bull call spread should be in profit but isn't. please explain
- Thread starter frankr
- Start date
Hi frankr
The only reason I can see why your position would be losing value is that goog iv is rising. If this was not the case then your long should gain more value than your short. Furthermore the rise in iv must be greater than the rise in shareprice for you to lose premium (and I don't think that has happened). Remember that iv usually rises prior to earnings/announcements etc.. There must be another explanation for your dilemma.
Thus I have looked at the option prices of your legs and it seems they are the opposite of what you have said, i.e. your long call is gaining more value than your short:
1/25 440 premium was 52.1, 450 premium was 47.5, net=4.6cred
1/24 440 premium was 56.3, 450 premium was 51.7, net=4.6cred
1/23 440 premium was 46.3, 450 premium was 42.2, net=4.1cred
So, your credit has increased over the last few days and you are ahead. Well done. Just sit tight or close your spread for a profit. Also you should review your optionetics manuals, particularly the section on debit spreads and volatility - also check on optionetics platinum for your risk graphs and the different scenarios when iv/underlying changes and go to as many 2 day seminars (as a refresher - it's free) as possible.
Cheers
The only reason I can see why your position would be losing value is that goog iv is rising. If this was not the case then your long should gain more value than your short. Furthermore the rise in iv must be greater than the rise in shareprice for you to lose premium (and I don't think that has happened). Remember that iv usually rises prior to earnings/announcements etc.. There must be another explanation for your dilemma.
Thus I have looked at the option prices of your legs and it seems they are the opposite of what you have said, i.e. your long call is gaining more value than your short:
1/25 440 premium was 52.1, 450 premium was 47.5, net=4.6cred
1/24 440 premium was 56.3, 450 premium was 51.7, net=4.6cred
1/23 440 premium was 46.3, 450 premium was 42.2, net=4.1cred
So, your credit has increased over the last few days and you are ahead. Well done. Just sit tight or close your spread for a profit. Also you should review your optionetics manuals, particularly the section on debit spreads and volatility - also check on optionetics platinum for your risk graphs and the different scenarios when iv/underlying changes and go to as many 2 day seminars (as a refresher - it's free) as possible.
Cheers
Hi ra1. I don't know what to say cuz I don't see the profit on my brokerage account. Maybe you can send me a private message here and leave me your email address so I can send you a screenshot of my online brokerage account. This morning when the stock went above $450 my brokerage account showed the short call rose by $3.8 and the long call rose by only $3.4 for a loss of $40. Yesterday the short call rose by $2.5 and the long call rose only $2.4 for a loss of $10. I didn't take screenshots. But if sometime during tomorrow the stock moves up, I will take a screenshot and send it to you.
Right now the stock fell to $433 and the long call dropped in value more than the short call. That seems right since the long call has a higher delta. But when the stock was moving up, it was the short call's value that rose faster. I checked, double checked, and triple checked this, this morning and yesterday when the stock rose.
If the stock rises and I'm at the computer I will try to get a screenshot to show this to you. So if you don't want everyone reading this thread to see your email address, send me a private message here and give me your email. Thanks. Have a good evening.
Right now the stock fell to $433 and the long call dropped in value more than the short call. That seems right since the long call has a higher delta. But when the stock was moving up, it was the short call's value that rose faster. I checked, double checked, and triple checked this, this morning and yesterday when the stock rose.
If the stock rises and I'm at the computer I will try to get a screenshot to show this to you. So if you don't want everyone reading this thread to see your email address, send me a private message here and give me your email. Thanks. Have a good evening.
hi buy1sell2. well everything i posted today was based on intraday. when the stock was rising this morning i was watching my account because with a $440-$450 spread i obviously want to get out when the stock hits $450. but the whole time the stock was rising, i was losing money in my brokerage account. anyway, yes this was all intraday. that makes sense since options prices are changing throughout the trading day.
but what was your point? i think i'm missing it. how does intraday vs after markets close affect my situation?
thanks and have a nice evening.
but what was your point? i think i'm missing it. how does intraday vs after markets close affect my situation?
thanks and have a nice evening.
The real problem is the subscription option software. It's all garbage and you don't need it. A good TA package for HV, real-time greeks from IB, ivolatility.com, prophet, Hoadley, and Schaeffer's are more than enough. Read McMillan on Options and Mathematics for Finance. On top of that IB's new scanners are very powerful now. Watch the greeks real time and over a period of weeks and get to know them rather than bury them in source code. Work on one stock only, such as QQQQ or SPY. Trade small. Write your own Excel spreadsheet and understand what the hell you are doing. Don't ever use software or formulas or anything you don't understand like your native language. Ever. You have absolutely no proof that the option is software is NOT putting out pure garbage. Even if it isn't you have no edge using the same crap everyone else is. You don't need 10,000 different options except to overtrade and do worse than a buy n hold investor who buys OIH and GLD and NIKI and hits the beach. It's all crap, all of it. Imagine that, crap coming from Wall St....
xtrhvydty
Would you mind defining all the abbreviations you used? TA, HV, IB? And what options software are you talking about? If you are referring to stuff like "Options Made Easy" I did go to their little presentation and determined it was a waste of money, so I don't use that stuff. I went through the Optionetics course and did a lot of reading on stock technical analysis online and began to paper trade. Recently I began to real money trade. I am willing to try what you said about watching the greeks real time by tracking just one stock. But where can I access the greeks real time? Is this available free of charge? If there is a charge, about how much is it?
Buy1Sell2
Yes, I realize this now about expiration. I wish I didn't have to learn it this way with real money but now I know better. In Optionetics they overstress how not to stay in the trade in the last 30 days of expiration because of how fast time value drops. They also stress how if you do later expirations it gives you more time to be right about which way the stock will move. They did not stress the importance of doing short term options for debit spreads. At least I don't remember any mention of it. The only time I learned to do short term options is for credit spreads because you want the options to expire worthless so you give as little time as possible for the stock to move. If I had known all of this about expiration I would have done the Feb 06 spread because as mentioned I had a strong conviction the stock would hit $450 within a day or two but from a price of $450 I was very iffy on what would happen especially since earnings are due next week. If only I knew to do the Feb expirations. It probably would have cost me less to enter the position too.
Anyway thank you, both of you, for your responses.
Would you mind defining all the abbreviations you used? TA, HV, IB? And what options software are you talking about? If you are referring to stuff like "Options Made Easy" I did go to their little presentation and determined it was a waste of money, so I don't use that stuff. I went through the Optionetics course and did a lot of reading on stock technical analysis online and began to paper trade. Recently I began to real money trade. I am willing to try what you said about watching the greeks real time by tracking just one stock. But where can I access the greeks real time? Is this available free of charge? If there is a charge, about how much is it?
Buy1Sell2
Yes, I realize this now about expiration. I wish I didn't have to learn it this way with real money but now I know better. In Optionetics they overstress how not to stay in the trade in the last 30 days of expiration because of how fast time value drops. They also stress how if you do later expirations it gives you more time to be right about which way the stock will move. They did not stress the importance of doing short term options for debit spreads. At least I don't remember any mention of it. The only time I learned to do short term options is for credit spreads because you want the options to expire worthless so you give as little time as possible for the stock to move. If I had known all of this about expiration I would have done the Feb 06 spread because as mentioned I had a strong conviction the stock would hit $450 within a day or two but from a price of $450 I was very iffy on what would happen especially since earnings are due next week. If only I knew to do the Feb expirations. It probably would have cost me less to enter the position too.
Anyway thank you, both of you, for your responses.