thanks for your guys' help, nuclear and hielko.

so i guess i cant buy put contracts and then just sell them to someone who owns the stock--a person to whom theyd be worth a million dollars? if not, then what did you mean by trading them?

and so in the microsoft example, a normal, intelligent person would be expected to make on average only about $652 from the $5000 by exploiting the information they had, since what they would do is buy 200 shares (about all they could afford) of MSFT at 24.68, then buy 2 put contracts with a strike of 23 for $.02, sell the 200 shares at 19.74 and make $652 (23-19.74=3.26; 3.26x200=652). That sucks a lot.

and i assume that basically all strike prices between where the stock is and where you know it will fall carry about the same expectation? (eg.: if a 23 strike put is $.01, the 24 strike put will cost $100.01)

No, no, no and no. Guess you manage to illustrate nicely why you should stay away from options when you don't understand them .

1. You can buy put contracts and just sell them; that's what you should do!
2. buying shares and buying puts is retarted if you think something will go down, because what you gain on the puts is lost with the shares
3. an intelligent person would be expected to make way more than 5000$ with 5000$, i just showed you that you can probabaly make 1 million+
4. No, the EV of different strike prices is very different. The higher strikes are more expensive, limiting the number of options you can buy and limiting your return in case of a very big drop. But the upside is that these options will also make money with a smaller drop, while the lower strike price options would expire worthless.

You're looking at it the wrong way. You describe a regular put as if it were a naked put. In your scenario above as a naked put you've still made a healthy 16.5% on the trade. I'd call that not a suck. You're looking at it in terms of dollars made.

In the scenario of a regular put (you first own the stock before the drop and the exercise):

You buy 200 shares at $24.68, thats a cost of $4,936.00 (+commission)

You buy your $23 strike put contracts (+option comission). The stock drops to $19.74. Your position is now worth $3,948.00, a drop of -$988 or -20%

You exercise your put contracts and sell your 200 shares at $23 or $4600.00 (-comission).

So instead of sitting on an unrealized -20% loss of -$988, you have a realized loss of -6.8% or -$336 (-option cost). It might have taken 1, 2 or 4 years to recover that $988 (a 25% gain to get back even) . Meanwhile you might find a place for the saved $652 that returns better than Microsoft. Or you could simply plow it back into Microsoft. So instead of having $3948 invested at $19.74 (and an unrealized loss), you now have $4600 invested at $19.74 and a realized loss of $336 that can go towards offsetting a realized gain of $336 from something else.

yeah--that was pretty stupid not to realize that buying the very stock i knew would drop 20% would incur a net loss.

so i would buy as many naked puts as possible and sell the contracts to someone who owns actual shares after the drop.

i just dont understand why nuclear said i would be fortunate to double my money, and hielko says any intelligent person would make 20x it. if it were a volatilish tech stock and the put contract spanned a date that included a quarterly report, would the price for the put be so much higher that i may not even be able to make double my money on a 20% drop? on a stock with <$1bn market cap is it possible there wouldnt even be anyone selling put contracts?

With a <$1bn market cap it's possible that there is no option market, but if there are options available doubling your money is really easy if you know that a 20% drop is coming. Maybe 20x could be hard because the option premium on smaller companies is usually higher, maybe the bid/ask spread is really big, maybe you have to buy options that have a month till expiration instead a few days etc etc.

But making 10x should be doable in an almost worst case scenario. But you can simply check yahoo finance for some companies and the option prices.

To make $50k you would have to trade the option, not exercise it.

So say in your original example the $50 stock has a put contract with a strike of $50 going for $1, thats the premium for protection that the writer has in place in case he's forced to buy.

You would have to buy the contract and the stock would have to fall to $40 and the value of the contract would have to fly to $10.

Does that happen? To be honest, I don't watch enough options to know how frequently that kind of radical increase occurs. But when I have taken a peak at stocks that make large moves (Yahoo/Investing/Market Stats/Largest Gainers-Losers %), I usually only see 2x or 3x increases in put contract price. The top loser in the list today has seen its options only 2-3x in value after a 40% drop.

