Max G. Ansbacher's Options Strategies
Almost any method of trading options which has the chance of making an above average return also carries a commensurate high degree of risk. But some practitioners of the arcane art of options trading do manage to do better than others over the years. One such person who has done very well for his clients is Max G. Ansbacher, Chairman of Ansbacher Investment Management, Inc., located in the prestigious Rockefeller Center complex in New York City.
Mr. Ansbacher has a long and distinguished involvement with options. In fact, he is the author of the first book published on the modern form of options, titled The New Options Market, Revised and Enlarged Edition. It was originally written in 1975 and Mr. Ansbacher has been trading options professionally ever since. In addition to this book, which has become one of the all time best selling books on options, he has written two other books on investing, has lectured on options at over 50 investment conferences in both the U.S. and overseas, and is the creator of The Ansbacher Index which is broadcast over the world wide facilities of the CNBC cable network.
He manages accounts for investors in both the U.S. and overseas. What sets Mr. Ansbacher apart from many others is that he has an excellent record of bringing in above average profits for his clients. Since most people who buy options seem to lose money, we asked Mr. Ansbacher what the key was to his success. He replied, Yes, I agree that most people who buy options do seem to lose money. But what many people don't realize is that the money which the options buyers lose, doesn't disappear from the face of the earth. Rather it becomes the profits of the options sellers. And therefore, I concentrate in selling options.
What Mr. Ansbacher was saying is that options trading is actually a zero sum game when one looks at the total overall economic effect. This means that buying and selling options in its total impact on the economy does not either create any money or lose any money (except transaction costs). If the sellers make money, the buyers lose money. And if the buyers make money, then the sellers must lose money.
Since the options buyers tend to be the ones who lose money, it therefore must be true that the options sellers are the ones who make money over the long run. We asked Mr. Ansbacher why this should be true. His answer was, The options buyers tend to be less sophisticated than the sellers. They don't always carefully assess the chances that their stocks will really go up enough to make money when they buy a call. Similarly, if people think a stock or a stock market is going to go down, they often over estimate how much it is going to go down. They will buy a put which is going to lose money unless the stock makes a really unusually large move within a relatively short period of time. These are the options I sell.
Of course there is not an investment program yet invented which makes money on every single trade, and option selling is no exception. When we asked Mr. Ansbacher about this, he said, Certainly there are times when we have losses, but we believe that the probability lies with the sellers. And so we usually find that every loss is matched by many more winners.
Selling options is something which has to be done very carefully, because the risk is high. We asked Mr. Ansbacher what he does to control this risk. He said that the first defense was to control the number of options which he sells. I usually sell only about one fifth the number of options which margin rules permit me to do. The second line of defense is that I use stop loss orders, which in most instances will automatically get me out of the options before the losses rise to a point which I consider unacceptable.
He continued, The most interesting line of defense and the most important from the point of view of making money, is that I sell out-of-the-money options. This means that I sell options which have a strike price which is a distance away from the current price of the underlying security. We should point out that a strike price is the level at which an option becomes effective.
What Mr. Ansbacher means is that if a stock is 100, for example, he will not sell the 100 strike price call, because it is tool likely that the stock will go above 100 and he might lose money. Instead, he might sell the call with a strike price of 120. The stock would have to be above 120 at the option's expiration for the seller of the option to sustain a loss. Obviously it is less likely that a stock will go up 20 points than it will merely go up a few points. So, by selling out-of-the-money options, Mr. Ansbacher is able to shift the probabilities in his favor.
Another major decision which an options trader has to make is whether to be trading calls, which go up in price when a stock goes up, or puts which go up in price when the stock goes down. Mr. Ansbacher said that he makes this decision based upon a number of factors, including his long experience in the field. One of the factors I rely upon, is my own Ansbacher Index. This Index tells me whether the puts or the calls are higher priced. Since I am selling these options, I will generally choose to sell the ones which are higher priced. I believe the Index also gives an indication of which way the stock market is likely to go in the intermediate future. Thus, Mr. Ansbacher can sell options on the stock market which will be profitable for his clients if the market moves as The Ansbacher Index indicates it is likely to do.
The minimum account which Mr. Ansbacher accepts is US$100,000, and he accepts accounts from people residing anywhere in the world. Depending upon the type of account, the investor will receive monthly or quarterly statements giving the exact value of the account. Clients are encouraged to discuss their accounts personally with Mr. Ansbacher.
For more information contact
Ansbacher Investment Management, Inc.
