Option Course by Dr Clemen Chiang

http://info.channelnewsasia.com/bb/viewtop...ight=troy&start

This thread caught my attention and I think it is an interesting read for fellow members here. Essentially it is a discussion of option course conducted in Singapore, centered around Dr Clemen Chiang's course. Among many comments, I find this one by christian troy particularly worth mentioning:



And somewhere in the middle of this thread, a useful comment by Jwong139 which apply to all traders:

"...Usually, I don't like to ask others how much they have made because it is irrelevant. The rationale is quite simple. Suppose ABC makes a million a year. He must have done the requisite due diligence on his trading styles/ systems in order to generate that kind of return. So, if we follow blindly ABC's system, there is no guarantee that we can make the same kind of return. Good traders are people who develop their own trading systems considering their own trading personality and risk appetite. Copying other traders' style won't make us a good trader. Some food for thoughts."

It is a long thread, but worth spending time to read.

[Note: This message was posted in response to those that the original poster
has subsequently requested to be deleted. Note added - 3Sep2006]

Time is better spent on research and learning instead of unwillingness to pull
oneself out of the mud. If preference is to stay in the mud then the result is the
inability to go to places of research and places of learning. Such that the mind
gets stuck and and then be influenced by the surrounding mud. Eventually the
mind thinks of nothing but mud.

The mud is but a very small place, but the space beyond is huge and limitless.
There are much better things to think about and do once out there. But I know
it is actually a personal choice of where one wants to be.

If the past is so painful why not leave it behind and go forward. Then the eyes
can see beauty, the nose can smell beauty, the ears can hear beauty, the mouth
can taste beauty, the touch can feel beauty. When all come together, the mind
can think beauty.

Once this condition is ripe, one can learn correct things and avoid incorrect things.
One does not feel angry anymore cause the mind then realise that setbacks are
stepping stones to progress.

If Singapore did not make the mistake of thinking she could not make it on her
own then she would not have wanted to become part of Malaysia. If she did not
become part of Malaysia then she would not have suffered the setback of being
booted out in 1965. If it did not suffer this setback, it would not be forced to make
it on her own. So a mistake was made but the country chose not to stay in the
mud. Instead, she turned mud and swarms all around into industrial land.

So it is like this. It is like this that one can make progress.

The options world is outside of the mud. There are a lot of knowledge out there.
But for this knowledge to go into the mind, the mind must first make room. If the
mind does not make room, cannot throw out the anger and hatred, then there is
no room possible in the mind for knowledge.

Just like the refrigerator is filled with rotting food and getting smelly. Nothing in
there can be eaten. And if one does not throw away the unwanted, how then are
fresh produce to be put inside?

How?

[Note: This message was posted in response to those that the original poster
has subsequently requested to be deleted. Note added - 3Sep2006]

The beginning of progress can be simple. Examples:

http://www.amazon.com/gp/product/073520238...2405537?ie=UTF8

http://www.traderslibrary.com/category.asp...4833415793CA256

http://search.yahoo.com/search?p=black+sch...1-finance&x=wrt

http://www.google.com.sg/search?hl=en&q=black+scholes&meta=

There is a game I used to play. You may want to try.

That is using Black Scholes Merton Model to verify that the bid-ask of the options and the underlying are correct. (You have to use real-time data)

You shouldn't be surprised that, across so many different calls and puts, of different strikes and expiration, they are in sync with each other and the underlying.

And if you stare hard enough, you will realise that once in awhile there are free money.

They used to train young graduates in this manner. And they stared at the damned screens for hours and grabbed the free money. This is to horn their understanding of the options market and to cultivate their patience.

Afterall trading is not about playing big or small. For that we will wait for 2010, when the casino open.

(Black Scholes Merton model is flawed. Everybody knows it. In fact, Black during his time in Goldman, developed strategies to make money by attacking the flawed model. Having said that, the model will provide you with the understanding, and that is a small step towards making money)

[Note: This message was posted in response to those that the original poster
has subsequently requested to be deleted. Note added - 3Sep2006]

Take this a step further. Since it can be difficult to change one's state of mind; to
change from one of whinning to one of progress, let me start a small ball rolling.

