Neophytes and the dissonant generally assume that a +expectancy is worthwhile regardless of the R:R. Assume a delimited spread; not naked, that returns 10% on capital at 10:1 risk. I can't count how may would take that risk over selling guts at 1:1 and a max 50% return. Traders get drawn into and then inured by the probability (hit rate).
Conservative Options Trades
- Thread starter danshirley
- Start date
Neophytes and the dissonant generally assume that a +expectancy is worthwhile regardless of the R:R. Assume a delimited spread; not naked, that returns 10% on capital at 10:1 risk. I can't count how may would take that risk over selling guts at 1:1 and a max 50% return. Traders get drawn into and then inured by the probability (hit rate).
I believe that a positive expectancy makes the trade worthwhile regardless of the R:R.
(Plus an annualized return of 10% or more)
Since I am not a neophyte I guess that makes me a 'dissonant'.
Of course I have no idea what 'selling the guts' means. It sounds real messy.
(Plus an annualized return of 10% or more)
Since I am not a neophyte I guess that makes me a 'dissonant'.
Of course I have no idea what 'selling the guts' means. It sounds real messy.
Quote from oldnemesis:
I believe that a positive expectancy makes the trade worthwhile regardless of the R:R.
(Plus an annualized return of 10% or more)
Since I am not a neophyte I guess that makes me a 'dissonant'.
Of course I have no idea what 'selling the guts' means. It sounds real messy.
it's no secret that I feel using leverage of 10 times ones account value, (which leaves the investor with no potential Plan "B" as back up, for the occasional times things go really bad), to earn a 10 - 20% return.... is not a good R/R.
(Of course, whether the degree of leverage is merely 8 times, 20 times or 40 times ones account value is actually irrelevant, as those % are all 100% the exact same thing, as it pertains to a spread trading portfolio.)
Endless repitition of words phrases or ideas is a symptom of autism:
http://autism.lovetoknow.com/Autism_Symptoms_Mild
Repetition-A common symptom of autism includes repetition of words and phrases. In many cases, these phrases are related to something the child has been exposed to, such as a movie, a book, or a song. The child may continue to say the word or phrase throughout the day or even throughout the following week.
http://www.youtube.com/watch?v=zA1hyqA6UTY
http://autism.lovetoknow.com/Autism_Symptoms_Mild
Repetition-A common symptom of autism includes repetition of words and phrases. In many cases, these phrases are related to something the child has been exposed to, such as a movie, a book, or a song. The child may continue to say the word or phrase throughout the day or even throughout the following week.
http://www.youtube.com/watch?v=zA1hyqA6UTY
Quote from oldnemesis:
Endless repitition of words phrases or ideas is a symptom of autism:
http://autism.lovetoknow.com/Autism_Symptoms_Mild
Repetition-A common symptom of autism includes repetition of words and phrases. In many cases, these phrases are related to something the child has been exposed to, such as a movie, a book, or a song. The child may continue to say the word or phrase throughout the day or even throughout the following week.
http://www.youtube.com/watch?v=zA1hyqA6UTY
yOUR GETTING SUCKED IN AGAIN
CHEERS
JOHN
JNJ:
When JNJ was having some previous problems I used to spend three afternoons a week at their research headquarters in Raritan. In those days the problem was getting drugs approved at the FDA... trivial issues compared to what has been going on lately.
http://online.barrons.com/article/S....html?mod=BOL_hpp_emr_4#articleTabs_article=1
http://finance.yahoo.com/q/bc?t=5y&s=JNJ&l=off&z=l&q=l&c=&ql=1
Trade:
Sell the Jan '15 55 put and buy the Jan '15 50 put for a net credit of $95.
Yield = 95/405 = 23.4% in 747 days or 11.5% annualized
Prob = 95%
Expectation = .95(95) - .01(405) - .04(202) = 90.25 - 4.05 - 8.08 = 76.12
(note 95 is above the offer at closing but I think it will fill)
This is a very long term trade, as would be buying the stock, but with much higher return and much less risk... plus getting your payout up front which, given the long term nature of the trade, is not trivial.
This is NOT the typical in/out of monthly option traders. This is a completely different animal.
