Options Log

[nbowers79 10]

I will post up some of my options positions(not actual size though) here to see if anyone has some good feedback to perhaps help me some. I'm new to spread strategies and have had a rocky start. I had purchased some amzn puts last week and sold them this morning to put on a vertical put spread on NFLX, I went with the 100/85 spread. So far so good. All comments are welcome. Thanks

[SIUYA 11]

if you need help/ideas/suggestions you will likely need to post a chart of what you are thinking and why, plus more info regards the options you are trading.....reason being that there are so many possibilities when it comes to strikes, series, strategies and price from a risk reward point of view is paramount.

eg; selling a 50 tick put spread at 20 might actually make sense in some scenarios but not others.

[diarist 10]

... I'm new to spread strategies and have had a rocky start...

 

Have you traded options on a straight directional basis? Are you using these trades to take a position based upon you assumptions concerning earnings announcements and the market's subsequent reaction?

[nbowers79 10]

Have you traded options on a straight directional basis? Are you using these trades to take a position based upon you assumptions concerning earnings announcements and the market's subsequent reaction?

 

 

Hi I have taken directional positions via in the money options but for the spread positions I have been buying slightly out of the money positions I use the spread strategy in this instance to help offset the cost of volitility and time. In my experience time is worth little and I try to minimize its cost whenever I can. Also I usually take the position about 3-5 days before earnings and I do it with stocks that seem to be trending. Usually large cap stocks where the options spread is at least 5%. I don't use weekly options, I consider weekly options the same as gambling at a casino.

[diarist 10]

Hi I have taken directional positions via in the money options but for the spread positions ...

 

Why are you trading spreads now? Did you or did you not make money trading long options?

[nbowers79 10]

Why are you trading spreads now? Did you or did you not make money trading long options?

 

I decided to try my hand at spreads in order to further reduce the cost of time and volitility. And yes I was making money trading in the money options. I will continue to do both in the future as well. As for now the spread seems to offer a good opportunity to reduce risk and increase return.

[diarist 10]

... the spread seems to offer a good opportunity to reduce risk and increase return.

 

How does a spread reduce risk over a straight long option position? How does a spread increase return, i.e. profit potential over a simple long call or long put?

[nbowers79 10]

How does a spread reduce risk over a straight long option position? How does a spread increase return, i.e. profit potential over a simple long call or long put?

 

Hi,

 

I'm no expert so if anyone has a better explanation please feel free to cut in, or if I am not correct also please cut in.......In response to your questions about risk reduction and higher returns via spreads:

 

If you go into the market and buy 1 in the one in the money put(specifically the june16 110) at todays closing price it would cost you 10.05 per contract plus commission.....

the delta on these as of the closing is -.88 so for every dollar the underlying stock moves your option price would move .88 cents. ......so you have 1005 dollars invested in this thing and if you want a 40% return you need the stock to go in your favor about 5 dollars.......

 

In this instance you have 1005 at risk for a possible return of 40% and we're not sure how long it will take to get there....

 

If you look at a put spread on cat say from 100 to 95.00 you would only need to invest 173.00 for about the same profit except when you factor in that you are only investing 173 and when it has reached your max profit level it will be worth 500.00 your actual percentage return would be far greater. Here your risk is only 173 dollars where the long put was 1005.

 

Hopefully this explanation is close to correct and you find it helpful! Good luck in your trading.

[diarist 10]

But if CAT drops to 80, your profit on the long put is 20, but your spread has maxed out at a price of 5 and a profit of 3.27, right?

[diarist 10]

It is very frustrating that it takes 12-24 hours for my posts to appear. I understand the desire to moderate messages from new members, but at ET and other forums the moderation process takes minutes to an hours or so. Every post I have made here has not been posted to the thread until the day after I submitted it.

[nbowers79 10]

But if CAT drops to 80, your profit on the long put is 20, but your spread has maxed out at a price of 5 and a profit of 3.27, right?

 

 

Hi while you are correct that if cat drops to 80 the long puts would have more profit, it doesn't alter the fact that when comparing the two strategies over the same price range the spread takes a fraction of investment to put on and returns a far higher percentage yield for the risk taken.

[nbowers79 10]

This morning I got into a call spread on aapl. I went with jun575/590 looks like it might have some bounce to it. aapl was trading at 562.50 when I entered the position.

[nbowers79 10]

This morning I got into a call spread on aapl. I went with jun575/590 looks like it might have some bounce to it. aapl was trading at 562.50 when I entered the position.

 

Doubled down this morning.........we'll see how this works. I was kind of thinking the huge reaction to Europe would have happened yesterday....

[OptionsBaller 10]

I'm pretty new to options as well, only been messing with them about 6 months. I've made some money on LNKD following some more experienced traders at this chat site(best of luck to you) :

 

http://www.optionmillionaires.com/2012/where-is-the-market-headed-tomorrow/

 

"Where is the market headed tomorrow?

