Coming back to optios. Need safer trades.
- Thread starter iSeriesGuy
- Start date
Dividends received finance nothing. They are payment to you with your own money (the stock price is reduced by that amount on ex div). In order for the dividend to be yours, the stock must rise. If it flatlines or drops, you've gained nothing.
Collars are verticals. They are not risk free unless legged into. Please post an example from dividendium.com that is risk free.
They espouse a "No Lose Stocks" strategy which is buying dividend stocks and buying deep ITM puts in order to capture the dividend. This idea has a "very limited downside, while leaving as much upside as possible. " Well DUHHHH !!! Via equivalence, long stock plus deep ITM put is the same as buying cheap OTM calls. Sure they lose very little but they have low odds of cashing in. IMO, this is another example of someone trying to sell subscriptions to the naive and uninformed.
IMHO, doing anything at all with the drugs unless you are really plugged into the industry - especially options plays - is a very dangerous game. Very easy to get badly burned.
In this case, in addition to company, product and market risk with a small company and a single product, you are taking on a huge amount of regulatory risk.
Good luck.
Yes, I agree - that's basically what I was saying. There are people out there who can make most any strategy appear to be good at least for a while.
I think it's possible the OP was thinking of some strategies where the max loss up to a certain point at least isn't huge - such as ratio/backspreads as long as there is no IV collapse (not usually shown or explained to newbies) and it is closed out 30 days or more to expiration.
My favorite personal strategy certainly involves loss of risk, but I try to minimize losses using IV probabilities and other factors.
Like someone said if the worst case scenario was truly a small gain, almost everyone would be doing it.
JJacksET4
Interesting site. TOS has a simple database if you were not yet aware of it.
Spin,
Thanks for the headsup. I am viewing and typing this while my eyes are quite dialated from an eye exam, so if I mess up that is why
It doesn't come as a shock I guess that they get free subscribers first, get their emails, etc; and then start charging. I haven't been using it that much anyway though - they frustrated me a few times when I was supposed to get some older date in my email and I never got it - maybe it went to SPAM or something, but I don't think so.
I Have found it better to just chart out the P/L of a trade - decide on the possible IV range that is likely and go from there. It was useful sometime to look back, but I found it kind of hard to really tell much about a strategy sometimes because of intra-day issues (big moves and then back)/bid ask spreads etc
I'll let you know if I find anything else that looks good later.
JJacksET4
Thanks for the headsup. I am viewing and typing this while my eyes are quite dialated from an eye exam, so if I mess up that is why
It doesn't come as a shock I guess that they get free subscribers first, get their emails, etc; and then start charging. I haven't been using it that much anyway though - they frustrated me a few times when I was supposed to get some older date in my email and I never got it - maybe it went to SPAM or something, but I don't think so.
I Have found it better to just chart out the P/L of a trade - decide on the possible IV range that is likely and go from there. It was useful sometime to look back, but I found it kind of hard to really tell much about a strategy sometimes because of intra-day issues (big moves and then back)/bid ask spreads etc
I'll let you know if I find anything else that looks good later.
JJacksET4
New to me. How to access?
I no longer subscribe to dividendium.com, so I can't post an example. When I was a subscriber, the service seemed to offer what it promised. I wasn't too enticed, because the expected return was rather low compared to what seemed attainable in other strategies, but I do think it was risk free, as long as--and this is not to be ignored--the dividend was paid. The dividend did indeed provide a risk-free profit in the particular trades they listed. One would by a stock, by an underpriced put that locked in a certain minimum value for the stock, and sell a call. When the dividend was paid, the cash inflow would result in a net profit to the position. Yes, the underlier went down in price to compensate for the dividend being paid, but that's where the put comes in. The put made the underlier's value irrelevant. Even if the underlier went down to 0, one would still make a profit on the trade because of the put having hedged the downside. The sale of the call reduced costs to the point where the payment of the dividend put the whole trade into the black.
This idea is definitely real. I did it with PG stock one cycle and it made 1.3 % for somewhat over a month of holding the trade. It's not necessary to leg into this trade. Even if you get into it with apparent risk, the dividend more than makes up for the maximum risk.
Yes, long stock plus DITM puts is the same as OTM long calls. I hate it when people try to make synthetic trades seem different. I'm amazed how often people (mainly vendors) distinguish between cash-covered puts and covered calls, or between butterflies and iron butterflies. With the trades listed on Dividendium however, they are saying buy stock, buy a put, and sell a call. Not merely buy stock and a put. Buying a call alone would accomplish nothing like what I am talking about here. It would be necessary, as you point out, for the underlier to rise to profit on a long call trade, but no movement is necessary with the trade type I am describing. This is just classic dividend arbitrage. Just as in merger arbitrage, the risk is only that the deal may not go through, the deal in this case being dividend payment.