Case Studies in Options Trading

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wadef

I'm not a professional trader - just trying to get better. I've been writing covered calls in my IRA with some success over the past 6 months, and I'd like to begin to initiate some spreads in my trading account.

If anyone would care to share how a particular trade unfolded and their thought process behind it I would be greatly appreciative. Or if anyone is interested in my simplistic approach to covered calls I'd be glad to share recent trades. Thanks.
 
Depends on what kind of spreads you mean -- debit or credit. What degree of risk do you desire or can handle??

A very suitable kind of spread for an IRA coupled with risk/reward would be put credit spreads. In other words, if there is a particular stock you really like or may want to accumulate over the next 6 months, this is a good way to potentially make some income/and or lower the costs associated with acquiring the position which would be offset by premium you write.

Take Bear Stearns. Had great earnings, should get some institutional play here. Lets say you want to acquire 1000 shares of Bear Stearns but do not want to pay the current market price of $66.00 Instead you want it @ $65 or $60. Go out three months or two months from now, and sell these specific puts at the given strike you can live with paying for it, in case the stock pulls back and gets put to you. ((((((To cover yourself/mainly for margin purposes, but if your rich, screw it and just stay naked, if permissable. If your with a Fidelity, forget about it.)))), buy a long put with a lower strike price to cover.

There are numerous other kinds of spreads/strategies you can play with, but for now this is a start.
 
I didn't know they let you write covered calls in an IRA. But let me guess whether you are allowed to write naked puts. And what exactly would be the reason for that? Exactly: Because the puts would not be covered.

I would be more interested n gamma scalping. Is anyone here doing that? I'm assuming metoxx is doing something along those lines, but if you are not quite at that level, what is a reasonable minimum accout size to gamma-scalp profitably?
 
Quote from Lobster:

But let me guess whether you are allowed to write naked puts. And what exactly would be the reason for that? Exactly: Because the puts would not be covered.

I
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Hey Lobster...IRA's have come along way. Naked puts might not fly in most cases, depending on where your IRA is; many bread and butter or mom & pop run IRA from a bank, etc. is not going to let you do much. On the hand, brokers like ML or optionsXpress offer a bunch of option initiatives for IRA's...that is why I mentioned the fact that maybe he should cover and buy the lower strike put.......Would like to hear more about your scalping ideas......
 
Woah - fast repsonse. This site is great. My IRA is at Datek (now Ameritrade) - only covered calls allowed there. I'd be doing spreads in my other Ameritrade account that has 10k in it. After reading the many posts on this site, though, I'd probably better open an account elsewhere for lower commission costs.

I'm not familiar with Gamma scalping, though I'm reading the Cottle book, Woulda, coulda, shoulda that was mentioned on another thread. Trajan's option journal from Feb 03 was very interesting.

Mostly I was considering calendar spreads on stocks I have an opinion about.
 
Quote from optionsplayer:


Would like to hear more about your scalping ideas......
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What I am thinking about is just buying a straddle, let's say long 100 calls and 100 puts at the same strike, and then keep the whole position delta-neutral buy buying and selling the underlying in 100-share lots. Is anyone here doing anything like this?
 
Quote from wadef:

Mostly I was considering calendar spreads on stocks I have an opinion about.
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Here's my take:
If you have an opinion on a stock, you should trade the stock, not the option. If you have an opinion on a stock's volatility structure across months, you should trade calendar spreads.
If you have an opinion on the vol of a stock in a certain month, you should trade straddles (delta neutral or close to).
If you think you want to trade credit verticals, but not debit verticals, you should try to understand what a box is.
 
Quote from Lobster:


I would be more interested n gamma scalping. Is anyone here doing that? I'm assuming metoxx is doing something along those lines, but if you are not quite at that level, what is a reasonable minimum accout size to gamma-scalp profitably?
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What is gamma scalping?
 
Quote from wadef:

Woah - fast repsonse. This site is great. My IRA is at Datek (now Ameritrade) - only covered calls allowed there. I'd be doing spreads in my other Ameritrade account that has 10k in it. After reading the many posts on this site, though, I'd probably better open an account elsewhere for lower commission costs.

I'm not familiar with Gamma scalping, though I'm reading the Cottle book, Woulda, coulda, shoulda that was mentioned on another thread. Trajan's option journal from Feb 03 was very interesting.

Mostly I was considering calendar spreads on stocks I have an opinion about.
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Well, I could tell you what I'm doing right now. CSCO diagonals, I'm buying the july 17s and selling april 15s for even money. I Have been legging into a bunch of these for the last week with some of the short calls being Mar. Have tried the last couple of days to leg into apr12/july10 diagonal as well, but no luck. Why? free call after the april exp. and then sell may and june against the julys. Stock seems to be range bound.
 
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