Horizontal length of entire MOB bar

[jkeech]

Hi,

On AGET EOD ...

Why are some MOB lines (the main purple/blue one) longer than others?

Even though there are two vertical date bars, sometimes the whole MOB line is relatively quite short, othr times it extends a few months past the second date bar.

What does his mean and how should it be interpreted?

If the date range (on TGT daily type 2) is Oct14 til Nov10, but the right end of the MOB ectends out to Apr7 '04, should my option epxiry be at least 30 days past Apr7, or just 30 days past Nov10?

In the past I've found that using the date bars on a daily to take hte trade, keeps blowing out by up to a couple of months and I have to exit my trade early because of nearing expiry.

As is nearly ALWAYS the case, yes there is also the small black bar at the beginning of the line signifying insufficient data. This NEVER goes away til the trade is well under way and past the previous wave high or low. I used to get hung up by seeing this small black bar, but was advised by AGET tech support staff to not be too concerned about it & then later another staff memeber reminding me again that it means insufficient data. Naturally I need to enter the trade at the beginning of the trade, not at the end of it, so if I can't use it prior to entry to caclulate profit targets etc for risk/reward, then it seems to be of little use (also given that it keeps blowing out by a month or two).

[MR]

Hi,

[MR]

Re: Horizontal length of entire MOB bar

Hi,
.

Originally posted by jkeech If the date range (on TGT daily type 2) is Oct14 til Nov10, but the right end of the MOB ectends out to Apr7 '04, should my option epxiry be at least 30 days past Apr7, or just 30 days past Nov10? In the past I've found that using the date bars on a daily to take the trade, keeps blowing out by up to a couple of months and I have to exit my trade early because of nearing expiry.

Maybe someone out there who trades options is better qualified to answer your question here John. I am totally unqualified to answer option related questions as they relate to use of AGET features. I would defer to someone else's wisdom here. Sorry.

[gspiker]

This doesn't really address your question, but from my point of view, unless you are cash strapped, it usually pays to buy options as far out as possible...assuming you can find a contract with reasonable OI and volume...

I can't tell you the number of times buying a few months further out than I thought I might need has saved me grief.

Garth

[MR]

Re: Horizontal length of entire MOB bar

Hi,

Originally posted by jkeech As is nearly ALWAYS the case, yes there is also the small black bar at the beginning of the line signifying insufficient data. This NEVER goes away til the trade is well under way and past the previous wave high or low. I used to get hung up by seeing this small black bar, but was advised by AGET tech support staff to not be too concerned about it & then later another staff memeber reminding me again that it means insufficient data. Naturally I need to enter the trade at the beginning of the trade, not at the end of it, so if I can't use it prior to entry to caclulate profit targets etc for risk/reward, then it seems to be of little use (also given that it keeps blowing out by a month or two).

The "*" or what we now see as a "black box" at the beginning of a MOB simply is a warning that there is not enough data to calculate primarily the 'hash' or timing marks. It is a reminder to periodically recalculate the MOB as more data comes in.
There are some interesting MOB info in the technical section relating to how recalculating is helpful for the time marks, see page T-152 to T-155.

[MR]

momentum illustration

[MR]

hi,

[MR]

Hi,

[MR]

Hi, Another recent MOB example where Primary pivots are most effective. The 'hash marks or 'timing marks' shown represent the most desirable MOB area where you would or should expect maximum support or resistance if the price intercepts the MOB inside those marks. If the price passes through inside these hash marks it suggests additional strength, or a continuation of the trend in progress for the time being. In some ways hash marks are designed to work somewhat like the Ellipse does with timing a setup.

[jkeech]

Thanks Marc for the comprehensive response.

Who could I ask then who would know if a very long MOB line should be interpreted as the possibility of the date blowing out way past the date bars?

[jkeech]

Originally posted by gspiker
This doesn't really address your question, but from my point of view, unless you are cash strapped, it usually pays to buy options as far out as possible...assuming you can find a contract with reasonable OI and volume...

