Conservative Options Trades

Quote from tradingjournals:

Dan: with regard to the loss paid from gains, what I meant is that if the chance of a big hit is small, by the time one gets the hit (if any) the account would have compounded enough that the loss from the hit would hopefully be only a fraction of the gains one would have made. There is of course the bad luck that one might get hit even on the first trade. I guess it is the reason why one needs money management, and diversification.
More...
--------------------------------------------------------------------------------

so do i...but it sounds very OBAMAish

cheers
john
 
Have gold and silver peaked??

SLV:
http://blogs.barrons.com/focusonfun...up-hedgies-sell-gold-silver/?mod=yahoobarrons
http://finance.yahoo.com/q/bc?s=SLV&t=2y&l=off&z=l&q=l&c=

Bear call spread:
IF I think SLV has peaked:

Sell the Jan '12 SLV 50 call and buy the Jan '12 SLV 52 call for a net credit of $20
Yield = 20/180 = 11% in 122 days or 33% annualized

Prob and expectation are meaningless with Hype and momentum driven entities like SLV... but Prob of SLV going above 50 is listed at 12.5% for whatever that's worth.

For GLD which scares me a lot more than SLV:

http://finance.yahoo.com/q/bc?t=2y&l=off&z=l&q=l&p=&a=&c=&s=GLD

Sell the Jan '12 195 call and buy the Jan '12 197call for a net credit of $25
Yield = 25/175 = 14.2% in 122 days or 43% annualized
Prob > 195 = 24.8%
 
Nice work Dan, your insight and thoughts are very unique and meaningful. After being burned on shorting puts on momentum stocks (NFLX), I think it's time to take a more conservative approach to trading options. Yeah, it sure is fun watching your options triple and quadruple but there simply is so much risk and its hard to be profitable in the long run. Keep up the good work!
 
TSM:

This is a speculative rather than conservative trade


http://www.fool.com/investing/general/2011/09/20/apple-moves-to-taiwan.aspx
http://finance.yahoo.com/q/bc?s=TSM&t=5y&l=on&z=l&q=l&c=
http://moneycentral.msn.com/investo...ment=10YearSummary&symbol=US:TSM&stmtView=Qtr
http://finance.yahoo.com/q/ks?s=TSM+Key+Statistics

With TSM at 12.18

buy the Jan '12 12.50 call and sell the Jan '12 15 call for a net debit of $80

Price.............P/L..........%
12................(80).....(100%)
13................(30).....(62%)
14.................70.........87%
15................170......212%
 
SPY:
http://finance.yahoo.com/news/Market-Recap-China-Falters-wscheats-1218429435.html?x=0&.v=1
http://www.businessday.co.za/articles/Content.aspx?id=154210
http://finance.yahoo.com/q/bc?t=2y&s=SPY&l=on&z=l&q=l&c=

Trade:
Bear call spread:
Sell the March 137 call and buy the March 140 call for a net credit of $40
Yield = 40/260 = 15.4% in 176 days or 31.9% annualized
Prob = 82.7%
Expectation = .827(40) - .086(260) -.087(130)= 33.1 - 22.4 -11.3 = - 0.6 or essentially zero. i.e. as one would expect SPY options prices are pretty precisely calculated to give a net expectation of zero.
 
USO:
http://finance.yahoo.com/news/Market-Recap-China-Falters-wscheats-1218429435.html?x=0&.v=1
http://www.businessday.co.za/articles/Content.aspx?id=154210
http://www.minyanville.com/business...07?camp=syndication&medium=portals&from=yahoo
http://www.forbes.com/sites/greatsp...rgues-for-higher-oil-prices/?partner=yahootix
http://finance.yahoo.com/q/bc?t=2y&l=on&z=l&q=l&p=&a=&c=&s=USO

Trade:
Sell the March 45 call and buy the March 50 call for a net credit of $30
Yield = 30/470 = 6.4% in 176 days or 13.2% annualized.
Prob = 91.4%
Expectation = .914(30) - .04(470)- .04(235)= 27.4 - 18.8 - 9.4 = 0

This USO trade is currently offered at 24 which would not give a positive expectation. We need 30 to get a zero expectation. I will bid for 30 and see if market volatility and spreads will give me the trade.
 
 
You must log in or register to reply here.
Back
Top