I’m Interviewed

Today, I talk options with Manshu of OneMint.

This gives me a good opportunity to discuss several things that are always on my mind.  For example, why options are appropriate and helpful for passive investors – those who like to invest, and then pay scant attention to their holdings.

We also discuss whether options are appropriate for rookies, and I have to battle the ideas that investors 'should stay way from options altogether,' or that options cannot be conservative investment tools.

I hope you find it worthwhile.

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3 Responses to I’m Interviewed

  1. marathonman 06/23/2009 at 11:58 AM #

    hi Mark,
    Read your interview and thought that it was great. Another good reminder of how to best use options.
    When reading it I started thinking about risk, risk charts and such and had a question about them. I use the TOS platform and they have some very good tools one of them is a risk graph showing what I believe is the maximum gains/loss for each trade, spread or option. Is this risk graph affected by changes in and of the greeks or stock price or is that risk set at the setup?
    I ask this because I am attempting to generate trades that have a 3XR factor. That is that the potential gain is 3X maximum loss. Of course the gain has to have some potential to actually be achieved but I was wondering if this kind of thinking is how you view your IC trades or is it something different.
    Also with IV being more consistent recently are you looking more at diagonals?
    Thanks again,
    Don

  2. Mark Wolfinger 06/23/2009 at 12:15 PM #

    I was pleased with the opportunity to alert all those who avoid options that doing so is not a good idea. One doesn’t have to use options, but refusing to acknowledge their existence and ability to manage a portfolio’s risk serves no purpose.
    1) Choosing an investment strategy that feels right to you is important. as i always say: but not as important as managing risk well.
    2) I do not specifically view my iron condor trade in terms of risk and reward. But, that ratio is already incorporated into my plan because I prefer to collect a premium of approximately $3 for a 10-point iron condor. Thus my ‘built in’ risk to reward ratio is nothing near your 3:1, but is roughly 3:7 instead.
    3) 3:1 risk reward and iron condors do not go together in my opinion. But, you do have the ability to collect $7.50 for a 10-point iron condor. If those positions are within your zone, they go for it.
    4) I am unfamiliar with the TOS risk analytics, except to know that they are supposed to be the best and most complete software available from any broker. But for some traders, it’s overkill.
    I do not know whether the risk is ‘current’ or established at setup, but I strongly believe that it should be current – because current is he ONLY number that matters. When you opened your position or how much premium you paid or collected is irrelevant. You must manage the position from today forward. And it’s today’s R/R that matters. Too many traders simply cannot understand that point (or they simple disagree).
    5) I have begun using diagonals again, but I am NOT loading up on vega. I also trade iron condors and am keeping my portfolio near vega neutral.
    I wish you well with your 3X1 R/R ratio. You will discover that limits your choice of premium selling option strategies.

  3. marathonman 06/23/2009 at 2:15 PM #

    Thanks Mark,
    I am always interested in your view of risk, returns safety and other aspects.
    just wanted to let you know that the video’s were VERY helpful too. I find it much easier to understand and grasp concepts through video and spoken words. Thanks for taking the time to put them up.
    Don