option operation class by 老吴头

OK! Let's do it

Class two.....option time course and charactors.

1. the reason to list option is not for hedge in 90% condition and time. Option is the tool for the MM to make compensation for their huge stake holding. in most condition, MM try to sell option, but not buy. As results, if y buy the option until expired day, 99% people are loser. Therefore, if y want to play option, you have to understand MM's mind. ....their expenditure, then we have the time course that always happen in 90% condition.

2. Phases

Phase 1.
After expired day, there is 4-5 weeks to next ED. At the 1-2 week, the price of the option has more premium, therefore, MM like to sell them, buy not buy until premium smaller. In most cases, their moving is around 1-2 folds. For operation, I alway follow the MM, just short both siders at very little number, if one side lose 1 fold, short more. In most %, after one week holding short , you can get get profit from both side if mt no big moving. Then, time's phase 2

Phase 2
From week2-3, shares begin to move and in most case, they move toward opsite direction of week1 since MM sold that other direction. No reason to set fished free. But be careful, check the volume of both side, the prices is below or higher than the big volume. For examle, if the call is below the big volume in the history, the share shall be down, put should up. Now, be careful, before the direction change, MM always like to decrease the premium of both sides to confuse us. At phase 2, the time course mostly are longer that phase 1 and 3 up to 7-10 days. Ok, let see Phase 3. The short life but crazy shaking phase.

phase 3
After phase 1 and 2, MM sold the goods at both sides and option losed most premium. Then what is the most importanct? the volume, a) from the volume of 3 three weeks, y can see MM's mind and most huge volumes become the presure to the shares's moving. b) check the call/put ratio, make a judgement which side moving is good for MM -------selling more options of both sides , but not set tiny fish free. As the results, phase 3 is the most dangerous since its moving is very short life. It could be 1-2 day with 5 or higher folds moving. For operation, a) contrarian to know the ratio of call/put, to know the moving direction; 2)don't be greed , take profit ASAP; 3) if y can't find direction, short the one moving 5-10 folds.

Above is the basic time courses of option moving. In 90% condition, MM do like this.