That is almost always the first realisation to greater learning. It is only when one starts to think they know it all that they stop learning. It is when they know that they will never have enough time to know it all that everyday brings a new adventure.
The thing about options is not really about taking a view on the market but allowing the market to give you the opportunity. Too often traders try to outsmart the market and fight with it. The market was there long before you came along and long after you have gone, it will still be there. Nobody beats the market. Those that are bent on doing it are embarking on a foolish adventure.
If however, you are willing to wait for the market to bring untold fortunes to your doorstep, it will accede to your will AT ITS OWN TIME.
Smart and correct use of options will allow you to have the market deliver the goods whenever it deems the right time. What it means is…you do not need to figure out where it will go, what it will do. You just wait for the market to do what it wants to do and go where it wants to go.
In doing so, it will reveal to you a window of PROFIT, not a window of opportunity but a window of profit. You take this profit and open up another window of opportunity and wait for the market to deliver yet again…the market WILL NEVER FAIL you.
With options, you could work a directional view, you could work a market neutral view and you could work a volatility view…now if only it could make coffee too, it would be perfect !!!
Knowing a lot about options gives no benefit and as a matter of fact, I do not know as much as it seems. Those that write books on it know a lot more about options than me…they know all the glamour terms, all the exotic names, concepts and strategies but they cannot bring it to the market for the market will make fools out of them.
I cannot do the mathematics involved nor will I attempt to. I only know, understand and have worked the core concepts to the point that it is not even 2nd nature…it just flows within my blood. I have lived and breathed options longer than I care to recall and only because it continues to be a bright new adventure for me everyday. The maths I use is simple…easy to visualize, easy to fathom.
Does something like Dynamic Hedging prove an easy read to you?
It really doesn’t matter. It is easy actually but more importantly is what can it do for me ? How to use the knowledge one has, little or vast, is far more important than how much knowledge one has. Working with options require a mindset shift, one that is radical and almost completely opposed to what a “normal” trader would have.
Most traders coming into the option world think in terms of trading the options, ie…buying it when it is low and selling it when it is high. That would prove to be a fatal error 100% of the time.
When you trade options, you must TRADE the UNDERLYING MARKET !!..not the individual option.
The options are priced to the underlying MARKET and increase or decrease of it’s value comes from the MARKET move against a constant that is ever present…Option Decay.
Understanding how these two work will give you an advantage ALWAYS because you are relying on a CONSTANT in the market…something that is predictable, ever present and behaves exactly the same ALL the time.