options (finance)

[Kirkrrr]

Ja,

I'm currently in the process from transition to playing poker to a full time stock trader. I wanted to trade options/futures in the beginning but then went with stocks since imo there's a lot more info on it and it's easier to learn in the beginning than options, although options-trading does have advantages in that the spreads are narrower (and thus it's easier to profit) and depending on who you go with are your broker, commissions won't be very high. Here's the bad part about options trading, however: they expire. Since a chunk of the options price is time-value, the less time remains until expiration, the less it's worth thus it's always a race - not only do you have to "guess" correctly, you have to guess correctly in the alotted timeframe. That makes options trading FAR more difficult than everyone thinks in the beginning. Far as your questions, I will try to answer some, hopefully others will elaborate:

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-are the parallels with poker really that strong?

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HUGE, and they can't be overstated. Both poker and trading are probabilistic fields, both require you to focus on the process rather than the results, good money management and discipline, and understand the role of time in that if your decisions are good results will take care of themselves. You will have major headstart on most beginning traders coming from a poker background.

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-how feasible is his suggestion?

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I'd start with stocks or even forex before jumping into options. What you have to really and truly understand is that the market is a zero-sum game, so every dollar you make is a dollar another trader/investor just lost. When you hear how much money options traders make, well, lets just say they would roll out the red carpet for you and welcome you to the trading arena with open arms.

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-how should I go about learning? I know nothing.

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There's lots of literature available on the subject. I went to www.tradingacademy.com. They aren't cheap but the stuff they teach you won't learn anywhere else. There's also www.elitetrader.com, a forum like 2p2 but dedicated to trading and all the aspects thereof.

Someone said about wrong decisions in the market resulting in greater losses. Umm, lol, no they don't. I daily take positions worth over 250k, the worst loss I've had has been about 1k. It's called stop-loss, and it's totally sweet. So you will have time to learn without fear of going broke in a week. In fact, that would take some really major effort on your part. But it does require a lot of study and patience. PM me if you have any other questions, I will try to answer best I can.

Kirk

[SlowHabit]

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What you have to really and truly understand is that the market is a zero-sum game, so every dollar you make is a dollar another trader/investor just lost.

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Not to nit-pick but the market isn't a zero-sum game. You probably meant options.

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Someone said about wrong decisions in the market resulting in greater losses. Umm, lol, no they don't. I daily take positions worth over 250k, the worst loss I've had has been about 1k. It's called stop-loss, and it's totally sweet.

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I don't know much about options but I find the above claim hard to believe. Because if stop-loss is that sweet, why did funds such as Amaranth and LTCM lost billions of $$$?

Or you might be running hot [img]/images/graemlins/cool.gif[/img]

[Kneel B4 Zod]

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And even if he has a negative return, he still gets paid by the fund for doing a shietty job.

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or eventually gets fired

I had this conversation with a friend of mine who is an analyst, who recommended 1 stock for his company and also bought a good deal of it for his personal portfolio. even though he had 'his' money invested in the stock, it was much more important to him that the stock went up, for his careers sake.

[xxThe_Lebowskixx]

kirk,

can you please detail your progession and results at trading. what is your poker background? thanks

[jws43yale]

Read the book "Fooled by Randomness". It is an interesting read about general randomness and trading writen by a succcessful options trader.

[econophile]

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Besides hedge fund managers [or employees who are required to re-invest their salary/bonus into the fund], can you give me an example where the person running a fund is liable for losses? And even if he has a negative return, he still gets paid by the fund for doing a shietty job.

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just because you can't lose money doesn't mean you have risk-free compensation. the bulk of compensation in these careers comes from bonuses, which are tied to performance. so your earnings could be much lower than your peers if you have subpar performance.

[xxThe_Lebowskixx]

"Options, and other trading/investing in general, requires inordinate amounts of independent studying to actually be able to think independetly from the rest of the "participants"."

This is what I dont understand. How does someone look at a bunch of reports on the internet and decide if a stock should be bought or sold?

[xxThe_Lebowskixx]

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Lots of parallels to poker, except the hours.

You might want to check out this poker related site about forex, a lot seems relevant about options.

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lol

[Kneel B4 Zod]

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How does someone look at a bunch of reports on the internet and decide if a stock should be bought or sold?

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well some would say that doing this is a suckers game. you aren't going to be able to beat the market doing this, etc etc.

the other tact is to do primary research. ie don't rely on other peoples reports, do your own and try to figure out what direction a stock should/will be going.

this is what analysts are paid hundreds of thousands of dollars, or millions, to do, b/c its hard to do well