and selling it for a greater price. When determining the amount that he or she is willing to pay, the dealer must make an assumption of the future value of the car. If he is incorrect about how much someone will purchase the car for, then the dealer will take a loss on the transaction. If correct, however, the dealer stands to make a profit. On the other hand, the owner of the car might reject the dealer's original bid for the car and ask for a greater amount of money, thereby coming in between the dealer's bid/risk market. If the dealer assesses that the price that the owner is requesting for the car still enables a profit, he or she might buy the car regardless of the higher price. Similarly, when a market maker determines whether he or she will pay (or sell) one price over another, he or she determines not only the theoretical value of the option buy also whether or not the option is a specific fir for risk-management purposes. There might be times when a market maker will forego the theoretical edge or trade for a negative theoretical edge for the sole purpose of risk management. Before proceeding with our discussion of the market maker's trading activity in detail, let us again refer to the casino analogy. The house at a casino benefits largely from its familiarity with the business of gambling and the behavior of betters. As an institution, it also benefits from keeping a level head and certainly from being well (if not better) informed than its patrons about the logistics of its games and strategies for winning. Similarly, a market maker must be able to assess at a moment's notice how to respond to diverse market conditions that can be as tangible as a change in interest rates or as intangible as an emotional trading frenzy based on a news report. Discipline, education, and experience are a market maker's best insurance. We mention this here because, as an individual investor, you can use these guidelines to help you compete wisely with a market maker and to become a successful options trader. Market making as a business In the previous section, we addressed rather conceptually, how a market maker works in relation to the market (and, in particular, in relation to you, the individual trader). A market maker's actual practices are dictated by a number of bottom-line business concerns, however, which require constant attention throughout the trading day. Like any business owner, a market maker has to follow business logic, and he or she must consider the wisest uses of his or her capital. There are number of factors that you should consider when assessing whether an option trade is a good or bad business decision. At base, the steps that a market maker takes are as follows: 1. Determining the current theoretical fair value of an option. (As we have discussed, the market maker can perform this task with the use of a mathematical pricing model.) 2. Attempting to determine the future value of an option. Buying the option if you think that it will increase in value or selling the option if you think that it will decreases in value. This is done through the assessment of market factors that may affect the value of an option. These factors include : Interest rates
3. Determining whether the capital can be spent better elsewhere. For example, if the interest saved through the purchase of a call (instead of the outright purchase of the stock) exceeds the dividend that would have been received through owning the stock, then it is better to purchase the call. 4. Calculating the long stock interest that is paid for borrowing funds in order to purchase the stocks and considering whether the money used to purchase the underlying stock would be better invested in an interest-bearing account. If so, would buying call options instead of the stock be a better trade? 5. Calculating whether the interest received from the sale of short stock is more favorable than purchasing puts on the underlying stock. Is the combination of owning calls and selling the underlying stock a better trade than the outright purchase of puts? 6. Checking for arbitrage possibilities. Like the preceding step, this task entails determining whether one trade is better than another. In the section on synthetics, we explored the possibility of creating a position with the same profit/loss characteristics as another by using different components. At times, it will be more cost effective to put on a position synthetically. Arbitrage traders take advantage of price differentials between the same product on different markets or equivalent products on the same market. For example, a differential between an option and the actual underlying stock can be exploited for profit. The three factors to base this decision on are as follows:
For example, if you buy a call option, you save the interest on the money that you would have had to pay for the underlying stock. Conversely, if you purchase a put, you lose the short stock interest that you could be receiving from the sale of the underlying stock. The dividend rate. If you buy a call option, you lose the dividends that you would have earned by actually holding the stock. 7. Finally, determining the risk associated with the option trade. As previously discussed, all of the factors that contribute to the price of the option are potential risk factors to an existing position. As we know, if the factors that determine the price of an option change, then the value of an option will change. This risk associated with these changes can be alleviated through the direct purchase or sale of an offsetting option or the underlying stock. This process is referred to as hedging. A market maker's complex positioning As we mentioned earlier, the bulk of a market maker's trading is not based on market speculation but on the small edge that can be captured within each trade. Because the market maker must trade in such large volumes in order to capitalize on fractional profits, it is imperative that he or she manage the existing risks of a position. For example, in order to retain the edge associated with the trade, he or she might need to add to the position when necessary by buying or selling shares of an underlying asset or by trading additional options. In fact, it is not uncommon that once the trade has been executed, the trader an opposite market position in the underlying security or in any other available options. Over time, a large position consisting of a multitude of option contracts and a position in the underlying stock is established. The market maker's job at this point is to continue to trade for theoretical edge while maintaining a hedged position to alleviate risk. In the following section, we will review the basics of risk management in the form of hedging. Although market makers are the masters of hedging, hedged positions are essential for the risk management for all option traders. It will be equally important for you to understand how to use these strategies. THE TRUMP CARD OF MARKET OPERATORS: HEDGING Thus far, we have overviewed the logistics of the market maker's business model and have seen how it functions to both serve the trading public and the market maker simultaneously. Now we will consider how market makers work to secure their edge against the ongoing risks presented to their many positions. An investor who chooses to invest in a particular market is exposed to the risks that are inherent in that market. The specific risk is high if the investor concentrates on one security only. The more a portfolio is diversified, the lesser the specific risk. Hedging is the most basic strategy that an investor can use in order to guard against loss. A hedge position is taken with the specific intent of lowering risk. As we have learned, option positions are susceptible to more than just simple directional price risks, and therefore, a trader must be concerned with more than simple delta neutral trading. There is risk associated with each of the variables that determine an option's value (from interest rates to time until expiration). In order to minimize the effect of these risks to an option's value, a trader will establish a position with offsetting characteristics. Just as you hedge a bet by betting against your original bet too a lesser degree, market makers try to take on complementary positions (in stock or options) with characteristics that can potentially buffer against exposure to loss. A hedge, then, is a position that is established for the sole purpose of protecting an existing position. Determining what risks an option position might be exposed to is one of the first steps towards determining how best to hedge risk. We have learned that six risks are associated with an option position: Directional risk (delta risk) is the risk that an option's value will change as the underlying asset changes in value. All other factors aside, as the price of an underlying asset decreases, the value of a call will decrease while the price of the put will increase. Conversely, as the underlying asset increases in value, a call will increases in value as the put decreases in value. Delta risk can easily be offset through the purchase or sale of an option or stock with opposing directional characteristics. Directional hedges are illustrated in Tables 1 and 2. Table 1: Delta Effects
Table 2: Position hedges
Gamma risk is the risk that the delta of an option will change. The holder of options is long gamma (backspreader) and the seller of options is short gamma (frontspreader). Sometimes referred to as curvature, gamma can be offset through the purchase or sale of options with opposing gammas. Volatility risk (vega risk) is the risk that the volatility assumption used in pricing the options will change. If the option volatility rises, the value of the calls and puts will increase. The holder of any options might benefit from an increase in volatility whereas the seller might incur a loss. This risk can be offset through the purchase or sale of option contracts that have an opposing vega value. For example, we know that options decrease in value as volatility decreases. Therefore, selling options (that benefit as volatility decreases) might be the best hedge for a trader who is looking to offset vega risk. Time decay (theta risk) is a positions exposure to the effects of a change in the amount of time remaining to expiration. We know that time moves forward and as it does, the time value of an option decreases. This exposure can be offset through the purchase or sale of options with opposite theta characteristics. The effects of time decay on an options value are illustrated below. Effects of Theta