I traded currency options for a bank back in 1994/5. I was in the proprietary desk
and it was the first time the dealing room was about to trade options, courtesy of
yours truly. I had applied for options trading limit and since the dealing room was
still pretty much new to options, I applied for limits only to buy options. This
means I could not sell (write) options.

I avoided inter-bank FX options because they were OTC and I had to square with
the same counter-party bank so they will read me like a toad when I had to asked
them for a price when I wanted to square my positions. There were two other
choices - CME currency futures options or PHLX currency options. I opted for PHLX
becuase they opened for longer hours, if I remember correctly, about 20 hours.

Since I was a buyer of options, I had to be careful that I don't pay too much to
volatility. Also I target the out-of-money strikes to take advantage of rising
gamma if I am right about the direction. Example if I am long an option with a
25% delta and I am right, the delta will go up. This is the effect of gamma.
Assuming that delta were to go up to 50% then literally, my position size has
increased due to price moving in my favour.

Delta: The amount by which an option's price will change for a one-point
change in price by the underlying entity.

Gamma: The rate of change in an option's delta for a one-unit change in
the price of the underlying security.

I will now use AT&T as a "realtime" illustration. I scan through the DJIA 30
component stocks (should have scan through more but I don't have the time) to
look for one where stock's volatility has contracted and which I think breaking out
into a trend is a possibility.

In the case of AT&T, it has already broke into an uptrend since one month ago
based on the Turtle Trading System. At the same time of the break, Bollinger
Band also exploded after a squeeze. The system is still long while prices has sort
of gone into a sideway congestion allowing the volatility to drop.

Notice that the Bollinger Band is now in another squeeze (volatility has dropped)
which means another explosion is likely. Since the trend is up and prices is near
the top of the congestion range, I check this one out.

Now I don't know what the "normal" volatility of AT&T is, so I did a plot of Historic
Volatility for a guide. It shows 13.99% after dropping from about 22%. See chart.

There are two nearest Call strikes available are 32.50 and 35.00, The available
months are Oct2006 and Jan2007. Since Oct2006 is nearly a month away and
when the time delay will drop the most, it is the unwritten rule that options buyers
are to avoid them. I look at Jan2007 then.

The last traded price for the Jan2007 32.50 Call is 0.70 and this gives an Implied
Volatility of 13.64% - very closed to the Historic Volatility. It has a delta of 0.3929.

For the purpose of me trying to change the negative state of mind of this thread to
beauty, let's assume we take a theoretical trade today. We buy one lot of AT&T
Jan2007 32.50 Call at $0.70.

Alternatively, we can also do the AT&T Jan2007 35.00 Call at $0.18 which has
a lower delta of 0.1353 and an Implied Volatility of 14.08%.

Let's see how it goes. Let's try to give some beauty to this thread.

For monitoring:
http://finance.yahoo.com/q/op?s=T&m=2007-01

[Note: This message was posted in response to those that the original poster
has subsequently requested to be deleted. Note added - 3Sep2006]

As of this time of the night here:

The Jan2007 32.50 Call has a traded range of 0.65 - 0.75. Assume the order is
done at 0.70, the intended price.

The Jan2007 35.00 Call has a traded range of 0.15 - 0.15. Assume the order is
done at 0.15, a better fill against the intended price of 0.18.

Normally, for an outright long Call, I will do only one of them. But for the purpose
of this exercise, let's just assume we do both and see how they turn out.

I did not mention the stop loss. This should be based on the underlying
instrument, in this case AT&T stock price, never never the option price chart. I will
use the Turtle Trailing stops. It is a bit tight at the moment but then we entered
much later.

Let's monitor them.
http://finance.yahoo.com/q/op?s=T&m=2007-01

[Note: This message was posted in response to those that the original poster
has subsequently requested to be deleted. Note added - 3Sep2006]




Here are the Greeks chart for the two Call options.