Published May 9, 2012 | By jimmybob

 

inShare

 

Most daytraders close out their positions before the close. Making a living trading stocks is all about controlling your risks, and obviously there is more risk when you hold an equity overnight. Who knows what type of news can come out before the market opens that may impact your holdings. Better to lock-in the gain or loss before the close, and wait for the next trading day. That is, unless you are an option trader. Why? Well some of the most Epic moves come from holding a position over a few days.

 

Lets use todays move on LinkedIn(LNKD) as an example.

 

Stocks like LinkedIn (LNKD) are susceptible to volatile moves which is caused by the varying opinions of the ‘proper’ valuation of the stock. There are those who think a stock with a P/E ratio of 800 is a bubble and then the ones with the foresight(like myself) who are more forward looking, and think LinkedIn (LNKD) is undervalued. Bulls and bears squared off today. With Greece grabbing the headlines again (puke) causing a market sell off, LinkedIn(LNKD) fell over 8% to $101.53.

 

Its at that moment when option traders start to salivate. Not more then 3 trading days ago, LinkedIn (LNKD) traded over $120, now it sat almost 20% off its highs. CALLS! Buying the calls today at that moment would have resulted in some huge returns. But it those who hold for another day or two that may reap the big rewards. Take a look at the possible return today on the LinkedIn (LNKD) $11o calls. $550 into $4,400 possible.

 

 

 

But if you have read our blog, your know we are extremely bullish on LinkedIn(LNKD). Todays action maybe a prelude to the stock trading firmly above $120, which would result in those calls being up substantially more. Time will tell.

 

 

 

Where is the market headed tomorrow? We have used the VIX the last few months as a forward looking indicator, along with some other signals. The VIX pushed through the upper bollie, only to fall back through it. We think this is a key reversal signal. Take a look at the chart below:

 

 

 

 

 

The great thing about options is, you only need to be right a few times out of 10 to make some serious cash. Check back after tomorrow and let us know how we did.

Edited May 10, 2012 by OptionsBaller

[nbowers79 10]

Wow......what a week! Whales belong in the ocean, not working for JP Morgan!

[nbowers79 10]

Exited apple for about an 8% gain....would have liked more but the macro risks seem to be mounting in the world lately! I got into a small vertical put spread on the spy this afternoon in preparation for next week. I have been making more trades than I have intended lately but the market seems to be very volatile, and unsure about direction. Spy short looks like a good deal. Random question for anyone reading this: Do any of you use options oracle? I have tinkered around with it a little lately and am unsure about some of the probabilities its been giving me. Glad the week is over I'm tired.....it was a profitable week but seemed like a long one. Hope everyone has a calm, relaxing weekend.

[nbowers79 10]

Good morning. Looks like today will start out like a real barn burner! Hope everyone got some sleep over the weekend! Starting this week with the vertical put open on the spy. Also watching oil. Europe is looking really bad this morning.......I wonder how much will spill over into the US.

[nbowers79 10]

Mid week now on the spy puts/spread....things working well. Market seems to be getting a little ahead of itself with the relentless selling but it seems at any time something could come out of Europe and just send this off a cliff. Stayed away from oil as I'm not informed enough to mess with it! If the market does come back some this will just happen again in June with the new round of elections.......Good luck to everyone!

[nbowers79 10]

Looks like it could have a big break soon. The technicals I watch seem to be sitting right on the edge of a drop.....a big drop. Obviously technical analysis is not a precise science/art so we'll know when we know but it really looks interesting. I'm still holding my spy puts/spread. It has treated me very well this week. I am not the most creative trader though......how have you all been managing in this downturn? Anyone watch cnbc last night as they were discussing the 13f filings and deere's earnings? I'd say someone on that show took a hit on deere!! I have some coffee to drink so good luck to everyone.

[mslk 10]

great log! looks like market is falling apart and there is a rush to vxx and gold\silver. not sure how long it will last but i have calls on vxx and thinking of buying calls on gold\silver tomorrow

 

as for my equities, i'm rolling all my naked puts out and down, even as far out as sept

 

-mslk

[nbowers79 10]

While I realize trading involves little to no manual labor this week has been exhausting! Glad the week is over. Thank you mslk for sharing your insight. Those vxx calls should be treating you well! Going to go catch up on some sleep for Monday!

[nbowers79 10]

Time for an update. I closed out the spy spread on friday for a nice profit....unfortunately I was watching cat and decided that it was just a temporary spike so.....I bit. Took on some put contracts and closed them this morning for a nice loss! Luckily I went ahead and jumped on some bidu for the ride back up...not sure if this is a temporary bounce or change in trend but time will tell. Europe can't be fixed over night but I have found that you can't fight the tape and survive very long! I got in to Bidu with a 120/130 june call spread. It went through the bottom strike today and turned a morning loss in to a profit for the day we'll see how the rest of the week goes! Hope everyone had a nice weekend. Good luck this week should be exciting!

[nbowers79 10]

Got out of bidu around 121.50........didn't leave much on the table. Hung around and picked up a put spread on aapl 560/550june.... its done me well this afternoon. Will probably close out of it in a day or two....... Apple was at 563.25 when the spread executed. Pretty wild swing this afternoon with the news out of greece. Not sure what to expect for tomorrow but technically aapl looked good so we'll see.