Interest rate risk (rho risk) is negligible to most traders. Its impact can be substantial if a position contains a large amount of long or short stock or long-term options. Decreasing the stock position, replacing stock with options is the most efficient way to reduce rho risk. Remember, longer-term options are more interest rate sensitive. Dividend risk can be offset through the purchase or sale of options or the underlying stock. An increase in the dividend will make the call decrease in value because the holder of the call does not receive the dividend. In this situation, it is more advantageous to own the underlying asset over owning the call. Conversely, the put will increase in value when the dividend is increased because the short stock seller must pay the dividend to the lender of the stock, which makes owning the put more desirable than shorting the underlying asset. Table 4 illustrates the effects of changing input variables on an option's theoretical value. Varying market conditions
Knowing the risks involved with options trading is the first step to successful trading while hedging these risks to create a profitable position is the second step. We have learned that there are different ways to hedge each trade, providing a market maker with the important task of determining the best hedge possible for each trade he or she executes. Determining which hedge is the best is based on knowing not only the risks of the original trade but also the corresponding risk of the hedge. Observing actual positions under a multitude of conditions is by far the best way to learn the complex nuances of options. The next two chapters will guide the reader through the fundamentals of the marketplace and setting up a trading station, giving the investor the ability to begin trading on his or her own. HOW TO SELECT AN OPTIONS BROKER Once you've made the decision to trade online, it's important to identify a brokerage firm that will meet, and preferably exceed, your expectations. This is especially true in the options trading arena because there are potentially many more factors involved than in a straightforward stock transaction. With stocks, once you have determined what stock to trade, it really becomes a question of how much to buy or sell and when. With options, the decision is much more complicated because the following factors must be considered:
Given this level of complexity, there are a few important issues to consider before you choose an on-line broker: Real Time Option Quotes Whether an online broker provides real time option quotes is, perhaps, the most important consideration for even semi-serious option traders. On-line brokerage firms, especially those that specialize in stocks, are sometimes lacking in this critical area. While they might be able to provide real time quotes on individual options, the option chains (the charts showing the bid-ask, volume, and other critical information for all strike prices and expirations) are often not accurate. Commissions With the efficiency of the exchanges and the standardization of the contracts, there is no longer a reason for option traders to pay higher commissions on option trades vs. stock trades; it's no more difficult to execute an options trade than it is to execute a stock trade.
Access to Analytics Advanced analytical tools like implied volatilities and deltas are important to serious option traders. However, most traditional brokers do not provide customers access to this nformation. Instead, their customers are forced to trade in the dark. Choosing an exchange (i.e., BSE or NSE) When options are traded on multiple exchanges, it's often possible to get a slightly better price on one of the exchanges. While these discrepancies don't last very long, 0.50 or 0.25 can make a significant difference on a large block of trade. However, brokerage firms that make it difficult to execute basic spread orders are even less likely to offer customers a choice as to where their trades are executed. In fact, many customers probably aren't even aware of potential price discrepancies across exchanges. For investors who make larger trades, this can be a significant issue. POSITION MANAGEMENT Before establishing any position it's important to establish a few guidelines for yourself:
The importance of this cannot be overstressed. If you have already earmarked the money for another use, it is not advisable to invest it in a risky position--even for a short term trade. Every day the market extracts money from people who can't afford to lose it. Don't be one of them. Is the position you intend to put on sufficiently small that it won't have a major impact on your portfolio? This is a guideline novice traders routinely violate. Experienced traders caution people against putting on positions that will have devastating results if the market moves the wrong way. Some traders go so far as to say that positions should be so small that putting them on seems almost meaningless. Typically, the percentage of your portfolio associated with this would be 1/2% to 1%. Keep in mind though that this applies to traders more than long-term investors. This is not to say that investors wouldn't benefit from the same advice. They probably would. It's just that a disciplined approach is particularly beneficial to option traders who could easily lose their entire investment. What is your specific objective for this position? What is your exit strategy? These issues are inter-related so we will examine them together. First, whenever you put on a position, it's important to set a price target along with a strategy for what happens when you get there. For example, if you are convinced a particular Internet stock is hugely overvalued (imagine that!) and due for a