Since I wanted to make use of Gamma, the 35.00 Call would be the better one but
it is illiquid at this time. The 32.50 Call is more liquid. I am not sure if there is any
strikes in between these two because from Yahoo! there seems not to be. If there
is then it would be better for choice. But just stay with these two for this exercise
and see what difference they make.

The charts are from a spreadsheet that I found (outside of the mud) at this link:
http://www.optiontradingtips.com

[Note: This message was posted in response to those that the original poster
has subsequently requested to be deleted. Note added - 3Sep2006]

Okay I have a bit of time in between so I like to fill in why I choose AT&T for
the exercise. Beside the Turtle Trading System position and the Bollinger Band
Squeeze, the other factor is that this stock is in a strong position. It made
52-week high recently.

Last night (or should be this morning), after our theoretical orders were done, it
made yet again another 52-week high. Well, actually more than 52-week high. If
my counting is correct, it is 190-week high.

I will leave it here now else I give the impression that I am falling in love with my
position, even how theoretical the position may be. What is left to do now is to see
how it goes and to see what we can learn out of this.

If anyone has any other strategies, please by all means go ahead and contribute.

[HC Note: Deleted Messages

I had deleted a few messages in this thread as per request by the original message poster, and a few replies that are related to those messages and are content specific. I hope that fellow users can pardon the seemingly uncontinuity of the message flow, as this is the best I can do to retain whatever is userful.

I appreciate the understanding of all.

Thanks a lot.]

It's been about two weeks so maybe a small update uis due.

AT&T's uptrend (based on the Turtle System) is still intact. The trailing stop has
moved higher. The Bollinger Band expanded but not the type of explosion hence
explain why the slow trend.

Here are the closing options prices as of 14 Sep:

Jan2007 32.50 Call: 1.20 (vs 0.70 entry)
Delta: 0.5718 (vs 0.3929)

Jan2007 35.00 Call: 0.35 (vs 0.15 entry)
Delta: 0.2346 (vs 0.1353)


Now, many are no doubt tempted to do a quick calculation to show:

71.4% profit (for the 32.50 call)
130% profit (for the 35.00 call)

If you are thus tempted, I say DON'T!!!

This is the type of % profit you see splashed on nearly all of the investment
seminars advertisement you so often see in the newspaper. I will never want to
misrepresent numbers. Percentage profit should always reference your Account
Equity or what the Turtles call Notional Account Equity as the denominator. Never
never the premium you pay. NEVER NEVER NEVER!!!

So to the traders who practice trade anaylsis in a professional way, obviously
they know this is the wrong method. But to many layman they don't, and this is
why this type of hype always work. There is no way anyone can stop all the
layman from being hyped. If they want to be hyped, they will treat you as
blocking their road to riches. They just have to go through the proceess of
being hyped, feel the pain and then hopefully learn from their mistakes.

Such hypes were common im the USA some twenty to thirty years ago. They are
now happening in Singapore.


This is how the AT&T charts look like at this point:

Thanks CSK,

I hope other forummers gained as much as I did.

(1) You mentioned you want the gamma to work for you but did not really explain. I think it is important to explain the greeks ?

(2) I was hoping you lose money or at least take some heat (not to make you lose face lar). But firefighting is a skill that is sadly lacking in many traders. For example would you exit based on the turtle exit?

(3) Personally I like the bollinger squeeze setup because I like to trade the retracement of a major trend (rather than breakout). It is just my personal preference.

---

(4) Sadly, this forum is full of monologue. Doesn't anyone believe in a lively debate? SometimesI have some debates with CSK, while I don't believe I have changed his views nor he had changed mine, but I did learn something from the discussions.

Don't be shy, don't be paiseh and don't delete away offending posts unless it breaks the law lar :D

Undead and all:

Don't be shy, don't be paiseh and I don't delete away offending posts unless it breaks the law :).

Hi Undead,

It is good to know that at least my effort is not in vain.

1) Delta and Gamma
In another post later, I will explain Delta and Gamma in the context of the examle
trade. I will explain in a simple analogy, thanks to my little knowledge I have in
maths and physics. Many have this knowledge too but sadly Options trainers
never use it. If you see or hear them using this analogy after mine then you know
it came from here.

