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Divergences
- Thread starter romik
- Start date
Quote from 4re:
Let me get back to you on this. I have a lot of charts pulled up right now. I will have to get into my account for the P/L with options xpress. I try not to look at it much because it makes me antsy.
no rush, I just wanted to see the difference in ROI being short and holding puts. It's around 15% ROI in this paper trade at the mo.
Quote from 4re:
Look at what they did today. They're trying to keep from paying me the big bucks on this trade. Right now I think I am up 10K on this trade. We'll see later though and I'll let you know. Now that isn't factoring in the 5K I already took off the table.
more interested in ROI Gary, as I want to start implementing divergence based signals using options, though I have never actually traded options. I have an account with Investrade from a while back, they do options. So I assume you bought 7k worth of puts or am I mistaken. I've just had a glance at CAL board on Yahoo, they haven't got a f...ing clue WHY this being sold off, bloody hell, I started at Yahoo boards 5 years ago LOL.
Quote from romik:
more interested in ROI Gary, as I want to start implementing divergence based signals using options, though I have never actually traded options. I have an account with Investrade from a while back, they do options. So I assume you bought 7k worth of puts or am I mistaken. I've just had a glance at CAL board on Yahoo, they haven't got a f...ing clue WHY this being sold off, bloody hell, I started at Yahoo boards 5 years ago LOL.
Tell them to look at the stinking charts...LOL...Every August is just bad news for airlines and CAL PE is in the 40's. I have fair value for them priced at 16-17. So it was just a matter of time before this happened. So funny-mentals and T/A was against them this time. I will go more in depth on the options though tis weekend for you.
Romik,
Here is my P/L and explanation on the CAL trade. I hope it sheds some light on how this trade has gone so far.
As you will see in July I bought 70 of the Sept 25 puts for $1.10 times 100 because that is how many shares you have the option to sell. So each contract was $110.00. For a total of 7,805 on the put side.
Right after that (for insurance) I bought 120 Sept 40 calls for .30 each (or $30 per contract) for a total of $3,780...
As you will see now the 40 calls are worth 0 which is what you expect on this. So now your puts have to profit more than $3,780 in order to break even and make a profit in this trade.
Right now the puts I still have are valued at $12,960 after I already sold $5,000 worth earlier. So that would make my 10,000 trade +/_ some change worth $17,960. Which you will see on the second page I am uploading. There is a sell order for 4.00 put on there right now which I might cahnge depending on market conditions this week. I am trying to double or better on this trade. I hope this helps but feel free to ask any questions.
Gary
Here is my P/L and explanation on the CAL trade. I hope it sheds some light on how this trade has gone so far.
As you will see in July I bought 70 of the Sept 25 puts for $1.10 times 100 because that is how many shares you have the option to sell. So each contract was $110.00. For a total of 7,805 on the put side.
Right after that (for insurance) I bought 120 Sept 40 calls for .30 each (or $30 per contract) for a total of $3,780...
As you will see now the 40 calls are worth 0 which is what you expect on this. So now your puts have to profit more than $3,780 in order to break even and make a profit in this trade.
Right now the puts I still have are valued at $12,960 after I already sold $5,000 worth earlier. So that would make my 10,000 trade +/_ some change worth $17,960. Which you will see on the second page I am uploading. There is a sell order for 4.00 put on there right now which I might cahnge depending on market conditions this week. I am trying to double or better on this trade. I hope this helps but feel free to ask any questions.
Gary
Attachments
Gary, thanks for the post, it's great.
What do you consider a reasonable commission in options?
Do options have liquidity issues like in stocks when you want to close position?
Do you close the position by selling options or buy/sell shares covered by option contracts?
I can see the benefits offered in options vs shares, more risk though due to the spread and time issues. I am still digesting your post and will most probably have some more Qs later on. Thanks again.
What do you consider a reasonable commission in options?
Do options have liquidity issues like in stocks when you want to close position?
Do you close the position by selling options or buy/sell shares covered by option contracts?
I can see the benefits offered in options vs shares, more risk though due to the spread and time issues. I am still digesting your post and will most probably have some more Qs later on. Thanks again.
Quote from romik:
Gary, thanks for the post, it's great.
What do you consider a reasonable commission in options?
Do options have liquidity issues like in stocks when you want to close position?
Do you close the position by selling options or buy/sell shares covered by option contracts?
I can see the benefits offered in options vs shares, more risk though due to the spread and time issues. I am still digesting your post and will most probably have some more Qs later on. Thanks again.
Romik,
I am not sure what I pay for commissions. I have had this account for quite a while. They used to be considered pretty low but I am not sure. Sorry...
Yes, stocks do tend to have liquidity issues. In fact that is why you want to pick yuor stocks carefully. CAL usually trades about 5 million shares a day so I had big problems getting into this trade. Make sure the stock you pick trades more than 10 million a day and you should be ok.
Another big thing about options is what they call greeks. Long story short, they help you determine pricing, volitility and other crap. One method I have found to keep from having to figure all this crap and keep it simple. Find a high volume stock and look at the BB's. Wait until they are getting tight (meaning volitility has gone down. Then buy your positions before it pops out of the BB's. \
You close a position buy "selling to close" the option. You will see my orders to do so at the bottom of the second page.
Your divergence method with added BB's will get you going. You will have a bias towards which way you think the stock will go (as I did in this case). Place a higher amount of your position on that side. The other side should be for insurance (as I did on this one).
Gary