discussion on simple options strategy

R

regardspratik

I am fairly new in terms of trading options. I know the basics of the options and have been trying to do THE MOST BASIC options spreads.

This is my recent spread i made on a mining stock SCCO (11/22/13) whn It hit a 52 weeks low. few months back when it hit its new 52 week low it shot back up about 15-18% in a month or two. it has also done that couple of times before as well.

It was in 25.5 - 25.6 range
I sold a put 26 strike for 85 bucks used that to (dec exp)
buy a put of 25 strike for 50 bucks and used rest to (dec exp)
buy 7 calls of strike 31 for 35 total. (jan exp)

now as you can tell I am very bullish on this stock.

it has hit its new 52 weeks low as i write this (11/25/13).

so now that you know what my strat is, let me know whats your thoughts on it.

Also what has been the best or most common successful strat you use?
 
Your bullish and the trade reflects that. The options market doesnt agree since its offering a tinny tiny amt for the 31s. odds are you will lose your dollar. However since no one knows where it will go you could be right. Personally if Im bullish on a stock I would sell a slightly otm put and buy a call closer to the money...synthetic long.More risk that way since I could get stuck with the stock..however if Im that bullish I don,t mind getting put.
 
thnx Richard. I already tried tht for another stock and didnt get anywhre as lost some money. the reason I have bought a put is only to save me from downside. I am jst hoping it doesnt go below buyer's BE which is at 25.15 as I am certain i ll be left with the stock which is ruin my spread completely.
 
If you're bullish on the stock, why aren't you just buying ITM calls with expiry that reflects the timeframe of your "bullishness"? I have slowly come to the realization that this advice (given to me on this website) seems to be the most reasonable.

That or simple credit spreads, but with those you need to ride the trade out to near expiry, which can be nerve-wracking. I find that understanding the trade of the underlying (stop & limit) lets me trade the high-delta long call with a clear mind. It often pans out in a day or so. Get in, get out. Go to dinner.
 
Your trying to catch a falling knife. if you have limited funds, do a long ratio 1x2 for $0.00.

Worst case scenario is that it settles in between your strikes.
 
@Jimmy - I simply dont want to jst do the call ITM as it really doesnt give me any protection for any downward movement in the stock. This is evident by the SCCO stock in question. it jst went to 24.8. Luckly (as of now), I have not been called on. but my shitting my pants as I write this knowing full well it can me called any minute.
 
why not just sell cash secured puts? its simple and consistent. you lose out on opportunity risk, but you can do this consistently over time.
 
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