correction, you might decide to buy a long put either at-the-money or slightly out-of-the-money. If the market behaves as you predict and the price drops, you have to decide how far to let your profits run and at what point to take profits. If the stock drops 50% and your put is now deep in-the-money, this might be a good time to take profits. On the other hand, if you think the stock is still overvalued, you could buy a slightly out of the money call and let the put ride. For example, if the stock dropped from 250 to 150 and you own the 240 put, you could lock in your profit by buying a 150 call. This way, if the stock goes back up, what you lose in the put will be made up by the call. If the stock continues to drop as you hope, the put will increase in value and the call will expire worthless. Whatever you decide, it's good to have your strategy thought out in advance. This helps to take the emotion out of it. What is your downside risk? With option spreads and other advanced strategies, your maximum loss may be more than your initial investment. Before entering into any trade, it's important to know your maximum profit, maximum loss, and break-even. Trading surprises are seldom pleasant. Modifying and Managing a Position Depending on market conditions, option investors may need to modify their positions either to lock in profits or protect themselves from adverse moves. Protecting your profits and limiting your losses Taking the easiest example, let's imagine you bought a long call and watched with interest as the stock rallied. How can you protect what is now a paper profit? Considering the additional stock commissions involved in exercising the option, we'll disregard this as a strategy and focus on other alternatives. The dilemma whenever a position makes money is when to take profits and when to let profits ride. By selling the call, you lock in profits, but you may miss additional upside. On the other hand, if you sit tight, the stock could pull back below the strike price. In this case, you would lose your additional investment as well as your paper profit. Fortunately, there are other alternatives. The important point to note is that the riskiest course of action is to do nothing because your initial investment remains at risk along with any paper profits you have generated. SEVEN MYTHS ABOUT STOCK OPTIONS For years, the options market was shrouded in mystery as transactions took place with obscure options dealers who set the prices and terms of options contracts known as Jhota Phatak. The BSE and NSE created "listed options" that became the standard, and option prices were set in an auction market nearly identical to the stock exchanges. For the first time, this allowed the option holder to choose to sell his contract on the open market before it expired. Trading volume in listed options has exploded in the United States and option trading on more than 1,900 different equities and indices now accounts for the equivalent of 70 million shares of stock trading each day. But many of the myths associated with options have lingered. Unfortunately, these myths have caused many investors to remain on the sidelines while they could be utilizing options profitably or for reducing risk.
Myth #1:
This "statistic" is often bandied about by those who have no experience trading options. According to the CBOE, about 30% of all options expired worthless -- a far cry from 90%. Myth #2: This assumes that the investor is trading options with the same amount of capital that he would devote to stocks or mutual funds. On a "rupee for rupee" basis, options are riskier. Here at STOCKWHIZO Research, we never recommend trading options in this manner. Instead we show our subscribers that options are a cheap way to reduce their overall risk. How? First, by limiting their total rupee exposure to a fraction of what they would invest in stocks or mutual funds. Second, by diversifying their options portfolio among different underlying equities. And third, by purchasing both call and put options, since put options are profitable when the underlying stock declines in prices. Myth #3: Unlike the gambling casino (or the lottery or the race track) which has built-in percentage advantages for the "house," option trading is a "zero sum game" in which option sellers and buyers are always at a standoff in total. Option buying and selling differ only in the distribution of their outcomes, not in their relative profitability. Although option buyers can have more losing than winning trades, they never lose more than their original investment and their profit potential is unlimited. Option sellers profit most of the time but their potential losses are unlimited. STOCKWHIZO has always been dedicated to maximizing profit potential through option buying -- by taking full advantage of the unlimited profit potential and limited risk of this strategy. Myth #4: Nonsense! Anyone who is familiar with stocks can easily learn how to trade options. The approach to option trading that we use at STOCKWHIZO is very simple. If we are bullish on a stock, we advise you to buy a call option on that stock. For a fraction of the underlying stock price, you "rent" any appreciation in the stock above a particular price for a specified time. If we are bearish on a stock, we advise you to buy a put option. Here you "rent" any decline in the underlying stock below a particular price for a specified time. It's that simple! Myth #5: While this may have