2) Cutting Loss
I know that the example "realtime" trade may turn out with a loss. That too can
still be a lesson although a negative as well as positive one. Yes, I will stick to the
Turtle exits. Yes, this is a difficult part for the trader, me included. Many make the
mistake of hanging on and hope. I have done this in the past too.

3) Bollinger Band Squeeze
The Squeeze does not tell which side will be the coming price directional breakout
but only to expect an explsosion in volatility, therefore prce directional breakout.
Therefore may be difficult to use it as a tool to buy (on weakness) in this case. I
read your "trade the retracement of a major trend (rather than breakout)" as such
in the case of this AT&T example.


4) Monologue
I was hoping that forumers would contribute. I did ask for this in one of my earlier
post. I learnt about the importance of brain storming from my earlier work in the
manufacturing industry. There should be no negative criticism of any ideas
because no matter how ridiculous or stupid they may seem, there may be some
worth either directly or indirectly in that it may trigger the brains of the others to
improve on it.

I was hoping that someone with better options knowledge can offer a better trade
than the simple one I am showing.

5) Deleted postings
I believe using an example like this is a much better approach than the style that
the former forum member had used. He subsequently requested that his profile
and all his postings to be deleted after I told him that the statements he made in
his postings could land him with legal problems from his target (not this forum, not
me). It is good that he has realised the danger he may bring to himself. This
forum has accepted his request so that the danger may not happen.

It is natural that some may still have questons or misunderstand such deletions so
in the hope that all be cleared up, I attached here below the Personal Message I
recieved from the forum member.

First, the definition for Delta and Gamma:

Delta: The amount by which an option's price will change for a one-point
change in price by the underlying entity.
Gamma: The rate of change in an option's delta for a one-unit change in
the price of the underlying security.


I will use the Speed and Acceleration of a car for the analogy. The definition:

Speed: The distance by which the car will travel for a one unit change in
time.
Acceleration: The rate of change in the car's speed for a one-unit change in
time.

Notice that the above are similar except in different area. The logic, though,
remains the same.


Let's now talk about the car's speed and acceleration.

When we apply more pressure on the petrol pedal, the car accelerates and thus
its speed increase. When we release the petrol pedal slightly, the car retardates
therefore its speed either increase less or slow down but the car still move
forward.

Reproduced below are the Delta and Gamma charts from an earlier post showing
the situation at the time of order entry. For this analogy, the Delta chart is the
Speed chart while the Gamma chart is the Acceleration chart.

You will notice that as Acceleration increase, the slope (tangent) of the Speed
chart increase. When Acceleration decrease, the slope (tangent) of the Speed
chart become less steep. Here I have to say we have to assume for the analogy
that we do not let go of the petrol pedal until the car speed slow down.

At the time of order entry. AT&T was trading around 31.00. This is shown as the
red vertical line. Notice that for the 32.50 Call, acceleration is already at its peak
while for the 35.00 Call, acceleration is still increasing and peak around 33.50
(magenta line). This is why I said the 35.00 Call would be better but it was not
liquid at that time.

Here are the Delta again as of 14Sep2006 vs 29Aug2006:

Jan2007 32.50 Call:
Delta: 0.5718 vs 0.3929 (+45.53%)

Jan2007 35.00 Call:
Delta: 0.2346 vs 0.1353 (+73.38%)

This is the effect of Gamma (Acceleration) on Delta (Speed). Should AT&T rise
further, the effect will be even greater.

I hope this simple analogy helps to understand Gamma. I know it is not a perfect
analogy but I try to make it simple to understand.

Here is a spreadsheet of the two Calls using data as of 14Sep2005 for simplicity.
AT&T was lower on 15Sep so the numbers are lower. It should be noted that
because the Delta for the 32.50 Call is higher so any price drop in AT&T will affect
the 32.50 Call more than the 35.00 Call.

Assumtion used:
Round/Turn commission: USD2.00.
This is what TradeStation.com charges so this is a useable number.