Yes, in that example the value of the contract will absolutely go from 1$ to at least 10$. The value of a put contract will always be at least the intrinsic value (the amount it is in the money). If it wouldn't someone would be giving away free money (example with put @ 5$: buy put for 5$, buy shares for 40$, exercise put = effectively selling shares for 50$ => profit 5$).

Im looking for a site to paper trade for mac ninja trader doesnt work and freestockcharts doesnt allow u to short stocks, place stops and doesnt give u fake money so u cant tell how ur doing. I did some searching on 2p2 and google and cant find anything thats compatible with MAC any1 have any suggestions?

Use google docs spreadsheets imo - It will even give you 20 minute delayed prices.

How can I screen for liquidations?

Newbie query:

+ What are the bankroll requirements for short-term trading options (ETOs)?

+ How much should I put on the table at a time (i.e. max 5% bankroll per trade?) to lower risk of busto?

+ With all the sharks/big players in the tank, is it possible to make money as an amateur?

I don't know anything about the first question. For the second question maybe you should read up on the kelly criterion and also look at your income stream and psychology with respect to risking/making/losing money and figure out a good answer for the second one.

And sure, but you need to know where your edge comes from. For a value investor that means maybe finding companies that are too small or out of favor for big institutions to be dabbling much with and buying them at a discount. Managers are getting paid whether they beat or don't beat the market so many just don't want to deviate too far from the market for fear of woefully underperforming and having upset clients or maybe losing a job. This can give an amateur an edge vs. them. I don't know where edges come though from for amateurs or institutions (although I guess for them it involves more current info and quicker trades and whatever algorithms they got doing **** for em) with respect to trading.

Hello,

I work at a semi-reputable prop firm and I had a few questions to ask the forums and I thought this would be the place to ask. I used to be a fellow poker player a couple years back when I was in school and I have made the transition over to prop trading. So far so good... but I am always trying to gain more info about my field. Knowledge is pretty thin at my firm and so I am consulting you.

I had a question regarding dark pools and the mechanics of dark pools. Here's a quote from the dark pool wiki:

"Adverse selection

One potential problem with crossing networks is winner's curse. Generally if you are completely filled, it implies that the counterparty actually had more liquidity behind their order than you did in yours. If you are slicing many small orders across time, this would not be meaningful. However if you are trading large volumes then it can be assumed that the other side - being even larger - will be likely to cause market impact and thus push the price against you. So the fact that you got filled is an indicator that you actually didn't want to get filled - it would have been better to wait until the price had been pushed and then cross.
Another type of adverse selection is caused on a very short-term basis by the economics of dark pools versus displayed markets. If a buy-side institution adds liquidity in the open market, a prop desk at a bank may want to take that liquidity because they have a short-term need. The prop desk would have to pay an Exchange/ECN access fee to take the liquidity in the displayed market. On the other hand, if the buy-side institution were floating their order in the prop desk's broker dark pool, then the economics make it very favorable to the prop desk: They pay little or no access fee to access their own dark pool, and the parent broker gets tape revenue for printing the trade on an exchange. For this reason, it is recommended that when you are transacting in smaller sizes and do not have short-term alpha, do not add liquidity to dark pools; rather, go to the open market where the short-term adverse selection is likely to be less severe."


1. What are crossing markets?

2. I don't understand the last adverse selection problem. The quote reads: "...if the buy-side institution were floating their order in the prop desk's broker dark pool, then the economics make it very favorable to the prop desk: They pay little or no access fee to access their own dark pool, and the parent broker gets tape revenue for printing the trade on an exchange." I dont get why this is bad if you get executed in the dark pool as the buy-side institution. Why is it more likely (if there are no fees and the parent broker gets revenue), that the liquidity you provided in the dark pool was a mistake?


3. Do brokers offer dark pools to prop desks often? Do they offer flow? What other kinds of benefits do brokers offer their prop desks?