been a problem in the beginning, the brokerage landscape will significantly changed for the better. A number of brokerage firms now specialize exclusively in options. Many large brokers will become "option trader friendly." As time passes by with experience. Some traditional full-service firms will developed expertise in options and the desire for options business. While we do not recommend any specific firm, STOCKWHIZO subscribers receive a list of firms that are interested in options business and have the expertise to meet the needs of option traders. Myth #6: Since options are a "zero-sum game," and option prices are based upon a mathematical "option pricing model," some say it is impossible to profit from buying options in the long run. WE STRONGLY DISAGREE. First, prices for exchange-listed options are set in the marketplace by buyers and sellers, although the computerized pricing models do exert a strong influence. But more importantly, these models are based upon the mistaken assumption that all stock price movement is "random." Clearly, there are always certain stocks that are moving in well-defined price trends, as opposed to moving randomly. If you can identify those stocks whose price trends are likely to continue, you can beat the option pricing model! Much of our research has been devoted to developing indicators to determine stocks that will continue moving in such price trends, so our subscribers can profit from buying undervalued options on these stocks. Myth #7: Amateurs are rarely successful trading options because they don't have the time, information, expertise or the discipline to compete in this fast-moving market. But STOCKWHIZO subscribers have a big edge over these amateurs. First, our staff of professionals here at STOCKWHIZO Research have the information and expertise to make you a successful options trader. And second, we give you the disciplined trading rules that help you make big money and also minimize your time commitment to your options trading! We tell you how much to pay, when, and at what price to sell. And you can often leave these instructions with your broker, so your options portfolio can appreciate on "automatic pilot!" TRADERS PSYCHOLOGY Discipline Anyone seriously interested in trading would do well to buy a copy of Jack Schwager's books Market Wizards The New Market Wizards. Through interviews and conversations with America's top traders, Jack extracts the wisdom that separates successful traders from those who, through their trading, simply add to the wealth of successful traders. Keeping Your Trades Small One of the key factors mentioned by almost every good trader is discipline. Discipline, as you might imagine, takes a variety of forms. For beginning traders, one of the toughest challenges is to keep trades small. Believe it or not, more than a few top traders don't allow any one position to account for more than 1% of their total portfolio. Professionals attribute much of their success to managing risk in this way. Limiting Your Losses Another aspect of trading that involves discipline is limiting your losses. Here, there isn't a magic formula that works for everyone. Instead, you have to determine your own threshold for pain. Whatever you decide, stick to it. One of the biggest mistakes people make is to take a position with the intention that it be a short-term trade. Then, when the position goes against them, they make a seamless and unprofitable transition from trader to long-term investor. More than a few people have gone broke waiting for the trend to reverse so they could get out at break-even. If you are going to trade, you have to be willing to accept losses--and keep them limited! Letting Your Profits Run Another mistake novice traders make is getting out of profitable positions too quickly. If the position is going well, it isn't healthy to worry about giving it all back. If that's a concern, you might want to liquidate part of the position or use options to lock in your profit. Then, let the rest of it ride. Emotion It isn't uncommon for people to view trading as a fast-paced, exciting endeavor. Fast-paced? Absolutely. Exciting? Now that's a matter of opinion. The Importance of Remaining Cool-Tempered More than a few traders interviewed in The New Market Wizards emphasize the importance of remaining unemotional and cool-tempered. To these people, trading is a game of strategy that has nothing to do with emotion. Emotion, for these traders, would only cloud their judgment. In the book Jack talks about one trader who was extremely emotional. Although Jack was able to show him how to be less emotional and more detached, it became quickly apparent didn't enjoy being emotionally unattached. He found it boring. Unfortunately, emotion involvement in trading comes at a high price. Before too long, that trader went broke. The morale of the story is simple: If you insist on being emotionally attached to your trading, be prepared to be physically detached from your money. Acceptance and Responsibility One of the biggest mistakes traders can make is to agonize over mistakes. To beat yourself up for something you wish you hadn't done is truly counterproductive in the long run. Accept what happens, learn from it and move on. For the same reason, it's absolutely crucial to take responsibility for your trades and your mistakes. If you listen to someone else's advice, remember that you, and you alone, are responsible if you act on the advice.