Acct Size: USD100,000 (required for Position Size)
Position Risk %: 1% of Acct Equity
Position Risk $ : USD1,000 (1% of USD100,000)
Postion Size Contracts: (Position Risk $) / (Contract Cost) rounded down.

Actually, Position Risk is less than 1% (USD1,000) because Stop Loss is being
used. There will not be total loss of premium paid. Of course, if I estimate where
the Call premiums will be when the Turtle stop is hit, I will get a bigger Position
Size as a result but that will complicate the example. I keep it simple. Just know
that Position Risk is less than 1% although I use 1%.

1-1/2 weeks has passed since the last update. So here is another update.

Closing prices 25Sep2006:
AT&T: $33.49
Jan 32.50 Call: $2.10
Jan 35.00 Call: $0.85

Delta 25Sep2006 vs 29Aug2006:
0.7161 vs 0.3929 (+182.26%)
0.4036 vs 0.1353 (+298.30%)

From the above and also from the table below, you will notice that Gamma does in
fact have make a difference on the positions.

It is important I stress that these positions were "late entries" as I explained in my
postings of 29Aug2006 and 30Aug2006 that the Turtle System had already went
long much earlier and at a much lower price. If the Turtle Exit were to be hit now,
it would still return a handsome profit on the original entry.

Now come the part where a lot of us are weak at. You see a profit and I know that
a lot of us will fear it disappear. There is an urge to take profit. Our mind work
against us thinking: -

If we take profit now then what happen if it carry on higher?
If we don't take profit then what if it drop from here?

Well, all of us have this weakness. It is up to us individually to handle this
weakness. For me, whether it goes higher or lower from here, I will stick to the
Turtle Exit. I know I entered late for this option example and I know from the
onset that the Turtle Stops will be tight. In fact after having moved 6N from the
initial breakout there should not be an entry anymore but I needed an example
quickly to change the then prevailing tone of this thread and indcations then were
that AT&T would break to new multi-months high again which also means a
FailSafe breakout while in a trend.

As we mix with all sorts of people in the marketplace, we no doubt will come
across those who will say, "You won't go broke taking a profit." Yes, I know it is
tempting but do you have a trade plan and if you have are you going to stick to it?
If you stick to it, why? If you don't stick to it, why?

Here are the present status. Professionally, the returns are 1.79% and 3.94%
respectively. The unprofessional will instead tell you they are 191.66% (or
291.66%) and 400% (or 500%) respectively. No, do it the correctly way - the
denominator is always your account size NEVER the premium you pay.

Hi

Would like to find out if any of the options course is any good. I am personally not interested but my friend is. He and wife wants to do options trading and he seems bought in by the sales pitch. I told him to review carefully before commiting. I am not able to share with him much as I only trade stocks and index futures so i have no idea how options work but i wan him to be fully aware before pumping the money into those courses.

Would apprecite you candid comments about those options course offered in SG. (i.e. Optionetics, some marian lady, etc.) Many thanks.

SM

All the courses are very expensive. Options is a very deep subject and it is
unlikely that attendees can learn much in the 2 or 3 days seminar.

I learned options on my own and bought a software to do the analysis. It was
simple but quite good, programmed by an option trader. Unfortunately it was
discontinued, like a number of software I bought.

I have not attended any of the options seminars, not even the free preview. If I
am forced to choose one, I pick Optionetics. They have been around for many
years. I won't choose any of the local ones as they appears to be more hype and
motivation type of seminars than content. Just look at the way they dress
themselves up and their hairdo. I won't pick the mariam lady as well since her
advert says no need technical analysis, no need fundamental analysis, no need to
pour through fundamental reports, etc and yet pick winners in mnutes every day.

Look at it this way. How much do university graduates get paid on their first job
on graduation? After 2 years of kindergarten, 6 years primary school, 4 years
secondary, 2 years A level, 3 or 4 years university. How much? Maybe $2,000 or
$3,000. This after 17 or 18 years of education/training!

So can one really make big profit in the thousands or ten of thousands monthly
with only 2 or 3 days of training? Well this is what they are telling everyone that
they can. I say no one can!

