Daily Options Report

Apparently I am alone in America not watching much of the World Series. Didn't read all that much either, although this from Joel Sherman in the NY Post caught my eye.

(Damasso) Marte finished the postseason by retiring the final 12 batters over seven games. After a miserable season of injury and failure, Marte justified the three-year, $12 million contract given early last offseason by Brian Cashman.

Does the concept of small sample size pass over sports pundits, or are they this willfully obtuse? I understand that a key out is priceless, but .....if he's worth $12 million for that (and the 4 cheap players they traded for him), what's Mariano worth, $8 billion?

OK, bad example, he probably is worth $8 billion.

Anyway, into paper trading? Abnormal had these thoughts.

Some analysts recommend that novice traders start out paper trading, in part, so they can get used to taking losses.  We are in favor of paper trading to the extent that it helps traders learn the mechanics of trading (and taking losses).  However there is no substitute for experiencing the ups and downs of actual dollars on the line (no matter how small an amount).

Yes and yes. While I think it is some value, there is a danger of a false sense of security in it.

The plus side in options is that positions can get confusing and complex. Volatility moves, and your P&L can fluctuate very differently from how your sheets or model suggest. A particular issue is that longs may not work as well as you think they will if the basis of the long is a near money or OTM call. Conversely, that sort of long may do "less bad" on a decline. Paper trading can help give you a feel for this sort of price behavior, and other quirks.

The downside though is just as Abnormal says. You can't simulate the feel of losing actual money and how you will react. It's akin to playing online poker for play money. It's a lot easier to go all-in or call a big bid when you have no actual skin in the game. 

So by all mean, simulate new sorts of positions on paper first, it will help. Just know that "managing" said position will differ once the lights go on.