George Fontanills use options to reduce risk
Trader George Fontanills (George Fontanills) began to use options in order to achieve a delta-neutral in its futures positions, and because of this "sleep easy at night." Because it uses options in conjunction with trading futures, Fontanills believes he has found a way to increase your profits while reducing risk.
Fontanills began as a certified public accountant (CPA), but decided that it was not for him. After a degree from Harvard Business School, Fontanills began working in real estate, but then "the real estate market just died." In 1998, together with other partners Fontanills decided to try his hand in the futures market. "We hired a few guys. They lost 10% of our money for 30 days, and I thought - but not for me to do it yourself "- and decided to study Fontanills trading on their own. In market research, he showed a systematic approach. "I was probably one of the first users of Omega TradeStation and began writing a program to try to take into account all the variables associated with bids," - he explains.
"The first thing I found - is that the volatility and fluctuations in the market indicate the general confusion," - said Fontanills. To this day, he, in his words, he is looking for markets with high volatility for placing their trades.
At the beginning of Fontanills was a day trader, believing that it is better able to thus control their risks. But then he began to fear that misses a lot of fluctuations in the market place for the night. Then Fontanills decided to explore options strategies. "I learned how to use options and how to become a delta-neutral, so to hedge themselves in both directions and still sleep soundly at night. That's when I dramatically increased profitability. "
"Delta is by definition - is the ratio of rate of change of option price to the rate of change of futures prices - notes Fontanills. - This is how quickly change an option in relation to the rate futures. Delta-neutral means that regardless of whether the market goes up or down, I always make money on their position. " For example, "I'm one short col for wheat and two long call for wheat, in the money. If wheat goes down, then will I earn through his short positions in wheat, and eventually the rate of change will allow me to earn even more for this position. "
Although Fontanills notes that many traders discourages the apparent complexity of options, he said, "people who understood how to make money on stock options, can earn an income is easier and safer than using only futures." Speaking of the basic factors Fontanills remarks: "I do not ignore the basic factors, because I want to know what other people think. I earn my money mainly by the fact that in spite of doing what everyone thinks. The crowd is usually wrong. "
Looking for options transactions Fontanills proceeds as follows: "I look at what is going pulses. If the volatility and momentum reaches a certain level, far beyond the usual limits, then I would expect the reverse reaction, and then place the deal ... my most profitable trades were produced when something went wrong way round. "
The main futures market, which trades Fontanills it - gold, oil, agricultural products (soybeans, and wheat), S & P 500 market interest rates and currency. "I need quick, volatile markets, and here is the best fit S & P and Bonds", - he said. Usually it lasts deal "maximum thirty days."
Tips for beginners: "Trade a little, until you are familiar with what you are doing. All initially tend to close transactions. I lost probably 20% on his account on the first transaction - recognizes Fontanills - learn how to use all methods available for trading ... learn how to use options, because all have been successful traders I know are able to use all the tools. Why reinvent the wheel? The following methods are those people who have achieved success. "
He notes, however, the importance of the fact that "no matter what methodology you use, it should match your personality." And finally, "learn how to limit your risk ... If you stay long enough in this game, then nachites how to achieve success."