Another Way to View Losses Perhaps the most striking example of emotional distance in trading is a reaction to positions that go against thinking to yourself, "Hmmm, look at that." If only we could all be that calm! Of all the emotions we could possibly experience, fear and greed are possibly the two most damaging. Fear Of all the emotions that can negatively impact your trading, fear may be the worst. According to many of the traders interviewed in The New Market Wizards, trading with scared money is an absolute recipe for disaster. If you live with the constant fear that the position will go against you, you are committing a cardinal sin of trading. Before long, fear will paralyze your every move. Trading opportunities will be lost and losses will mount. To help deal with your fear, keep in mind what fear is False Evidence Appearing Real The flip side of fear is confidence. This is a quality that all great traders have in abundance. Great traders don't worry about their positions or dwell on short-term losses because they know they will win over the long term. They don't just think they'll win. And they don't just believe they'll win. They KNOW they'll win. It should never bother to lose, because one should always believe that one would make it right back. That's what it takes. To Talk or Not to Talk For many traders, sharing opinions and taking a particular stance only magnifies the stress. As a result, they begin to fear being wrong as much as they fear losing money. Although it may be one of the hardest lessons to learn, the ability to change your opinion without changing your opinion of yourself is an especially valuable skill to acquire. If that's too hard to do, the alternative may prove much easier: Don't talk about your trades. Greed Greed is a particularly ugly word in trading because it is the root cause of more than a few problems. It's greed that often leads traders to take on positions that are too large or too risky. It's greed that causes people to watch once profitable positions get wiped out because they never locked in profits and instead watched the market take it all back. Part of the remedy for greed is to have, and stick to, a trading plan. If you faithfully set and adjust stop points, you can automate your trading to take the emotion out of the game. For example, let's say you are long the 150 calls in a stock that rises more rapidly than you ever expected. With the stock at 240, the dilemma is fairly obvious. If you sell the calls, you lock in the profit but you eliminate any additional upside potential. Rather than sell the calls, you might buy an equal number of 230 puts. The Rs.90 profit per call that you just locked in will more than offset the cost of the puts. At the same time, you've left yourself open to additional upside profit. Gradual Entry and Exit Another strategy successful traders use is to gradually get in and out of positions. In other words, rather than putting on a large trade all at once, buy a few contracts and see how the position behaves. When it's time to get out, you can use the same strategy. Psychologically, the problem people have implementing this strategy is that it takes away the "right" and "wrong" of the decision making process. It's impossible to be completely right or completely wrong using this strategy because, by definition, some of the trades will be put on at a better price than others. Awareness and Instincts For professional traders especially, instincts often play a crucial role in trading. To truly appreciate this, just close your eyes and imagine making trades in a fast market with dozens if not hundreds of people screaming around you. In this environment, it becomes absolutely essential to maintain a high level of awareness about everything going on around you. Then, to have the confidence to pull the trigger when necessary, you have to trust your instincts. It's absolutely amazing to see how some professional traders, even in a busy market, know exactly who is making what trades. For these traders, expanded awareness is often a necessary prerequisite to fully developing and trusting their instincts. The same is true for professional traders as well. Watching how markets behave and developing a feel for the price fluctuations is truly time well spent. Unfortunately, in this era of technology, people have become so removed from their natural instincts that many are no longer in touch with their intuition. This is unfortunate because intuition functions as a wonderful inner guidance system for those who know how to use it. One trader interviewed by Jack Schwager in The New Market Wizards relies so heavily on his intuition that he didn't want his name in the book for fear his clients would be uncomfortable with his strategy and move their money elsewhere. Speaking anonymously, he described in detail how he establishes a rhythm and "gets in sync" with the markets. In this way, he has learned to distinguish between what he "wants to happen" and what he "knows will happen." In his opinion, the intuition knows what will happen. With this knowing, the ideal trade is effortless. If it doesn't feel right, he doesn't do it. When he doesn't feel in sync with the markets, this trader will paper trade until he feels back in rhythm. But even here, he keeps his ego and emotion out of it. His definition of out of sync is completely quantifiable. Being wrong three times in a row is out of sync. Three mistakes and it's back to the paper trading. Now there's a strategy almost everyone can benefit from. Trading is a performance-oriented discipline and every great athlete, trader, or Performer will occasionally hit performance blocks. Every Olympic contender trained hard physically, but the difference between the ones who made the Olympic team and those who did not was the emphasis put on mental coaching by the winners. Much of a trader's early education is concentrated on strategies and market analysis. But what are the necessary ingredients for peak performance? What are the tools for both mastering the mental side of the game and busting out of the inevitable slumps that can occur along the way? Mindset First - what is the mindset necessary for peak performance? How does one ultimately get in the groove? There is no better feeling than being in the "flow" - especially with trading. That is what many of us live for and what keeps us in the game, because trading can be a very tough business with long hours. There are several key common ingredients when you are performing your best, no matter what the field. EXPECT success. It begins initially with your self-talk. Do you get down on yourself when you make a mistake? - or do you say to yourself - next time I will do better because I have great trade management and am a superior trader! Be your own best motivator and believer in yourself. Positive Self Talk leads to positive BELIEFS. If you believe you can do something, you WILL eventually find a way. When you have a positive belief system that the eventual outcome will be OK, then you are more mentally and physically relaxed. You then have better concentration, which leads to smoother execution, which of course leads to peak performance. Now, on the flip side of the coin, negative self-talk sows seeds of doubt. This lowers self-confidence, which leads to a negative belief system. This then creates anxiety, which leads to disrupted concentration. Now the trader becomes tense and tentative which in turn leads to poor performance. Talk about a vicious cycle!