Attn New Clients Information
45 Rockefeller Plaza, 20th Floor
New York NY 10111
telephone (212) 332-3280
fax (212) 332-3283; Attn New Clients Information
Mr. Ansbacher has a long and distinguished involvement with options. In fact, he is the author of the first book published on the modern form of options, titled The New Options Market, Revised and Enlarged Edition. It was originally written in 1975 and Mr. Ansbacher has been trading options professionally ever since. In addition to this book, which has become one of the all time best selling books on options, he has written two other books on investing, has lectured on options at over 50 investment conferences in both the U.S. and overseas, and is the creator of The Ansbacher Index which is broadcast over the world wide facilities of the CNBC cable network.
He manages accounts for investors in both the U.S. and overseas. What sets Mr. Ansbacher apart from many others is that he has an excellent record of bringing in above average profits for his clients. Since most people who buy options seem to lose money, we asked Mr. Ansbacher what the key was to his success. He replied, Yes, I agree that most people who buy options do seem to lose money. But what many people don't realize is that the money which the options buyers lose, doesn't disappear from the face of the earth. Rather it becomes the profits of the options sellers. And therefore, I concentrate in selling options.
What Mr. Ansbacher was saying is that options trading is actually a zero sum game when one looks at the total overall economic effect. This means that buying and selling options in its total impact on the economy does not either create any money or lose any money (except transaction costs). If the sellers make money, the buyers lose money. And if the buyers make money, then the sellers must lose money.
Since the options buyers tend to be the ones who lose money, it therefore must be true that the options sellers are the ones who make money over the long run. We asked Mr. Ansbacher why this should be true. His answer was, The options buyers tend to be less sophisticated than the sellers. They don't always carefully assess the chances that their stocks will really go up enough to make money when they buy a call. Similarly, if people think a stock or a stock market is going to go down, they often over estimate how much it is going to go down. They will buy a put which is going to lose money unless the stock makes a really unusually large move within a relatively short period of time. These are the options I sell.
Of course there is not an investment program yet invented which makes money on every single trade, and option selling is no exception. When we asked Mr. Ansbacher about this, he said, Certainly there are times when we have losses, but we believe that the probability lies with the sellers. And so we usually find that every loss is matched by many more winners.
Selling options is something which has to be done very carefully, because the risk is high. We asked Mr. Ansbacher what he does to control this risk. He said that the first defense was to control the number of options which he sells. I usually sell only about one fifth the number of options which margin rules permit me to do. The second line of defense is that I use stop loss orders, which in most instances will automatically get me out of the options before the losses rise to a point which I consider unacceptable.
He continued, The most interesting line of defense and the most important from the point of view of making money, is that I sell out-of-the-money options. This means that I sell options which have a strike price which is a distance away from the current price of the underlying security. We should point out that a strike price is the level at which an option becomes effective.
What Mr. Ansbacher means is that if a stock is 100, for example, he will not sell the 100 strike price call, because it is tool likely that the stock will go above 100 and he might lose money. Instead, he might sell the call with a strike price of 120. The stock would have to be above 120 at the option's expiration for the seller of the option to sustain a loss. Obviously it is less likely that a stock will go up 20 points than it will merely go up a few points. So, by selling out-of-the-money options, Mr. Ansbacher is able to shift the probabilities in his favor.
Another major decision which an options trader has to make is whether to be trading calls, which go up in price when a stock goes up, or puts which go up in price when the stock goes down. Mr. Ansbacher said that he makes this decision based upon a number of factors, including his long experience in the field. One of the factors I rely upon, is my own Ansbacher Index. This Index tells me whether the puts or the calls are higher priced. Since I am selling these options, I will generally choose to sell the ones which are higher priced. I believe the Index also gives an indication of which way the stock market is likely to go in the intermediate future. Thus, Mr. Ansbacher can sell options on the stock market which will be profitable for his clients if the market moves as The Ansbacher Index indicates it is likely to do.
The minimum account which Mr. Ansbacher accepts is US$100,000, and he accepts accounts from people residing anywhere in the world. Depending upon the type of account, the investor will receive monthly or quarterly statements giving the exact value of the account. Clients are encouraged to discuss their accounts personally with Mr. Ansbacher.
For more information contact
Ansbacher Investment Management, Inc.
Attn New Clients Information
45 Rockefeller Plaza, 20th Floor
New York NY 10111
telephone (212) 332-3280
fax (212) 332-3283; Attn New Clients Information
posted by Raphael Blogger @ 1:59 PM
0 comments
