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Note from Braam Avenant

Some have asked for more information about Point and Figure charts. Here's a message from our friend Braam: P&F as I do it is a whole different method of short term trading than you will find in any book. As I always want to improve myself, I have bought all books on P&F. Most of them were a waste of money. But the best I have ever read is "The Definitive Guide to Point and Figure" by Jeremy du Plessis ISBN 1 - 897 - 59763 - 0. I want people to know this before they spend a lot of money on worthless books.

The "Mystery Players" in The Options Markets

The Mystery Players are primarily the large brokerage houses. They want to sell you options. They discourage you from selling because they want to sell to you – they want you to be the buyer, knowing that majority of all options will expire worthless.

Option market makers are very real and very smart. It is to structure your orders properly in relation to the bid/ask. It's see orders coming into the market and watching to see if they get filled. If you can do 100 lots, you can pretty much split the bid/ask and get filled.

Anything less than that has to be very close to the bid or offer to get filled (unless you don't mind waiting to see if the underlying stocks or futures go your way).

It took me a while to figure out that all the market movers do is to artificially manipulate the price away from the "theoretical value" via the bid/ask, take the trade, and then offset that trade in the underlying to capture the spread. Market makers know the importance and advantages of delta neutral, and are always working to stay neutral. I think that there is tremendous power to the trader who knows how to be neutral in several different ways before any trade is even initiated. In reference to 'theoretical value,' my opinion is that an option (or anything) is worth whatever someone is willing to pay for it.

The buyer of an option has the most odds stacked against him/her. After getting creamed in the bid/ask spread, paying an outrageous commission, an option buyer still has to be right about price direction in a certain time frame. And even if all of these odds are overcome, and the option goes in the money, it is still losing some value every day, which is why I will rarely buy another option.

Trade selection. Trade selection. Trade selection. Trade selection. The easiest way to put odds more in your favor is good trade selection. I cannot express how important this one thing is. And yet it took me awhile after starting to trade options before I could truly see this.

The markets are there to fill orders. That's really what it's all about. So if someone gets upset because their order got filled, then maybe they should think about what kind of order they placed, i.e. get stopped into a trade, next time.

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Tuesday, 26 March 2019

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.