Search results

He's giving you poor advice: ITM calls tend to have higher IV's, making them overpriced when compared with OTM calls. They also are more expensive, so they are not only overpriced but entail far greater risk of loss. Their greater probability of expiring in the money comes with those two costs...

If you're looking to hit your 1% target within a month, then options don't make sense. If you're doing a day trade, then a 1% move can make a near expiration option move by 100's or even 1000's percent. Someone who trades with 1% targets would tend to be a day trader or maybe a few days trader...

Yes, you're missing the main point of using options in the first place: leverage. In some cases, depending on time to expiration and IV, an option could return hundreds of percent profit on a 1% move in the underlying. The main disadvantage of options is time decay: with a stock that doesn't...

Is there no hybrid of the 252 and 365 based calculators? Weekends and overnights should count, as evinced by opening gaps, but to a far lesser extent than daytime trading hours. If I was forced to choose, I too believe the 252's will be less distorted from reality as the weekend decay shown in...

I don't know if you looked at the example in the link, but it is not distinguishing days when the market is closed from when it's open. Do you know of any that do it right?

When analyzing potential spread trades I like to use Online Options Profit Calculator http://www.optionsprofitcalculator.com/calculator/iron-condor.html as my broker's calculator is not very good, but I've noticed problems with it. E.g., theta (time decay) on weekend days are shown as if they...

The only way it makes sense to buy them both is if they have the same IV, otherwise just buy the one with the lower IV, as IV differences in the same underlying reflect the relative over/under-pricing of the option. E.g., if we assume that the ATM SPX option is efficiently priced, meaning that...

I would think that an efficient market would entail compensation for option sellers being built into the premiums; without this motivation there would be few options available for anyone to trade. You wouldn't expect option sellers to write options without some built in edge anymore than you...

SPX may not quote as tight, but in practice they fill near the middle and, more importantly, I've found they cost less than the expected 10x SPY options. You do get back part of that premium on SPY options when you sell though, but with a higher price, they will decay faster and if they result...

To enter that trade with my broker it costs me .15 x 225 = 33.75 plus 5.00 commission = 38.75 plus exchange fees and tax. This is too expensive for me, so I use SPX where 8 three legged spreads that are equivalent to 80 of your spreads would cost me .95 x 24 =22.8 plus 5.00 commission = 27.80...

As mentioned by others, this is no different than selling naked straddles; the underlying positions are just superfluous expenses. Selling straddles is generally considered a long term profitable strategy, but with the potential for terrible draw-downs so that money management requires only...

"How can this be profitable selling at the money straddles in addition to buying wings on those straddles and using stop loss pending orders of the underlying?" I don't think he buys the underlying so a stop loss order can't be put on it; the stop losses would be on the options. I've heard that...

I take a different view of the idea of using strangles for a hedge: most people think of them as an insurance expense that eats into their profit - they're prudently trading some profit for safety; so they go as far OTM as their tolerance for risk will allow. This "expense" perspective becomes a...

My point would still be the same, even if you use a mental buy target. Yes, there are pros and cons, depending on what you're trying to do, which is exactly the point I've been making from the first: it's a good strategy for some people.

Predicting the future and discovering a fair price to assign to risk are two completely different endeavors.

I can understand that: you were willing to sell sell something underpriced because your belief in market direction overrode that consideration. Still... I was hoping you had an answer for my question: I have a question: is is better to buy underpriced otm calls or sell overpriced otm puts? On...

If you compare the behavior of the market on those days, then it's obvious why option prices went up; that would be evidence that there was no under or overprice in either case. The only way to determine the effectiveness of the market at determining the true expectational value of options is to...

Now I'm confused; I was comparing "selling overpriced otm put spreads" with "buying underpriced simple otm calls". So even with their low iv you believe otm calls to be overpriced?

I already addressed this: The only way you can do worse than simply buying on the dip is when the stock gaps down from above to below the strike price minus the premium and stays down until the stock is put to you; had you waited for the dip without using a put, then your limit order would have...

This is a strategy for people who like a stock but are not willing to pay up unless they can get it at some lower price target - sometimes it's better to be patient and let the market come to you. The great advantage is that if waiting causes you to lose your opportunity, at least you've made...