I received an interesting e-mail message from a reader that inspired today's blog post. I'll get to his comment later, but first some:
One of the facts of life is that some people are very good listeners (I admit to being not so good at this) or readers, and understand the points being made by the speaker/writer. Nothing is misunderstood.
On the other hand, some people are lazy listeners and 'hear what they want to hear.' They ignore details, and that often results in bewilderment, as the speaker finds him/herself thinking: 'How can you possibly think I said that? I said almost exactly the opposite.'
The same can
be said for the speakers/writers. Some supply all necessary details, while others speak in such broad terms that the
detail-oriented listener/reader yearns for clarification.
I frequently find myself in uncomfortable situations due to my need for detail. I have one specific friend with whom conversations are often painful. I'm expected to understand what he means when his words are ambiguous. But it's even worse when I speak. I explain in detail, but those details are lost because they are unimportant to him. It's as if we are speaking different languages.
I don't know if this is a character flaw on my part, but it's the world I live in. Which brings me to today's comment. I believe I provide careful, detailed explanations
of the concepts of options: how they work, and how you can use them to reduce risk when
investing in the stock market. But is that true? Are many readers confused by my writing style? I'm not looking for an ego boost here, nor am I asking anyone to reply. It's a rhetorical question – but I'm wondering what went wrong in this example. or perhaps I'm overly concerned about something unimportant.
His opening comment, referring to data received from his broker, was: "I often see Delta, Theta and Vega
expressed in both positive and negative and I don't know how that
affecting my spreads."
The bottom line is that none of the Greeks are 'affecting' his spreads. They are merely measurements of specific risks associated with the positions. If any of those risks are unwanted – in an attempt to earn a profit – the beauty of trading options is that risk can be reduced or eliminated.
It's the word 'affected' that throws me. My interpretation of this comment is that he is missing something. But it may just be my problem – reading too much into a single word. I Take his words to mean that the Greeks affect his positions, but he is not sure just how that works. On the other hand, it may simply be a less detailed way of saying that he's a bit uncertain just how to use the Greeks.
The latter I can understand. We learn what the Greeks are and what they represent. How we should go about using them to our advantage may not be immediately obvious. It takes analyzing some positions, and thus, trading experience, to grasp the concepts. I know the Greeks are easier to understand with a clear explanation, but perhaps I failed to provide that. Or perhaps my 'too many details; approach may have made it more difficult for him to grasp the meaning of my words. This is a big problem because my goal – my job – is to explain things so that readers understand as quickly as possible. The idea is to prevent the unnecessary loss of money.
I believe in details; I live for the details. I don't know how else to accomplish my goals of helping the average individual investor learn to use options to mitigate market risk.