Under the Trading I understand a regular buying and selling, uncorrelated in time and usually with short intervals between 1 second-2 days.
In trading, a position by an offsetting transaction neutralized.
thus defined trading is the opposite of investing. As an investor, I have a longer time horizon, do not think short-term profits. Really?
Should I still do not think on my primary account and decide ultimately not his real changes on my activities? Why should I stick to the paradigm of the investor, if my shares have risen strongly, or strongly fall? Here I remain pragmatic and does not distinguish between trading and investments.
Sometimes you have to do it, for example, if I handle with options. I say why.
options are usually a little liquid financial product. Although we have large derivatives exchanges such as the Eurex, which guarantee the liquidity of quasi speak. In fact, options are not suitable for trading.
The Trading with DAX options on Eurex is one of my Jugednsünden. Back when there were no CFDs and I make a DAX futures could not, I traded just call and put options, and some with great success. This was mainly due to the rules and good luck in the choice of timing. I still strongly advise against it for the following reasons to act EUREX options intraday:
first Price. Unlike stocks and futures options are: always a value that depends on many factors. To those indeed are the classic Black-Scholes as time to maturity, volatility, price basis. In fact, however, the volatility is an estimate of Markteilnhemner that is channeled through the market maker. Thus, the time value portion can rise sharply in the short term, without there having been done on some underlying security. So you have no security as a trader, what price you can get at the Closing, even if you have the price of the underlying predicted correctly.
second Spreads. The above factor is often accompanied by the ever-changing spread between the buying and selling price. This often has disastrous consequences for the option trader. Look at the example of DAX option prices in violent price movements of the DAX. Suddenly the spread so far apart that you really only get the schlechtestesn course if you try to act quasi-real time. Moreover, this behavior has
advantages sometimes. My tip-immediately before important news is often the order book is empty. You may have an unrealistically good price.
third Trading fees will here often forget that you have to pay relatively more for option trading. Unlike stocks or futures, you are rarely less than 0.5% and 15 € per trade.
How handlet ie options? Now, in principle, one should expect from holding the option until expiration. This means taking into account a possible exercise with all the consequences, such as stock purchase, etc. Of course, if I succeed and I with a position in a good profit, am I make it smooth and open a new one. If not then not. Carefully
should proceed with a strategy where you can exercise constantly in stock options, according to the following principle:
I sell puts on stocks. The share price falls, I will exercise, get stock and writing calls on this, the price goes up, I will exercise and sell the shares, etc. This method does not work, if only in one direction the stock price moves too far.
My "classic" is the investment of a friend who has sold many years ago, puts on the German Telekom. The share price stood at 40 €. The stock fell rapidly below 25, he was exercised, the shares got booked for 40 € and clearly sold, according to the rules the same calls. Please tell me how he ever intended to compensate the loss between the cost 40 € and the then current price of 22 €? At best, the options in the following months will expire worthless and he deserves the time value of 0.60 € per period. That means he would need 30 months to earn the difference. If the share price fall even more deeply what happened at Telekom also, it can even be 60 months. In the worst case, he shares every month to buy something expensive to sell in the next month u something too cheap.
is as simple as it is not so.
Man can of course still earn with this strategy, it nevertheless retain the positions in the eye. I even look in once a day usually in the evening on the vault and analyze the potential profit / loss that is possible under different scenarios. I glide with a location in the potential loss, then I roll in the field of possibility. But only then. A difficult, but it's worth it.
One should do but just about how I look thoughtfully at the picture the glacier run down, which is also on my modest driving skills :-)
