14 thoughts on “We interview Larry McMillan

    1. Stock options are almost always priced fair plus the clip that they take from you on the bid ask spread and commision. Interactive Brokers is a good retail broker for options. They let you set up a page with multiple orders like a spread sheet then you can send the whole sheet at once. I have a hard time believing you could make money speculating with options. One idea is that Interactive Brokers will lend you money at .5 percent. You could in theory construct a synthetic short for little cost. One cute way of doing this is to write deep in the money calls and buy the put at that strike. You could do these a couple of months out. Every month and I have been waiting along time to use this nomenclature you would jelly roll from the current synthetic to the next. The whole point of this is a hedge that you find for little or nothing. The trick is to buy a stock with huge leverage that pays a dividend and collect the dif between the loan and the checks you get. Example if you could hedge KMB wich pays north of 4 percent you might be able to jack that up 10 to 20 times and strip away all your delta risk using synthetic shorts. Insiders can do this like market makers but it's allot harder when you are a retail investor.

  1. I have know Larry for over 40 years and find him to be the most
    authoritative and brilliant minds on the stock market. I introduced him to the stock market and was proud to watch him
    absorb and comprehend the market more than anyone that
    I ever meet in my 50 years in the business. I encouraged him to
    write his first book about the market and wish to say that his books have become the bible for the options industry. Larry also
    has a weekly option service through MarketWatch which is
    very insightfull and inexpensive.
    Ron Dilks
    former Sr. VP for Smith Barney

    1. Larry's stuff is some of the best but when you read between the lines of his first book he seems to say only Arbitrage will work. Interestingly I have done allot of options trading but one of my few profitable trades is when I did a conversion which Larry does explain. There are some Arb search products out there for options but I have not tried them because finding arbable trades is hard. I think Scale trading QQQQ with LIFO clearing is an interesting concept. I think the ideal would be not to trade to many contracts maybe trade nearby contracts at or slightly out of the money.


  2. I bought his books when we were both a lot younger.

    I trade Options instead of the underlying for one reason. If you choose a long time frame expiration, you buy the volatility and only part of the underlying price. If you choose a high Delta in a far in the money trade, you will see (almost) the same price changes as the underlying. Your cost is a smaller part of the option price compared to an outright purchase. Your gains are nearly the same as buying the underlying entity. I will explain if anyone cares.

    1. Hi Marcus,
      I am a new Options trader - in fact just completed a course by Optionetics and want to learn more from traders like yourself. Can you explain more on the strategy you just pointed out please. How far ITM should the Option be trading at? what should be ideal delta value?

      Thank you!

    2. Hi Marcus - just a few questions on your strategy from a beginner here.
      1. How far ITM in terms of $ from the actual stock price
      2. What time frames do you trade?
      3. How high the delta needs to be at?

    3. Hi Marcus Boyd,

      I would love to hear your explanation. I'm very interested in learning options, I am trading the Q's at small amounts and so far it's going right but I don't feel too confident in placing larger amounts... I guess learning from people like you could help 🙂



    4. I used to do that years ago but found the spot to be better. One main reason I did the high Delta options was for IRA trading. A cool trade is to find two products that have high correlation like QQQQ vs Apple or Chevron vs oil. The trick is to write options on the lower Volatility and buy options on the higher. It is really nice when both products have similar implides.


  3. I actually read Larry's book when I was 14 over 21 years ago. It is one of those few books you should read. I was never able to make money with options though because they trade so tightly. It took me probably 20 years to understand Larry's book. Interesting is that the knowledge applies towards all financial markets not just options. In his book you could think of your trading like a bell curve. That would be Black and Sholes theory. The trick is to trade with an advantage. The only way you can do that is ECN rebate trading or getting payed to trade. When you trade ECN kickbacks your trading the only game in town where you are the casino. ECN rebates like Attain are where you get payed to trade. You can buy a stock and sell it at the same price and still make money so you no longer have a 50/50 chance but a true house edge no different than charging a commision or operating a legal bucket shop. Anyway hope that was helpfull.

    Jeremy Konstenius

    1. Jeremy i am very new to options but i "THINK" that i am catching on somewhat and your comments are interesting and thought provoking. I would like to learn more about ECN rebate trading and the implied volatility strategy of writing on the lower and buying options on the higher. Thank you and happy trading

  4. Very interesting interview. Although covering basic concepts it mentions some crucial aspects such as volatility and the strategies we can implement using options. Thank you.

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