4. I don't get this following explanation about gaming dark pools. Doesn't this sound more like a pegging hidden bid (not sure if it's called that) and not a dark pool. "Gaming

Dark pools are open to gaming, but it is a risky business, predicated on being able to guess both the existence of large liquidity and the pricing mechanism being used. As an example suppose that, by whatever means, you believe that there is a large amount of hidden liquidity, say a buyer pegged to the public bid price but who does not want to buy out in the public markets. If the public market has much less quantity than you suspect is hidden on the bid, you can buy a similar amount of the asset, pushing up the price. Once the price is high enough, you place a limit price buy order of sufficient quantity onto the public market and simultaneously place a limit price sell order on the dark venue for the total quantity you just bought. You now hope that the hidden order will cross with you at the current high price bringing the profit. This profit comes from you being able to buy the stock incrementally at prices lower than the current price which you helped raise. This is a dangerous game though: how do you know that the pegged order is really in the dark pool, and how do you know what the volume is? Finally there is also the chance that another market participant will see the anomalous move, decide the market is mispriced, and take it back to the original price without you being able to liquidate your position at a favourable price."


5. What are standard rebates from ECNs? I hear they are about like $2 for 1000 shares? How much are the fees for taking liquidity? How much are the fees for providing? I just want to get an idea of how much my firm is making from tickets?

Can anyone recommend/point me in the direction of some good etfs for commodities, mostly food/water. Messing with etf screeners and I must be ******ed because I can't find any good ones with low expense ratios.

thanks

Hey guys... sorry for the newb question but I can't seem to find what I'm looking for after 20 mins with the search function.. I'm basically just looking for direction to the best resource for Forex (USD <-> CDN) with the smallest fee obv.. for years I'd been using a bank that did 1.5% but I've got a bunch to convert atm so I figure now's a good time to stop being lazy about it.. I'll strictly be using it for personal use, not for trying to make money trading forex..

I came across Oanda but during the reg process I see they have a disclaimer about allowing them to do a credit check.. is this something I want to avoid and good reason to use something else?

oanda is a good option, huge trustworthy company, and widely used among poker players.

Does anyone know of a good source where I can find currency related information on more than just the major currencies? The two main questions I want to know are:

Is currency x convertible/deliverable?

What's the spot liquidity for currency x? (doesn't have to be a precise number)

I don't have access to a bloomberg terminal but could I find this information there?

I can give you a price in 1,5,10 or whatever mio you are looking for, if you're just trying to get an idea of the market depth. Very dependent on time of day of course, and also on where you're getting your quotes from; we have a proprietary aggregator that takes feeds from several other aggregators, so we get pretty good pricing - we'll often be choice (bid=ask) in the majors at peak times.

Not exactly a vintage 1,000th post, but meh

EDIT: Also should point out that it can be difficult to guage liquidity (other than to say there's a lot), as there's a lot of sandbagging going on. One of the many quirks of the final frontier that is FX.

I started a wordpress blog for fun and averaged a few hundred views a day for awhile. I've only updated it 15 times in a year. In that year i have 32k views. I expect views to rise in the next few week to 500+ a day. Does this blog have any value assuming I could update it daily?

This has been asked 100 times I'm sure, but suppose I wish to buy some stock in a company on NASDAQ (or another exchange), which website(s) can I perform this through?

I don't need a broker right?

A broker is not a person, it is a vehicle that facilitates entry into a market exchange since an individual cannot.

In the past people didn't do things themselves so when they talked about their broker they literally meant someone they talked to that did the market actions on their behalf.

Any brokerage website, to answer your question.

Right, ok cheers that was helpful.

So which precise brokerage websites would people recommend? Are all of them like within 0.25% fee of one another? Any point in choosing a more expensive rate for other benefits? I'm in the uk fwiw

Functionality, usability and features.

While some might be cheaper, their interfaces might be crap or they don't have good customer service etc.

I have only ever used Ameritrade, but I really like their interface and additional features.

Alright cool. Are basically all brokerage websites open to anyone living anywhere? Or do you get uk ones, usa ones etc?

Also any other reviews of other brokerage websites from anyone welcomed.

I searched and it appeared this hasn't been brought up before: Does anyone follow people on Twitter related to "Business, Finance, and Investing" that you think provide interesting thoughts/links etc...? If so, I would appreciate a link!

(assuming this is the right thread).