You cannot understand this trade without reading and understanding the reference above. IF the reference is right, and JNJ's troubles are behind it, this is a good trade... and much more 'conservative' than buying the stock.
To venture into JNJ land with 100 shares of stock would cost you $7,063. This costs just $405.
Also the calculations of probability and expectation have to be understood as descriptions of position of the trade relative to past history of stock price, not in the usual vernacular meaning of those terms.
When JNJ was having some previous problems I used to spend three afternoons a week at their research headquarters in Raritan. In those days the problem was getting drugs approved at the FDA... trivial issues compared to what has been going on lately.
http://online.barrons.com/article/S....html?mod=BOL_hpp_emr_4#articleTabs_article=1
http://finance.yahoo.com/q/bc?t=5y&s=JNJ&l=off&z=l&q=l&c=&ql=1
Trade:
Sell the Jan '15 55 put and buy the Jan '15 50 put for a net credit of $95.
Yield = 95/405 = 23.4% in 747 days or 11.5% annualized
Prob = 95%
Expectation = .95(95) - .01(405) - .04(202) = 90.25 - 4.05 - 8.08 = 76.12
(note 95 is above the offer at closing but I think it will fill)
This is a very long term trade, as would be buying the stock, but with much higher return and much less risk... plus getting your payout up front which, given the long term nature of the trade, is not trivial.
This is NOT the typical in/out of monthly option traders. This is a completely different animal.
You cannot understand this trade without reading and understanding the reference above. IF the reference is right, and JNJ's troubles are behind it, this is a good trade... and much more 'conservative' than buying the stock.
To venture into JNJ land with 100 shares of stock would cost you $7,063. This costs just $405.
Also the calculations of probability and expectation have to be understood as descriptions of position of the trade relative to past history of stock price, not in the usual vernacular meaning of those terms.
http://www.youtube.com/watch?v=DEqBer7bvfQ
http://www.youtube.com/watch?v=dWmZeEosJXg
God bless us all...everyone
http://www.youtube.com/watch?v=dWmZeEosJXg
God bless us all...everyone
LLY:
http://finance.yahoo.com/news/lilly-2013-profit-forecast-tops-125931465.html
http://finance.yahoo.com/q/bc?t=5y&s=LLY&l=off&z=l&q=l&c=&ql=1
Trade1:
Sell Jan 14 40 put and buy Jan 14 35 put for a net credit of $47
Yield = 47/453 = 10.4% in 378 days or 10.0% annualized
Prob = 88.9%
Expectation = .889(47) - .03(453) - .08(227) = 41.8 - 13.59 - 18.16 = 10.05
Trade2:
Sell Jan 14 35 put and buy Jan 14 30 put for a net credit of $24
Yield = 24/476 = 5.04% in 378 days or 4.86% annualized
Prob = 97.2%
Expectation = .972(24) - .005(476) - .023(238) = 23.33 - 2.38 - 5.47 = 15.48
Copy of trade posted elsewhere
http://finance.yahoo.com/news/lilly-2013-profit-forecast-tops-125931465.html
http://finance.yahoo.com/q/bc?t=5y&s=LLY&l=off&z=l&q=l&c=&ql=1
Trade1:
Sell Jan 14 40 put and buy Jan 14 35 put for a net credit of $47
Yield = 47/453 = 10.4% in 378 days or 10.0% annualized
Prob = 88.9%
Expectation = .889(47) - .03(453) - .08(227) = 41.8 - 13.59 - 18.16 = 10.05
Trade2:
Sell Jan 14 35 put and buy Jan 14 30 put for a net credit of $24
Yield = 24/476 = 5.04% in 378 days or 4.86% annualized
Prob = 97.2%
Expectation = .972(24) - .005(476) - .023(238) = 23.33 - 2.38 - 5.47 = 15.48
Copy of trade posted elsewhere
http://www.youtube.com/watch?v=as8K3H7Rros
Almost 40 years ago. Just yesterday to me.
http://en.wikipedia.org/wiki/Three_Dog_Night
Almost 40 years ago. Just yesterday to me.
http://en.wikipedia.org/wiki/Three_Dog_Night