SECRETS OF TOP TRADING PERFORMANCE KEY INGREDIENTS TO PERFORMING YOUR BEST PASSION You must be passionate about what you are doing and having fun. Passion first, then performance. CONFIDENCE Top performance comes from having a high degree of confidence. You must have the confidence that you can take control and face adversity. You must also be confident that you will have a favorable outcome over time. CONCENTRATION Peak performance comes from exceptional CONCENTRATION. You must concentrate on the process, though, not the outcome. A sprinter who is in the lead is thinking about the wind on their face, how relaxed their arms are, feeling the perfect stride…they are totally in the moment. The person who does NOT have the edge is thinking, "Oh, that runner is pulling ahead of me…I don't know if I have enough wind to catch the leader…" They are tense and tight because they are thinking about the outcome, not the process. RESILIENCY Great performances come from being able to rebound quickly and forget about mistakes. CHALLENGE Great performance comes from pushing yourself and trying to overcome limitations. Staying in the safe zone becomes a monkey on your back. Challenge yourself to take that hard trade. Manage it. If it does not work out, so what…your risk was limited and you can pat yourself on the back for taking the hard trade in the first place. SEE AND DO ... DON'T THINK! Great performance comes from turning off the brain and becoming automatic. This is being in the Zone …in the groove. You can't overanalyze the markets during the trading day. RELAXATION When you are relaxed, your reflexes and timing are superior because you are loose. POSITIVE SELF TALK There are some concrete tools to break the cycle and bust out of the slump? The number one tool for starters is POSITIVE SELF TALK. We all talk to ourselves in our own head. Be aware of the things you are saying to yourself. The written word is also a powerful tool. Read affirmations and books on positive thinking. Norman Vincent Peale, Napoleon Hill ... Arnold Schwarzenagger's autobiography are a few. Richard Marcinko wrote a book called the Rogue Warrior. He talked about the Will to WIN and the belief that ANY circumstances could be overcome. This is a great inspirational book for traders. Next - act like you are already where you want to be. Assume the mannerisms, posture and talk of a top trader. In addition to self-talk and reading written words, develop mental pictures. Visualize what you are going to do with your wealth or how it is that you want to live. Think of the power that money would give you to start any organization you want or to make other people's lives better. Visualize your dream house. Program your subconscious as though you are already there. Dare to dream. OK - talk, words and pictures…what is next? Look at your environment that you have surrounded yourself with. Your success in trading will also be a product of your environment and I am not just talking about office space. Look at the people you surround yourself with. Do they support your activities? Surround yourself with people who believe in you, who smile, and who are enthusiastic in anything they try or do. The top Olympic athletes had friends and family cheering them on every step of the way. BE PREPARED FOR A SURPRISE EVERYDAY! All of the above factors deal with external factors and internal belief systems. Now let's get down to the DOING part! Every trader should be prepared before the markets open because they already did their homework - right?! One of the most impressive points in the Rogue Warrior book was this veteran navy seal's obsession for being totally prepared for Mr. Murphy! There was always a backup plan for everything and this is what kept him alive. Prepare your daily game plan by looking for both new setups and preparing strategies for managing existing positions. So, assuming that you have done your daily homework as a trader, the next step is to learn how to get into the groove. There is no better tool for this than having routines and rituals. Pre-market rituals help calm the nerves, get you into a rhythm, and also help to turn off the logical part of your brain - the part that wants to overanalyze everything. If you have a chattering monkey sitting behind your ear, routines and rituals are one of the best things to shut that monkey up. Maybe there is an opening sequence of tasks you do before the market opens. Perhaps in the middle of the day you draw swing charts or take periodic readings of the market's action. Maybe you keep a journal and make notes to yourself. At the end of the day, what type of record keeping do you do for your trading activity? What do you do to unwind? Salesmen are taught to do small rituals before cold calling clients. It controls the anxieties and fears of rejection. Cricket opening Batsmen have a pre-warm up ritual. It calms their minds and puts their body on the autopilot mode. It keeps them involved in the PROCESS and not thinking about the outcome. One of the more common rituals on the trading floors was to wear the same disgusting lucky tie every day. If the mind BELIEVED that the tie was lucky, this was all the traders needed to keep the long term odds in their favor. Here is another helpful factor: A healthy body keeps a