Option Industry Council class notes

I attended another free option class. If you might want to take a class, you can find a list of upcoming classes at the Options Industry Council link. If there are no classes in your area, they have podcasts and other training materials.

The presenter opened with some comments about the paid TV option classes and how those classes have given options a bad name. The OIC is hosting these classes to combat some of that bad information. In the fly-by-night classes, students are often taught one or two specific strategies and told that they are going to makes lots of money very easily.

Readers might recall one sad story (link to June 2008 story) I told on this blog about a man I met who had gone through one of the "bad" classes. He paid a lot of money for the class plus one-on-one coaching. He did fine with the paper trading. The caveat is that the paper trading programs are sometimes set up to give better than real world results. He lost all his money within a few months of starting to trade real money. The strategy taught at the particular class was buying straddles ahead of earnings reports.

I got an update on the man this past week. After losing his life's savings in the options market and the class tuition, and losing his white collar high paying professional job, he is now living in a run down mobile home park in the middle of no-where just barely surviving. Sad to say, but I imagine more than a few folks that sign up for the TV classes and coaching meet a similar fate. He was an intelligent educated man, but that didn't protect him from the promise of free money.

On to my OIC class notes from the Intermediate Class:
* many folks do covered calls because of high premium, not because they like the stock--big mistake, only do covered calls on stocks you want to own.
* for novices, the best place to start is at-the-money.
* best measure of volatility is implied volatility of the traded options (as opposed to historical vol).

* every crash is different, the next one will be too.
* debit spreads tend to be slightly better than credit spreads, but often only by 1% or 2%.
* option assignments are random.

* option market makers have to honor their bid/ask, however, in the time it takes for an order to get to the exchange the market sometimes moves.
* most of the time simple is better, a lot of traders crave complexity thinking the more complex the trade the better it is going to be--not true.
* presenter advocates scaling in and scaling out of positions vs. "all in" or "all out" trading.

* when things go wrong he blames his dog

Positions
Long GLD SPY via short puts