It is better off to buy some books and a software for the education. With the
thousands of dollars saved you can get a lot of good books and some decent
software instead. You will not need another 17 years. You will need at least a few
years. But definitely not 2 or 3 days.

Thank you CSK. I share the same view but need some affirmation and confirmation :) I shared with my friend Stocks investment.trading and Index Futures Trading, i guess they have better presentation skills than I do.

SM

The Turtle Trailing Exit Stop is now getting very tight again. For today, it is at
31.97 Stop. If this not not hit today then it will be higher for tomorrow at 32.09
Stop. It will stay at 32.09 Stop for ten trading days until hit or until prices resume
the uptrend.

AT&T last closed at 32.72.

Since I do not monitor the US stock market at night, I will not know at what price
the options would be if and when the AT&T Trailing Exit Stop is hit. So what I will
do is that should the Stop be hit, I will then use the lowest prices of the options as
the respective exit prices. Of course this make will make the P/L worst than actual
but I think for this theoretical trade, I do it this way. In actual real trading, the
options can be exited immediately during market hours.

Yahoo! is showing AT&T trading at 32.05 down 0.33. This makes yesterday close
at 32.38. But it actaully close yesterday at 32.73. This is a difference of 0.34 which
is consistent with the dividend paid in the past few cycles. They also pay dividend
around the beginning few days of October. So I think today may be the result of
this.

This is a negative demonstartion. I did not follow this part of the game. If I had, I
should square the position ahead of the dividend. My mistake. So we must learn
what to do and what not to do when trading US Stock options.

Since I goofed on this point, I will treat it as a real mistake and there is nothing I
can do now assuming I am running a real trade. So I will just have to stick to my
trading plan.

Remember, you must keep the dividend in mind if you want to learn stock options.
Use this mistake of mine to your fullest afvantage. See the effect of such.

Okay, 31.97 is hit. The low is 31.96 at this time. Since I happen to be watching,
I will exit at current prices.

Jan07 32.50 Call is 1.30/1.35. I exit at the bid of 1.30.
Jan07 35.00 Call is 0.45/0.50. I exit at the bid of 0.45.

The final results are:
Profit US$ 754.00 (0.75% Return on Acct)
Profit US$1624.00 (1.62% Retuen on Acct)

The exercise ends here. I hope you learned something. This is a very simple
trade, simple Buy Call trade. Most options trader may not hold the position for so
long. But I chose to - it showed how options prices behave and to have a sense of
how an option position can be. There are more sophisticated trade and there are
more characteristic to learn.

Have a good journey.

Is would only be right that I show the Turtle Trading System exited the position as
I had 2 days ago on 5-Oct-2006 since that was the basis for my trade exit.

So here is the chart of AT&T:

Optionetics course in Singapore
Preview in Oct

http://www.optionetics.com.sg/

[Message edited by HC on 2007-07-09]

FEW latest info that i got my hands on .....

"Hi Everyone,

I was sifting through these forums and many others as I was contemplating to enrol for his class.

I came across the following articles where there are people who have carried out legal actions about Clemen Chang's course about not fufilling his promises to his students.

Chanced upon the first report over here.

http://bp1.blogger.com/_FCg3MjqRfhM/Rg6vhQ...plaint+copy.jpg

And after the first one, this appeared.

http://bp2.blogger.com/_FCg3MjqRfhM/RnIcK8...14June2007a.jpg

i frm malaysia .....grad frm batch 46 spend 20,000 for his seminar ....we gonna block him frm conducting any seminar in malaysia.. anyone wanna lend a support pls email me at sp17268@hotmail.com or usdraj@yahoo.com

According to the papers,
things are settled.

What's your expectation for a trading seminar ?
Mine ? Relax and have fun.

Turn to your right and left and say hello.

When the speaker asks
"DO YOU WANT TO BE A MILLIONAIRE?!!"

Raise both your hands and shout "YESSSSSSS"

If he does a little dance.
Stand up and shake your bum.

Oh Yeah.