healthy mind. EXERCISE! This gets oxygen to the brain and keeps the blood flowing. How can you expect to be a peak performer when you are eating junk food and going through insulin swings? Or perhaps you drank too much wine the night before or are jittery from drinking too much coffee. How can you concentrate well if you are not getting a full decent night's sleep? Sure, most of these are minor factors but they can all add up to major bumps in your performance. One moment of sloppiness can lead to forgetting to place stops or letting a bad trade go too long. Then when damage is done, your confidence gets chipped away. You must treat your confidence level as something to be protected. Good habits will keep your confidence level high. Once you have good habits, it will allow you to increase your trading size. If you want to push yourself to the next level in your trading and are wondering how to increase your size, you MUST have a foundation of good habits. If you are running into a mental block in this area, it is your subconscious's way of telling you that either you have not done adequate preparation or you are not satisfied with your money management habits. GOAL SETTING There is one more extremely important thing that contributes to your success and that is GOAL SETTING. When you set your goals, they must be concrete and measurable. You must also break them down into bite size pieces. Perhaps your larger goal is to make 8 digits over the next three years, but how do you get there? Put together a more detailed business plan that is NOT Rupee oriented but will help you eventually reach your Rupee-oriented goal. Maybe it includes how many trades you should make per week, how much time you should devote each evening to preparation and studying charts, and plans for controlling risk. Both short term and long term goals help achieve peak performance. You must also have concrete ways to measure those goals. Top cricketers know the splits that they run. They know if they are ON or OFF according to how practice goes. They know their unforced error percentage, their personal best, and their competition's stats. The same should apply to you in your trading. Know your weekly win/loss ratios, your trade frequency, and the average amount of profit or loss each month. Only by having something to measure can you tell if you are improving or not and moving closer to your goal! The battleground isn't the markets but what's within you. The more you talk with other traders, the more you realize that everyone goes through various common experiences. Everyone makes many of the same classic mistakes. But what distinguishes the ones who can ultimately overcome them? CORRECT ATTITUDE Remember that ATTITUDE is everything. How you frame out an individual experience or event will affect your success in the long run. Do you see a trading loss or bad drawdown period as a major setback, or do you see it as a learning experience from which you can figure out how to be on the RIGHT side of a trade instead of the wrong side the next time around. Many great traders use periods after drawdowns to go back to the drawing board. Some of the best systems and trading ideas have come after periods of adversity. What incentive is there to learn and improve ourselves when everything is smooth sailing and we are fat and happy? But when times are tough, that is when we can rise to the occasion and prove that we can overcome any obstacle set down in our path. So many great athletes have been able to come from behind when they are down because they have learned how to seize that one opening or opportunity and CONVERT. They latch on to the tiniest shift in momentum and milk it for all it is worth. Latch on to that next winning trade and convert. The first small moral victory is the first step towards reaching the top of Mt. Everest. And if you keep making small steady steps, you will eventually reach the top. Sometimes for a trader, the greatest feeling in the world can be making back those losses, no matter how long it takes, because once you have done that, you realize you can do anything. DESIRE The most successful players are the ones who have a burning desire to win DEFY FAILURE! Don't check out of the game. Never give up!
CONSISTENCY Improve your consistency. Stay active, stay involved, and keep your feet moving. PATIENCE Be patient. Do not force a trade that isn't there. Wait for the play to set up. MANAGEMENT When you get a good trade, go for it. Manage it. Trail a stop. Don't be too eager to get out. FLEXIBILITY Be flexible - if what you are doing isn't working, change what you are doing! CONFIDENCE When down, get a little rhythm and confidence going. Don't worry about being too ambitious.
CONCENTRATION Stay with your game. Don't let outside distractions bother you. They take energy and break your concentration. KNOW YOURSELF Match your particular strengths to the type of market conditions. CLEAN UP YOUR ACT Hate making stupid mistakes and unforced errors. This includes not getting out of a bad trade when you know you are wrong. STAY POSITIVE Many players will play their best game when they are coming from behind. Copyright 2001 by Hiten Jhaveri, StockWhizo Investments. All rights reserved worldwide. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