I can't tell you the number of times buying a few months further out than I thought I might need has saved me grief.

Garth

Garth, this is what I thought also - however I understand now that to acheive maximum ROI, there is more time decay (because of gamma and delta effect) in a far dated option than a mid term date option.

So, to take a Jan05 option just because I could afford to in preference to an Apr04 option you would think would make time decay negligable, but apparently this is not really to the purchasers advantage after all (exept it of course gives more time to be correct).

Any further comments on this from anyone would be most apprecated.

[Harndog]

Options and MOB

As an ex-options trader, I will toss in a couple ideas.
1. Options are a different animal with different characteristics than strickly trading stocks or commmodities. BEWARE.
2. At the core of projecting option prices is standard deviation. Given the past historical movement of "X" how likely is "X" to get to "Y"price. What option market makers do is make markets based on the relationship of historical to implied volitity and adjust their pricing for supply and demand.
3. Implied volitlity is the market makers expectation the "X" will move over "Z" period.
4. If you need more information look for more information on the web or look on Trader's Library for Option Pricing books.
(Quick aside, I have found books much cheaper on Half-bay, an Ebay site)
5. If you still insist on trading these animals - explore trading spreads. (See the web for definitions) By trading calender spreads you can take advantage of time decay and maintain your underlying position. Stocks and Commodities Magazine has articles on this options spread strategies.
6. As you have found out, time decay starts excelorating on Friday the week before expiration.
7. If you are serious about trading options use a pricing model, because when you are trading options the core problem is overcoming the bid/ask spread differential.
8. The core question when trading options is when is "X" gonna do it and by when?
Good luck because you're heading to the deep end of the pool
Harndog

[MR]

Thanks Harndog and gspiker... good comments and insights you both offer. Really appreciate your input here... thanks again!

[MR]

The MOB can originate from several levels. A very simple approach to Make-Or-Break application is to just focus on Primary and Major pivots. Primary and Major pivots have the greatest odds of holding a price advance. When they do not hold the advance, it is indicative of a still strong trend in progress. The Intermediary and Minor pivots MOB's tend to pause a trend and eventually fail. How the MOB elongates or extends itself into the future is not as important as the actual location it is displayed. The hash or timing marks are the only timing element built into the MOB. The length and width of the MOB are relevant only for price and not to be construed per say for time, other than the hash marks.

[gspiker]

Garth, this is what I thought also - however I understand now that to acheive maximum ROI, there is more time decay (because of gamma and delta effect) in a far dated option than a mid term date option.

I think you will find there is more time premium built into a far dated option yes, but that the decay doesn't start to really happen until your options approach expir.

Therefore, lets say, I think I will be out of my trade by April 04, but I buy the Jan 05 options - time erosion will not be a major factor if my trade goes as planned since I will be out long before much time premium has eroded from this contract.

What I would worry about far more is volatility premium, and how much I am paying for that. Since over a short time a lot of premium can be sucked out of all contracts. That's why paying attention to volatility prem is important....maybe instead of buying calls I will sell put (if the vol prem is high) and capture the prem that way.

This is just one example of why to go out to Jan 05. Let's say that I think a medium term down turn is about to take effect. So I buy some April 04 puts. Downturn happens, market drops a nice 500 points for me by option expir, and I capture some profit. But in dropping 350 points, it takes out a major trendline...now do I play the next short even though PREM has been jacked up and if the market just stalls I start to loose a lot of my investment just to to volatility prem erosion, and if it starts going back up it will be REALLY painful, or do I just stand aside and hope that the market sits a spell or retraces before dropping again?

If I bought the 05's, the choice is much easier...I personally would take partial profits and let the rest ride.

The longer you give yourself for a position to work itself out, the better off you are in options (IMHO)...time is your enemy...make it a weak enemy by giving yourself lots off it.

Most option players loose money because they have the save a nickle loose a dollar mentality...they buy near term, deeply out of the money options because they are cheap. Well you get what you pay for!