OSCC Option Trading Tools
To drive home
bigger profits and pull out smaller losses,
you need a good hammer. OSCC is the best hammer.
An overview of
Option trading.
The number one rule
to learn, remember, and get an understanding of , is that
despite what all the books say
**"If you have
a long call option and the future rises, it does not
follow that your long call will make money".**
This site has
charts to show that the long call can lose. But remember
that the trader on the other side made money. This is why
brokers are essential!
. **Options and
futures unlike stocks, are a zero sum investment.**
That means for
every loser, there is a winner, and vice versa. You just
need to see the big picture to know what is going on.
There are four parts to the option trading picture.
1. Futures Knowledge.
2. Option Strategy Knowledge.
3. Option Premium
and Price
Knowledge.
............#3 is
our sole focus. We do one thing and we do it right.
4. Your final settlement price.
5. The preliminary information for this page is
found on the page where we describe why this
program was created.
How OSCC
and it's trading tools fit into this picture.
Why the OSCC big option picture.
This comes from
brokers with years of trading. They have learned who the
other players are, how they react to news and how much
they react. It takes experience to know what changes the
market direction and how much. Finding a broker with
superior futures knowledge is critical.
Many profitable option traders are simply leveraging
their knowledge or that of their brokers as to which way
futures are going to move. They are simply using that
knowledge to get or reduce option premiums. If up, they
buy a call or sell a put. But which one? If they buy a
long call and its under valued they make good money, but
if it's over valued they still may make money or at
worst, their loss may be small. If it is over valued they
may not make any money and their losses can be huge. This
is where OSCC can help the knowledgeable trader with it's
big picture of option premium values.
Can you make
money in Options without Futures Knowledge?
NO!
All option
trading involves some strategy. This strategy will have a
bias of some kind or another based on how the trader expects
the future to move after the option strategy is put in
place. Even a perfectly neutral strategy only makes money
for the writer (seller) of the option, if the future
remains exactly in place and never changes. Is this fair?
Of course it is. They are the ones with the unlimited
risk. A writer of options needs deep pockets, a $500,000
cushion and lots of luck. Oh, a very good broker is also
required.
2. Option Strategy knowledge.
When a decision is
made to leverage futures knowledge by using options,
knowledge of option strategies is very important. The
same expectation for a given rise in the futures can
require vastly different strategies depending on market
conditions and timing. This knowledge requires years of
practice and having been through many different
situations. It also requires good insight as to where
option premiums are sitting and where they may go. Again
OSCC is standing behind your broker with a big hammer. We
know premiums, they know strategies.
3a. Option Premium Knowledge.
The "OSCC Adjusted Total Max Premium" (ATTP) is separate from and only partially linked to
the futures
and can itself move up or down irregardless of which way
the futures are moving and the futures affect on
premiums. Thus it needs to be addressed as distinctly
different from the futures affect. This is what OSCC does. When using options as a hedge or to invest in, you
need to know the big picture of option premiums in a
particular contract and how that relates to other contracts. This is where OSCC and it's option model do the
work. Many option programs tell users that this or that
option is over valued. But what they are really saying is
that it is over valued compared to the other strike
prices, However, all the strikes prices together may be
severely undervalued, making that strike price actually
under valued when you look at the big picture. We do
things in reverse of other option programs, in that we
have already determined, to the best of our ability, what
the big picture is, both on a short term basis and a long
term basis. This should help to increase profits. Of
course we are not always right, risk changes and things
happen to both option premiums and the futures that no
one can predict. But if you know where you are working
from, you should be set up to reduce those losses.
See charts See
Definitions: Premium
3b. Option Price Knowledge.
When a trade occurs, it is the result of a
"BID-ASK" negotiation on the floor. However we
do not know if the transaction was initiated as a buy or
sell of a long or short option and whether the final
price was concluded at the bid or ask price. This is,
however, the price that comes across a quote as the
"Last Price or Trade". This is where OSCC again comes in to help with
another tool. In the past we have had on our web site the OSCC Copyrighted
Predicted Floor Value Quotes. These quotes predict to a
high degree of accuracy what will be the next trading
price for all the active strike prices for 30 year T-Bond
options on the floor of the CBT. This feature is
temporarily suspended. For the appropriate fee this can be done with any
commodity or stock option.
4. Your final settlement price.
Commodity future
and option accounts, unlike stock and stock option
accounts, are marked to market every day. That is,
whether you trade or not, your account is adjusted to
reflect closing prices at the end of the trading day.
Thus you can show a profit or loss without doing
anything. It is our opinion that these final
"Settled" prices should have values that are
relative to each other. That is, when a computer applies
a smooth curve to these numbers they should all fall
exactly on a smooth curve. There are many option programs
out there, but I have yet to have anyone prove to me they
can make every strike price fall on their curve. With
some 240+ parameters and memory ranges in our program, We
feel that We do a much better job of matching the
"settled" prices. Still it is not unusual for
"settled" prices to be several ticks off the
curve. The only real problem with this is the mark to
market system. If an off the floor trader is on the wrong
side of an "off the curve price", their account
could be involuntarily closed, even if it would have
recovered the next day. That traders loss is someone else's
gain.
Now, however, during the seven months it has taken to
rebuild this program to do the currencies, We have had a
chance to look closely at their settled prices. They did
fit our basic curve very nicely right away, the curve
actually just sliced through the middle of them. Thus,
very little parameter adjustment was needed and we ended
up with a smaller amount of over and under prices,
instead of all of them being way off to one side or the
other.
Of course, as a matter of reality, these prices are the
result of negotiations between floor traders, not
computers. Thus some inconsistency is just natural. We
feel that the CME is doing a much better job of this than
the CBT. That is just an opinion.
Why the OSCC big option
picture.
We want to educate
all traders as to how the "Max Premiums" in a
commodity contract such as December T-Bonds may affect
their ability to increase profits and reduce losses. For
a basic description of our option model see The OSCC
Option Model System.
Customer Service
If you have any questions or comments please
contact us.
If you need any additional explanations please send us an
email.
Go to: Forums visited
list and contact information.
We also have a new
"chart explanation page" to help explain
what these charts show and how to use them.
For a better understanding of what we do please read these
pages.
--- About Us What we found
that prompted us to develop our option program.
--- The OSCC overview of option trading.
--- The
OSCC Option Model.
--- Products
--- The Accuracy of the OSCC Option Model.
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